2 Safer Dividend Stocks to Get Ready for a Stock Market Correction

With two massive names in the investment world, Bridgewater’s Ray Dalio and Ark Invest’s Cathie Wood, both commenting on the state of the markets, investors might be ready to rotate into value and defensives before the herd has a chance to hit the panic button. At this juncture, Dalio noted a bubble might be forming and rate hikes from the Fed might be the pin that pops it.

And while Wood doesn’t see a bursting of the bubble, it sounds like she wouldn’t be surprised if there were to be a correction at some point, perhaps at the hands of a Fed pivot from rate cuts to rate hikes. Of course, such a pivot could entail great pain for the tech trade, as it did back in 2022. And while the Fed has not hinted at hikes yet, it’s always wise to be ready for a shocker or two, especially at a time of heightened market valuations.

Whenever the price of admission into the broad markets is high, there’s not all too much room for error. Personally, I’m more inclined to side with Wood in that there might be no bubble, but a correction is overdue, and it’ll probably be a painful one for investors who’ve gone a while since rebalancing.

In this piece, we’ll look at a pair of high-quality dividend stocks I’d be inclined to put in the “safer” category if we are, in fact, poised for a correction or perhaps something worse as the S&P looks to hit 7,000 by the year’s end.

• United Parcel Service (UPS) trades at 11.6 times forward P/E with a 7.35% dividend yield after falling 57% from all-time highs.

• UPS posted better-than-expected quarterly results with strength in international business and dividend remaining intact after cost-control measures.

• General Mills (GIS) trades at 9.1 times trailing P/E with a 5.1% yield after falling 47% while executing its multi-year Accelerate cost-cutting plan.

• Some investors get rich while others struggle because they never learned there are two completely different strategies to building wealth. Don’t make the same mistake, learn about both here.

United Parcel Service (NYSE:UPS) isn’t typically a safety stock, especially since it’s a rather economically sensitive name. That said, the stock has already been punished severely in recent years. Still down around 57% from all-time highs, UPS stock stands out as a bargain-basement name that’s too difficult to pass up, even for select hedge funds. The 7.35% dividend yield certainly seems too good to be true, as does the mere 11.6 times forward price-to-earnings (P/E) multiple.

Though some may see a falling knife, a yield trap, or a value trap, others might see real, deep value to be had at under $100 per share. The dividend doesn’t look to be at risk, especially after recent cost-control measures. With the firm recently posting a better-than-expected quarterly result and greater clarity about the fate of the dividend (it’s staying intact), it might be time to go bottom-fishing in the name before the worst of tariff headwinds pass.

With strength in the international business and other bright spots to be encouraged about, I’m more inclined to be more constructive on UPS, especially since some big money managers placed big bets in the third quarter. In short, UPS is too oversold to be moved by a correction in tech, at least in my view. With shares gaining 8% on Tuesday, I think it’s time to think about getting back into a name that’s too unloved on Wall Street.

It’s been an absolute bloodbath for General Mills (NYSE:GIS), which has now shed around 47% of its value from peak to trough. As we close off the year, there’s a good chance shares will have taken a more than 50% haircut from their all-time highs. And while headwinds seem insurmountable, I do think there’s hope as the firm embarks on a multi-year effort to cut costs and become more competitive.

The “Accelerate” strategic plan won’t pay off overnight, and investors seem quite unconvinced after the latest Investor Day. In any case, management has its sights set on longer-term milestones. It has a detailed plan and a pretty realistic timeline to get to where it needs to be. Given this, I can’t help but be a fan, especially with shares trading at 9.1 times trailing P/E to go with a 5.1% yield.

With a beta that’s pretty much at zero (slightly negative), GIS shares stand out as the ultimate way to play defence. The stock is dirt-cheap, expectations have basically hit rock bottom, and there’s a long-term plan to fuel a comeback. I wouldn’t bet against the unloved consumer packaged goods firm as it optimizes its supply chain.