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5 dividend stocks that are ‘forever’ investments

Less volatility and high payouts cushion the blow from a downturn in equities

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Never abandon Unilever’s stock, and the company’s Ben & Jerry's Ice Cream.

It’s undeniable that the stock market is at an inflection point.

At home, all eyes are on the Federal Reserve in anticipation of the end of near-zero interest rates, with investors trying to prepare for what comes after the inevitable return to higher borrowing costs.

Overseas, the threat of a “Grexit” and overheating markets in China worry international investors.

But it’s important to maintain perspective. Whether you look back to the European debt crisis of 2011 or the mortgage meltdown of 2008, long-term investors with a focus on high-quality stocks are nearly always made whole — and often come out significantly ahead on a total-return basis.

Particularly if you’re at or near retirement and focusing on income, you need to think about where stocks are going to be in a decade or two instead of a month or two. That’s because hiding out in cash doesn’t give you much to live on, while long-term bond funds may expose you to considerable interest-rate risks.

The answer for many investors, then, is to rely on stable dividend payers that have strong operations that enable them to weather anything the market throws their way and sustain their dividends even during a downturn.

Here are five such “forever stocks” I think investors should consider.

HCP Inc. HCP, -0.41%

  • Sector: health care (REIT)
  • Market value: $17 billion
  • Current dividend yield: 6%
  • Beta: 0.39
  • While HCP is a real estate investment trust — a type of asset that can be sensitive to interest rates — its portfolio of health-care-related properties makes it a very stable play. Senior-housing facilities, medical offices and hospitals enjoy a recession-proof business that is dictated by the need for care, not cyclical economic trends.

    As a result of this reliable revenue, HCP is able to support a big-time dividend that today tallies 6%. That dividend has been paid (and increased) on an uninterrupted basis since 1988. And with adjusted funds from operations at 79 cents a share last quarter, the dividend of 56 cents per share quarterly is quite sustainable at a 71% payout rate.

    Now, dividend growth hasn’t burned down the house in recent years and share performance has been sluggish. But what you’re buying in HCP isn’t momentum or the hope of a stock that doubles overnight. Consider the super-low beta of 0.39, indicating this stock “wiggles” less than half as much as the broader market does. That means getting left behind during a mammoth rally, yes, but it also means hanging tough no matter what Wall Street throws your way.

    Besides, when you are guaranteed 6% yearly with this REIT via dividends, you don’t need explosive share performance.

    And given the long-term demographic trends that will continue to boost demand for health care — particularly senior housing as the baby boomers age — there are few stocks that are better positioned for the long haul than this dividend darling.

    Williams Partners WPZ, -2.11%

  • Sector: energy (MLP)
  • Market value: $32 billion
  • Current dividend yield: 6.9%
  • Beta: 0.53
  • Master limited partnership Williams Partners may sound risky given the recent softness in energy prices. But this giant is not an energy-exploration company or a production firm that is reliant on fluctuations in crude oil. It’s simply a toll-taker, operating a vast pipeline and processing network.

    Thankfully for Williams Partners investors, that pipeline network is in some of the hottest areas for energy right now, including shale fields in Pennsylvania and Ohio that are prime targets for natural gas fracking. Williams also recentlyacquired Access Midstream Partners to expand its grip on energy infrastructure.

    And if that’s not enough for you, how does a nearly 7% dividend yield strike you?

    Direct energy exposure can cause volatility in your portfolio, and even mega-cap stocks like Exxon Mobil XOM, -1.24% are not guaranteed to deliver share-price appreciation over the long term. So why not avoid the volatility of commodity prices and stick with a middleman like this MLP, which has a stable stream of revenue as fracking companies use Williams’ pipelines and other facilities to go about their business?

    Williams Partners doesn’t offer the same explosive growth potential as a small-cap exploration firm, but if you’re a patient investor in it for the income, there is a lot to like about this high-yield MLP, even with an uncertain energy outlook.