Dividend Stock Picks on the Defensive

There are always goods that people will buy regardless of the current economic state. As the stock market tries to figure out exactly what to do, certain stocks stand to benefit in the long run from the purchase of consumer goods. If you can find stocks that also pay a dividend, you can make some money beyond just the growth of the stock price.

Method to my madness
I looked at seven stocks within the consumer goods sector to find nice income potential in the form of dividends. I then broke the seven stocks into three commodity groups and will recommend a stock from each of these three groups. Here are the seven stocks I looked at:



Dividend Yield

Kimberly-Clark (NYS: KMB)



Unilever (NYS: UL)



Dr Pepper Snapple (NYS: DPS)



Procter & Gamble (NYS: PG)



PepsiCo (NYS: PEP)



General Mills (NYS: GIS)



Coca-Cola (NYS: KO)



Source: FinViz.com.

Stuff you always need
The first three companies we will explore are Kimberly-Clark, Unilever, and Procter & Gamble. These companies are heavily involved in making what consumers need regardless of economic conditions. Kimberly-Clark's diverse product lines include Kleenex, Huggies, Scott paper towels, and many others. Procter & Gamble has many billion-dollar brands, including Gillette, Crest, and Tide. Unilever has a broad product base as well, from Dove soap to Axe Body Spray.

Of the three, I like Procter & Gamble because of its truly broad base of brands, most of which are staples in American households. My Foolish colleague John Grgurich also thinks it has a bright future.

Staple foods
Three of these companies make food staples that maintain space in cabinets across the country. General Mills is known for its cereals, but also has foods as varied as yogurt and frozen pizza. Unilever has a wide-ranging selection of food, including Hellman's mayonnaise and Lipton ice tea. PepsiCo is known for its namesake soda, but also produces Lay's brand potato chips and Quaker Oats oatmeal, among other products.

Although all three should continue to be successful, my choice here is Unilever. It is boosted overall by its wide diversity of product lines, and has a strong presence in both the U.S. and Europe, making it a defensive pick in times of economic uncertainty.

All that food will make you thirsty
Finally, we have two companies that help wet your whistle after all that frozen pizza and mayonnaise. Coca-Cola has the top two soft-drink brands in the country, and it doesn't seem like it will be going anywhere soon. Dr Pepper Snapple recently signed an agreement with Coke to use the latter's distribution chain to get Dr Pepper on more shelves. PepsiCo still sells Pepsi, the No. 3 brand in the country, but finds itself needing to continually promote itself in trying to close the gap with Coke.

Because this is all about dividends, my choice here is Dr Pepper Snapple, whose yield is higher than both of its competitors here. Combine that with its distribution deal with Coca-Cola, and you have a company that should continue to compete well with the two major soft-drink brands.

Build that defensive wall
These seven companies are just a few of the hundreds of companies that pay dividends. The scope here is limited to consumer goods, but you can find many great dividend stocks in our special free report "13 High-Yielding Stocks to Buy Today."

At the time thisarticle was published Fool contributor Robert Eberhard drinks way too much Dr Pepper, but does not own any stock in the companies mentioned here. Follow him on Twitter @GuruEbby. The Motley Fool owns shares of Coca-Cola and PepsiCo. Motley Fool newsletter services have recommended buying shares of Procter & Gamble, Kimberly-Clark, PepsiCo, Coca-Cola, and Unilever. Motley Fool newsletter services have recommended creating a diagonal call position in PepsiCo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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