Updated from 4:15 p.m. ET to reflect Monday's market action, closing stock prices, added content on Exxon and Chevron.
NEW YORK (
TheStreet) -- It's still an open question whether stocks are heading into an extended bear market or if the severe pullback this summer from the highs in late April is a just correction phase in a larger bullish pattern.
What seems certain though is that there will be plenty of volatility to deal with before the quandary gets resolved, and that's got investors looking for stocks that will hold steady when the broad market starts to yo-yo.
"The question on most investors' minds these days is: 'If or when will this become a new bear market, and what can one do to combat this incessant volatility?'," writes Sam Stovall, chief equity strategist at Standard & Poor's, in commentary on Monday.
In an effort to answer that question, Stovall ran a screen to look for highly rated stocks with above-average dividend yields and reasonable valuations that tend to be less volatile than the broad market.
"Looking at volatility from a different perspective, we see that within the S&P 500, the stocks that pay a dividend recorded less of an average YTD decline than those that paid no dividend," he says. "Also, dividend payers had a lower average beta and a higher average S&P Quality Ranking, implying that they showed a higher consistency of raising earnings and dividends in each of the past 10 years."
The concept of beta uses regression analysis to quantify how a stock reacts to market volatility. A level of 1 indicates the stock tends to move in tandem with the broad market, above 1 is more volatile and below 1 is less.
S&P's analysis also found that companies in the
that pay a dividend have posted an average year-to-date decline of 3.8% on a total return basis vs. 7.4% for companies that don't pay one. To make the list, companies had to rank highly on S&P's proprietary STARS, Fair Value (at least 4 on a scale of 5 on both counts) and Quality Ranking (a minimum of A-) metrics. In discussing each, the concentration will be on beta and dividend yield.