History Says These 2 Dividend Stocks Will Deliver in a Downturn

Large-cap stocks, especially technology and growth stocks, have been more volatile this year, with valuations approaching 25-year highs after a three-year bull market.

Some experts and market watchers are sounding the alarm, saying a correction may be coming due to elevated stock valuations and unstable geopolitical and macroeconomic forces.

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As an investor, it’s impossible to know what will happen in the future, although history is often a good guide. But what any smart investor should do is prepare his or her portfolio to maximize returns in any type of environment.

A good way to do this is to add stocks with strong dividends to your portfolio. Not only do they generate income or enhance total returns when reinvested, but they are often value stocks that tend to perform better during economic downturns.

Here are two great dividend stocks that offer both income and diversification.

If the market goes through a correction or moves sideways for a period of time, investors may turn to a few consumer staples companies that have consistently generated dividends over the long term and performed well during market downturns.

One is Hormel (NYSE: HRL)is the maker of Spam, a canned meat product, along with Skippy peanut butter, Dinty Moore beef stew, Planters nuts, Hormel chili and other staples. These products are always popular, but they tend to become even more popular during tough economic times. People tend to stock up on canned goods or cheaper foods when they’re on a tight budget.

Looking back on 2008, Hormel outperformed other companies S&P 500 Index Large-cap benchmarks were either negative or had a modest return of 1% or 2% for the year.

for McCormick (NYSE: MKC)is a long-established spice manufacturer, first opening its doors in 1889.

Like Hormel, McCormick makes spices that become more popular during economic downturns as people eat more frequently and use spices to add more flavor to cheaper, basic meals. It also performs better than the broader market when it’s down or down.

Both stocks have underperformed in recent years, posting negative returns over the past one and five years.

But their dividends remain strong. Hormel is the dividend king, having increased its payouts for 59 consecutive years. It also has one of the highest yields among S&P 500 stocks at 4.69%.