5 Ultra-Safe High-Yield Dividend Stocks to Buy Even if There's a Stock Market Sell-Off in 2025

Five-year, 10-year, and multi-decade charts of market movements all show that stock market sell-offs happen. No one knows when they'll begin, how severe the downturn will be, or how long they'll last.

However, we do know that sell-offs of 20% or more from recent highs, known as bear markets, occur about every 3.5 years but don't last nearly as long as bull markets. Meaning that historically, bear markets have been tremendous buying opportunities.

Holding quality companies through periods of volatility is essential for unlocking the long-term effects of compounding. But some investors may still want to consider buying safer stocks if they are worried about a sell-off. Especially risk-averse folks looking to supplement income in retirement or anyone more focused on capital preservation than capital appreciation.

Kraft Heinz (KHC 0.07%), Campbell's (CPB -0.31%), General Mills (GIS -0.80%), J.M. Smucker (SJM -1.36%), and Conagra Brands (CAG -2.07%) are five packaged-food companies with high yields that have more than missed out on the broader market rally over the last couple of years.

In fact, all five companies are within just a few percentage points or less of their 52-week lows, and most are within striking distance of their three- to five-year lows.

Here's why the sell-off in these dividend stocks is a buying opportunity for income investors.

Image source: Getty Images.

Inflation's effect on the industry

Economic cycles can affect cyclical sectors like consumer discretionary, industrials, financials, and even technology. But demand for packaged foods tends to be fairly recession resistant. Consumers are less likely to change their purchasing behavior on Kraft mac and cheese, Campbell's soups, General Mills' cereals, J.M. Smucker's Jif peanut butter, or Conagra Brands' Banquet frozen foods than they are on discretionary purchases like big-ticket goods and services. That makes the packaged food industry fairly reliable no matter what the economy is doing.

However, the last few years have been challenging for the industry, namely because of inflation. Even beverage companies like Coca-Cola and PepsiCo have overly relied on price increases to offset stagnating and declining volumes. So, while the S&P 500 remains just a few percentage points off all-time highs, packaged goods companies have noticeably sold off.

KHC data by YCharts.

Sales growth for the group has been mediocre, especially considering the impact of inflation.

CPB revenue (TTM), data by YCharts; TTM = trailing 12 months.

Despite the poorly performing stock prices and weak sales growth, margins for most of these companies have generally held up, especially for Kraft, General Mills, and J.M. Smucker.

CPB operating margin (TTM), data by YCharts.

Good margins indicate that a company isn't overly relying on price cuts to spur volume growth. When looking at packaged goods companies, it's important to understand the balance between sales growth and margins. If Campbell's really wanted to grow sales, it could just undercut other soup companies. But that strategy would do more harm than good by tanking its margins.

Dirt-cheap valuations with high yields

The sell-off across packaged goods companies, paired with steadily growing sales and earnings (albeit slowly), has pushed the industry's valuations down to bargain-bin levels.

GIS PE ratio (forward), data by YCharts; PE = price to earnings.

What's more, the dividend yields of all five companies are now all above 3%, and significantly higher than their average levels over the last five years.

At first glance, the combination of value and income may seem too good to be true for passive-income investors. There are valid risks to consider before diving headfirst into any of these stocks.

The biggest risk is the affordability of the dividend expense. The industry doesn't have the best track record for consistent dividend raises. Kraft has kept its payout the same for years. Campbell's has made modest raises over time but doesn't consistently increase its payout every year. General Mills and Conagra have raised their dividends every year since 2007. And J.M. Smucker has increased its dividend every year since it began paying one in 2000.

If you're looking for consumer staples companies with impeccable track records of dividend growth, then these packaged goods companies aren't the best fit. Instead, Procter & Gamble, Walmart, Coca-Cola, PepsiCo, Kenvue, Colgate-Palmolive, Hormel Foods, and Kimberly-Clark (among others) are all Dividend Kings that have paid and raised their payouts for at least 50 consecutive years.

Although investors shouldn't expect sizable raises from these companies in the near term, they can take solace in knowing that all five companies should be able to afford their current payouts. Here's a look at fiscal 2025 projected earnings for each company, along with their forward dividends per share.

Data source: Yahoo Finance.

Power your passive income with packaged goods stocks

The most valuable and best-performing consumer staples stocks in 2024 -- Walmart and Costo Wholesale -- have low yields and expensive valuations. Whereas slower-growing giants like Coke, Pepsi, and P&G have solid yields and reasonable valuations. Then there are the ultra-inexpensive packaged goods companies that are essentially the lowest-growth pocket of the consumer staples sector.

Value and income investors are getting an excellent opportunity to buy shares of these high-yield packaged goods companies while they are out of favor. Investing in equal parts among the five stocks discussed in this article produces an average yield of 4.3% while still allowing investors to participate in the stock market. For context, the yield on a 10-year Treasury note is 4.8%. Of course, investing in equities is riskier than a Treasury note.

Kraft Heinz, Campbell's, General Mills, J.M. Smucker, and Conagra Brands aren't the kind of companies likely to keep pace with the S&P 500 over the long term due to their limited growth prospects. But they are excellent choices if you're more interested in passive income from value stocks than the upside potential from rapidly growing businesses.