3 Dividend Growers for Volatile Markets

As the stock market heads into the final quarter of the year, one thing seems certain—and that's uncertainty. There should be plenty of it for investors to digest.

Concerns about a stalling global economic recovery, increasing coronavirus cases, the Congressional stalemate on a stimulus package, and the potential for a dragged out, contested Presidential election may produce a potent witches brew this October. Toss in what's likely to be a sloppy third-quarter earnings season and volatility will have much to hang its hat on.

What does this mean for investors? Some may opt to simply ride out the storm. But for others, the volatility may be too much to bear.

In turbulent markets like what we appear to be bracing for, investors could consider rotating into defensive companies with a track record of increasing their dividends through good times and bad.

While these types of stocks can be viewed as 'boring', in some markets, boring is good. Let's take a look at a few of these low risk dividend growers.

Is Procter & Gamble Stock a Good Investment?

Procter & Gamble (NYSE:PG) is far from a gamble in this environment. The consumer products company has increased its dividend for 27 consecutive years. It has a dividend yield of 2.1% based on the last four quarterly payouts totaling $2.95 per share.

P&G also comes with a side of steady growth potential. With a presence in 180 countries, strong global sales of laundry detergents, soaps, paper towels, and other popular consumer products drove a 13.3% acceleration in earnings during fiscal 2020.

The company routinely tops consensus earnings expectations and will probably do so yet again when it reports fiscal 2021 first quarter results on October 27^th. Why? Surging coronavirus cases in parts of the U.S. and Europe ahead of the fall flu season suggest we may be in for a long winter. And this means the likelihood of another round of consumer stockpiling of Procter & Gamble household essentials is good.

Management has provided guidance of 6% to 10% earnings growth in fiscal 2021. The current consensus estimate for FY21 EPS is 5.5%. Procter & Gamble isn't cheap at 25x forward earnings. But given the company's track record and reliable dividend, in this economic backdrop, it is well worth the premium.

Is Kimberly Clark Stock a Buy?

Another steady consumer defensive play is Kimberly Clark (NYSE:KMB). It has raised its dividend for 24 straight years and offers a bit higher yield than P&G at 2.8%. The maker of Scott's towels, Kleenex tissues, Huggies diapers, and other well-known consumer brands pays out more than half of its profits as quarterly dividends.

Kimberly Clark's growth record speaks for itself. Earnings per share have increased in each of the last five years and are expected to accelerate to 11.6% year-over-year growth in fiscal 2020. The pandemic catalyst has also applied to Kimberly Clark and will continue to provide above normal growth for the company for as long as COVID-19 is with us.

Aside from the obvious near-term catalyst, Kimberly Clark has opportunities for growth on multiple fronts. It is strengthening its core business in developed markets by expanding its product portfolio and employing more effective marketing strategies.

Accelerating growth in emerging markets will also be a key theme to watch. Earlier this month Kimberly Clark acquired Indonesian personal care company Softex Indonesia for $1.2 billion to expand its presence in the region. Interestingly, Indonesia is the world's sixth largest diaper market—and Softex has the country's second highest diaper market share deriving more than three-fourths of its revenue from diaper sales.

E-commerce and digital marketing initiatives are another long-term growth driver for Kimberly Clark. This will result in higher advertising expenses in the quarters ahead, but the investments should be well worth it to help the company connect with the increasingly digital consumer.

Is Flowers Foods Stock Undervalued?

Flowers Foods (NYSE:FLO) is a low volatility, mid-cap dividend grower that has boosted its dividend in each of the last six years. With a 3.2% trailing dividend yield, the packaged bakery foods company has been a major beneficiary of at-home consumption.

Strength in Flowers' retail segment has more than offset weakness in its foodservice and non-retail businesses in 2020. Consumers have been stuffing their pantries with Nature's own, Sunbeam, and Wonder breads as well as Tastykake snacks as if they are going out of style.

This has led to some impressive growth performances in recent quarters and led management to raise guidance during the year. Flowers now expects 2020 earnings growth to come in between 20% to 30% (after recording just 2% EPS growth in fiscal 2019).

Flowers is generating strong cash flow and pays out nearly 70% of its earnings in the form of dividends. Amid the pandemic, it has become a leaner, more cost-effective business and is also working towards paring down its debt.

At 19.7x times forward earnings, Flowers is trading slightly below its five-year median forward P/E multiple and a discount to the S&P 500's 21.6x forward earnings multiple. As one of the least volatile U.S. mid-cap names out there, Flowers is the type of company that investors may want to stock up on in anticipation of the rocky months ahead.