In Uncertain Economic Times, Here Are 7 Dividend Stocks You Should Consider

Treasuries are not the only refuge available to investors in these tough economic times, as the economy worsens.

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In a research note published by UBS on Friday, the headline read, "During Uncertainty, Focus on Sustainable Dividend Growers".

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In its report, PIMCO says that it is experiencing a difficult investing climate because of a variety of concerns, including continuing inflation concerns, sharp moves in the yield curve, and expectations that the Fed will cut rates in the near future.

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Based on projections from UBS analysts, the report's authors compiled a list of 30 stocks with dividend growth rates over three years at least in the mid-single digits, as determined by the reports' authors. All of the stocks have a Buy rating from UBS.

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It was also critically important for the stock screener to look for companies with dividend yields greater than the average 1.7% dividend yield seen for the S&P 500 index SPX -0.08% and dividend payout ratios that were sustainable. The dividend payout ratio determines the percentage of earnings that are paid out as dividends.

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The report says the growth of dividends in the S&P 500 has been less volatile than growth in earnings per share and buybacks, which implies that dividends should outperform earnings per share in the long run.

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Furthermore, it makes the assertion that dividend stocks can provide the investor with a margin of safety during times of uncertainty.

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In the wake of the recession that we are currently experiencing, Trade Algo decided to narrow its field of investments and to concentrate on utilities, whose dividends appear to be durable heading into a downturn, and some other sectors.

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A company that manufactures a wide range of products, such as electric components, brakes, and cylinders, is Eaton (ticker: ETN), which has a 2% yield through March 30, including dividends. As of March 30, Eaton shares, which yield 2%, have returned 11% to investors through March 30, including dividends. UBS projects Eaton's dividend will grow by 8.6% each year between 2022 and 2025, compared with minus 10% for the S&P 500.

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Home Depot HD +0.42% (HD), an American retailer of home improvement products, is also on this list. Hd has a dividend yield of 2.9% and a one-year return of minus 5%. It expects its dividend growth will be 10% on an annual basis.

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Cardinal Health CAH+1.35% (CAH), the nation's leading distributor of prescription drugs, is yielding 2.6% while the stock has a one-year return of 35% and UBS expects its dividend to grow by 7.2% annually over the next decade.

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By the year 2025, CVS Health CVS +2.39% (CVS) is projected to grow its dividend by 9.7% annually. It is a company with a 3.2% dividend yield and a minus 26.6% one-year return. Besides the national drugstore chain, Aetna is also part of the company's assets, which includes a large managed-care organization. Oak Street Health (OSH), which runs primary care centers, is in the process of being purchased by the company.

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CenterPoint Energy (CNP), a Houston-based utility that has a one-year return of minus 2%, is one utility that offers some defensiveness to a portfolio. The company offers a dividend yield of 2.6%, and UBS predicts it will grow its dividend by 8% a year by 2025. Through the expansion of the company’s transmission and distribution grid, the company has been investing, and these expenses are expected to contribute to the company’s earnings growth.

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Exelon (EXC) shares, which are also owned by Cogeco and other companies, have a one-year return of -9% and a three-year yield of 3.5%. In addition to Baltimore Gas and Electric, the company manages Potomac Electric Power and Baltimore Gas and Electric as well. UBS estimates its quarterly dividend to grow 7.5% in the next three years.

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There is another utility to look into as well. The stock of American Electric Power (AEP) yields 3.7% and has returned minus 6% in recent years. UBS projects that its dividend will grow at a 7% annual rate until 2025, a prediction that has been made by UBS analysts. The company is based in Columbus, Ohio and is tasked with generating, transmitting, and distributing electricity throughout a large geographical area. In addition to Arkansas, Indiana, Kentucky, Louisiana, Michigan, Oklahoma, Texas, and Virginia, it has regulated operations across multiple states.