3 Safe Haven Dividend Stocks to Protect Your Portfolio | Investors Alley

3 Safe Haven Dividend Stocks to Protect Your Portfolio

It might be time to trim some of the more risky stocks in your portfolio and start buying some stock “insurance”. Consider these three stocks that would do very well if the market declines. 

Gold has long been the go-to safe haven investment during times of uncertainty. Things are looking quite uncertain right now.

Insurance is something you buy hoping you’ll never have to use.

Gold is much like that.

It won’t make you rich but serves a key purpose in your portfolio. In many ways, owning gold is insurance against a declining dollar and economic uncertainty.

Gold does well when there’s a lot of fear in the markets. And fear is on the rise, with the price of gold up 7% in the last month alone and making five-month highs.

Investors are making the move to safety with geopolitical tensions running high across the world.

Donald Trump started making good on his promises to ‘protect’ American interests aborad, with bombings in Syria and Afghanistan over the past week. And more could be on the way.

The U.S. is set to make a preemptive strike against North Korea if the country goes through with a nuclear weapons test. Russian relations continue to deteriorate, with Secretary of State Rex Tillerson telling Russian President Vladimir Putin that U.S.-Russian relations are at a new low point concerning Syria.

For investors that don’t see a place in their portfolio for gold, it might be time to start thinking of it less as a metal and more as an insurance policy on geopolitical upheaval and economic uncertainty. With that in mind, here are the top three safe haven stocks for this market:

Top Safe Haven Stock No. 1: Sibanye Gold (NYSE: SBGL)

If you want a sizable dividend that offers exposure to the gold industry, Sibanye Gold is one of the few options. Sibanye pays a 4% dividend yield, but being a $2.5 billion market cap gold producer from South Africa, it gets overlooked.

The company has lost half its market value in the last nine months given the weakening South African rand relative to the U.S. dollar. However, it looks like we’ve seen a floor in rand prices and Sibanye is using this opportunity to diversify away some currency risk.

Sibanye remains committed to maintaining its solid dividend and it has been diversifying its operations to do so. Sibanye recently made palladium a bigger part of its portfolio, buying up Stillwater Mining. Palladium is a key component in automotive catalytic converters and gaining adoption for various chemical and dental functions.

Sibanye still has plenty of exposure to the gold market and will enjoy upside from rising gold prices. Plus, it’ll remain profitable even if gold prices fall, having an all-in sustaining production cost of less than $1,000 an ounce. This time last year, Sibanye was trading at over $16 a share, and since then it’s managed to hedge away some of the risk of another downturn in gold or the rand.

Top Safe Haven Stock No. 2: Franco-Nevada Corp. (NYSE: FNV)

Franco-Nevada pays a 1.3% dividend yield and has four years of consecutive dividend increases under its belt. This is despite the fact that gold prices have gone from $1,800 an ounce to as low as $1,100 during that time.

Now, part of the reason that Franco-Nevada has managed to keep paying a dividend and generate positive earnings the entire time is that it doesn’t have the typical expenses or debts of a gold mining company. One of the underrated business models in the gold industry is royalty-based operators. These are companies that finance gold miners and in return receive royalty payments on future sales.

Franco-Nevada is a royalty gold company and avoids the risks of exploring for gold. It doesn’t have to worry about buying equipment or operating mines. Thus, margins are generally much higher and it can generate better returns on assets and invested capital, while carrying less debt. Meanwhile it still has exposure to gold price upside, with a rather diverse portfolio of over 300 assets.

Top Safe Haven Stock No. 3: Randgold Resources (NASDAQ: GOLD)

If you’re looking for a pure gold miner play with no debt and a dividend yield, Randgold Resources is your answer. Randgold pays a solid 1.8% dividend yield and it has a long track record of successfully operating mines in the Sub-Saharan Africa region. In fact, over the last few years it’s managed to triple its gold production to 1.2 million ounces a year.

Unlike other major gold producers, including the massive Barrick Gold (NYSE: ABX), Randgold plans on boosting production in the coming years. As well, and what makes Randgold especially unique, it carries no debt. Any cash flow it generates can go right into boosting its dividend or investing in growth opportunities, whereas the likes of Barrick Gold has to worry about using free cash flow to pay down debt and interest payments.

In the end, there’s not much to get excited about in the markets these days. Any outperformance we’ve seen has been driven by just a few large-cap names. Instead, with geopolitical tensions having skyrocketed in what seems like a matter of days, safe havens should be the destination of choice for investors. And there’s few safe havens that offer the upside of gold.

Owning dividend stocks with secure and growing cash flows like the three above allows me and my subscribers to stop worrying about the daily gyrations of the stock market. Instead, we earn consistent returns, paid in the form of cash. It’s so easy, all you have to do is buy shares in the stocks that I recommend and watch as they deposit money into your brokerage account multiple times a month.

Right now, there are over 20 high-yield stocks available through my Monthly Dividend Paycheck Calendara system for generating a recurring monthly income stream from the market’s most stable high-yield stocks.

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About Tim Plaehn

Tim Plaehn is the lead investment research analyst for income and dividend investing at Investors Alley. He is the editor for The Dividend Hunter, an investment advisory delivering income investments with double digit growth in share price and dividend payments, and 30 Day Dividends, a specialty income service that takes advantage of opportunities for relatively fast, attractive profits around potential dividend payouts. Prior to his work with Investors Alley, Tim was a stock broker, a Certified Financial Planner, and F-16 Fighter pilot and instructor with the United States Air Force. During his time in the service he was stationed at various military locations in the U.S., Europe, and Asia. Tim graduated from the United States Air Force Academy with a degree in mathematics. Learn about Tim's new investment strategy for collecting income from the market each and every month without the use of options, futures, forex, covered calls, or risky trading strategies.