3 High-Yield, Low-Risk Dividend Stocks for Extreme Safety

NEW YORK (TheStreet) -- When it comes to times of uncertainty and volatility, nothing beats "widows and orphans" stocks. What are they? They are dividend stocks with high yields and minimal risk as compared to other stocks.

Widows and orphans stocks got their name because they are considered stable enough to provide reliable dividend income to "feed the family" of widows and orphans if the breadwinner is gone. The term "blue-chip stock" has come to have virtually the same meaning as widows and orphans stocks.

This article takes a look at three widows and orphans dividend stocks for investors looking for a mix of high yield and safety.

1. PepsiCo

PepsiCo (PEP) has paid increasing dividends for 43 consecutive years. The company is among the safest businesses to invest in. PepsiCo's widows and orphans-level safety comes from its well-known branded food and drink products.

In total, PepsiCo has 22 brands that generate over $1 billion per year in sales. The table lists those brands by category.

Carbonated Beverages

Non-Carbonated Beverages

Snacks & Food

Pepsi

Gatorade

Lay's

Diet Pepsi

Tropicana

Doritos

Pepsi Max

Litpon

Quaker

Mountain Dew

Aquafina

Cheetos

Diet Mountain Dew

Brisk

Ruffles

7 Up

Starbucks RTD Beverages

Tostitos

Sierra Mist

 

Fritos

Miranda

 

Walkers

 

While the company is named after its soda, the snack and food brands now generate more operating income for the company than its beverages.

PepsiCo currently has a dividend yield of 2.9%. The company has paid increasing dividends for four consecutive decades and hiked its dividend 15% in 2015.

For a company to grow its dividend payments year after year, earnings per share must grow. PepsiCo had adjusted constant-currency earnings-per-share growth of 9% in fiscal 2014. Over the last decade, PepsiCo has managed to grow its revenue per share and dividends per share at around 9% a year.

PepsiCo is expecting 7% constant-currency core earnings-per-share growth in fiscal 2015. PepsiCo will very likely continue to grow at between 7% and 9% a year based on its 2015 guidance and historical growth numbers.

PepsiCo ranks highly using the 8 Rules of Dividend Investing thanks to its relatively high earnings-per-share growth rate and low stock price standard deviation. The company has a stock price standard deviation of just 17.3%. PepsiCo investors can expect a total return of between around 10% and 12% a year from dividends (~3%) and earnings-per-share growth (7% to 9%).


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