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5 Defensive Dividend Stocks for a Choppy Fall

Markets can drift on headlines this time of year, so today’s note takes an educational angle. We define what “defensive” really means for dividend investors, then walk through five companies that fit the bill and why they belong on a short list for the months ahead.

What “defensive” means here

Defensive in this context is not about hiding from stocks. It is about owning businesses with essential demand, stable margins, and balance sheets that support a dividend through different parts of the cycle.

We looked for yields of roughly 2% to 6%, payout ratios that are reasonable on earnings or free cash flow, and a track record of raising or at least maintaining the dividend.

Numbers below reflect the current run-rate as of September 16 and are cross-checked against company investor relations, Nasdaq Dividend History, and major data providers.

Five companies to know this fall

Procter & Gamble (PG) sits at the center of household staples. The company owns brands that shoppers reach for regardless of the economic weather, which makes revenue and cash flow unusually steady. P&G has raised its dividend for decades, and the current payout is supported by consistent free cash flow after capital spending. Valuation can look full at times, so most of your return comes from the dividend and slow, steady growth rather than big multiple expansion. Current reference metrics: price about $158, annual dividend about $4.23, yield about 2.7%, payout ratio near the low 60s on trailing EPS, three-year dividend growth around 5%, next ex-date typically in late October.

PepsiCo (PEP) combines durable beverage cash flows with a category-leading snacks business, which gives it rare pricing power. That mix has supported more than half a century of dividend increases. Investors sometimes see different payout ratios for Pepsi depending on whether the source includes non-recurring items in EPS, which is why cash flow coverage is the better lens. Think of PEP as a core compounding income position, not a high-yield swing. Current reference metrics: price about $141, annual dividend $5.69, yield about 4.0%, payout in the 70% area on normalized EPS, three-year dividend growth about 8%, early September ex-date has passed and the next is usually in early December.

Johnson & Johnson (JNJ) is classic healthcare ballast. A fortress balance sheet, a diversified mix of pharma and med-tech, and a long record of dividend raises give JNJ staying power when the market gets jumpy. Litigation headlines can move the stock from time to time, but free cash flow coverage of the dividend remains solid. Current reference metrics: price about $177, annual dividend $5.20, yield about 3.0%, payout ratio a little over 50% on trailing EPS, three-year dividend growth roughly 5%, next ex-date typically in late November.

Verizon (VZ) offers the higher yield on this list, supported by improving free cash flow as major network build-outs normalize. The company increased its dividend for 2025, and management’s free cash flow outlook points to comfortable coverage from operations rather than one-offs. The trade-off is competition and churn risk, so watch subscriber trends and capital intensity, but the income stream is attractive for investors who want a bigger cash component. Current reference metrics: price about $44, annual dividend $2.76, yield about 6.3%, payout ratio in the low 60s on trailing EPS, three-year dividend growth around 2%, next ex-date expected near October 10.

Duke Energy (DUK) represents the regulated utility profile many income investors favor. A constructive regulatory framework and visible rate-base growth translate into predictable earnings and dividends, even though growth is modest and capital spending is heavy. Utilities can be sensitive to interest-rate moves, so expect some price volatility when bond yields swing, but the dividend record is steady. Current reference metrics: price about $120, annual dividend $4.26, yield about 3.5%, payout ratio typically in the high 60s to low 80s on EPS depending on the source, three-year dividend growth near 2%, next ex-date is usually mid-November.

How to use this, practically

Blend names to balance income and durability. Verizon and Duke can carry more of the cash yield, while Procter & Gamble, PepsiCo, and Johnson & Johnson offer steadier dividend growth and lower day-to-day volatility.

Scale entries over several dates rather than all at once, and let the calendar work for you by noting ex-dividend windows.

Revisit coverage trends each quarter, focusing on free cash flow and payout ratios, and keep any single position to a reasonable slice of your dividend sleeve so one story does not dominate your income.

Dividend change to note

Microsoft announced a quarterly dividend increase to $0.91 on September 15, payable in December, with record and ex-dates in late November. It is outside today’s list but relevant for investors who track dividend growth across large caps.

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Nothing in this newsletter is financial advice. Always do your own research and think for yourself.