Income investors should focus on stocks that pay solid yields, but also those that have sustainable payouts and strong business models. The safest dividend stocks can raise their dividends each year, even during recessions.

The following 3 dividend stocks have low dividend payout ratios and recession-proof business models, meaning their dividends are well-covered even during a recession.

Raymond James Financial (RJF)

Raymond James Financial is a financial holding company whose major operations include wealth management, investment banking, asset management, and commercial banking. Approximately 90% of the company’s revenue is from the U.S. and 67% of fiscal 2022 revenue is from the company’s wealth management segment.

On October 25th, 2023, Raymond James Financial released results for its fourth quarter and fiscal year 2023 for the period ending September 30th, 2023. For the quarter, the company reported net income of $432 million which represents a 1% decrease compared with a quarterly net income of $437 million in the same quarter previous year. Reported earnings per diluted share for the same periods were $2.02 and $1.98, an increase of 2% year-over-year.

The company has grown earnings by 15.8% per year over the past decade and 13.5% over the past five years. We expect earnings to increase by 8% per year for the next five years. The company has been able to increase its yearly dividend payout for 11 consecutive years. Over the last five years, the average annual dividend growth rate is 13%. In December 2022, the company increased its quarterly dividend by 23.5% from $0.34 to $0.42 per share.

RJF has a 2023 dividend payout ratio of 18% indicating a safe dividend.

Westlake Corporation (WLK)

Westlake Corporation (WLK) is a global manufacturer and supplier of petrochemicals, polymers, and building products. The company operates through two segments: Performance and Essential Materials and Housing and Infrastructure Products.

The Performance and Essential Materials segment produces a wide range of products, including polyethylene, polypropylene, specialty polymers, and vinyl resins, used in various consumer and industrial markets such as packaging, automotive, and construction. The Housing and Infrastructure Products segment manufactures and sells a range of building products, including roofing materials, siding, and other products used in construction.

On November 2nd, 2023, the company announced results for the third quarter of 2023. WLK reported Q3 non-GAAP EPS of $2.20, beating market estimates by $0.22. The company reported revenues of $3.12 billion for the quarter, down 21.2% year-over-year. In Q3 2023, Westlake reported strong financials with $3.1 billion in net sales, a net income of $285 million, and an EBITDA of $682 million. The Housing and Infrastructure Products (HIP) segment was particularly successful, with record quarterly income from operations ($256 million) and EBITDA ($327 million).

Despite lower average sales prices, the company benefited from robust North American housing and infrastructure activities. However, a legal reserve and other items slightly reduced EBITDA by about $20 million.

The company’s competitive advantage lies in its vertically integrated business model and diversified product portfolio, which allows it to control the entire supply chain, reduce production costs, maintain high-quality standards, and provide a competitive advantage in the marketplace. In addition, the company has shown resilience during economic downturns due to its strong financial position and ability to adapt to changing market conditions.

WLK has increased its dividend for 18 years and has a 2023 dividend payout ratio of 22%.

Mueller Industries (MLI)

Mueller Industries is a company that manufactures and sells metal and plastic products around the world through its three segments: Piping Systems, Industrial Metals, and Climate. The Piping Systems segment offers copper tubes and plumbing-related fittings, and it also resells steel pipes, brass, and other metal products to wholesalers in various industries.

The Industrial Metals segment manufactures brass, bronze, and copper alloy rods and other metal products for OEMs in the industrial, construction, HVAC, plumbing, and refrigeration markets. Finally, the Climate segment offers valves, protection devices, and brass fittings for various OEMs in the commercial HVAC and refrigeration markets, high-pressure components, and accessories for the air-conditioning and refrigeration markets.

The company recorded a diluted earnings-per-share of $1.17 for the third quarter. Net sales for the quarter totaled $819 million, showing a decrease from the $944 million reported during the corresponding period last year, primarily due to the factors mentioned above affecting demand and pricing.

MLI has a 2023 dividend payout ratio of 10% which is very low and indicates a safe dividend. MLI stock currently yields 1.3%.

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Bob Ciura has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Bob received a Bachelor’s degree in Finance from DePaul University, and an MBA with a concentration in Investments from the University of Notre Dame.


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