Cramer: Your Best Defense Against Market Swings
What separates winning stocks from the losers, Cramer said Monday, is that they pay a viable dividend and one that has a nice yield after taxes. The dividend is so powerful, it helps dividend-paying stocks withstand any number of headwinds facing the market.
Take defense contractors, for example. These companies are being hit, as the government spends less on defense. Yet many of these stocks have been huge winners because they have yield protection, Cramer said. Lockheed Martin is up 15 percent year-to-date largely because it yields 3.7 percent, he noted.
Meanwhile, Clorox and Kimberly-Clark didn't meet analysts' expectations when they recently reported earnings. In turn, both companies had their estimates cut. Yet both stocks are up 7.4 and 6 percent respectively. (Read More: Cramer's Top Dividend Plays)
Speaking of earnings, Cramer said ConocoPhillips has been a "major disaster," as all of the analysts have had to cut numbers. But the stock's 3.6 percent dividend yield seems to have helped it post a 6 percent gain for the year.
HJ Heinz is another example, Cramer said. It has been slammed by several brokers and downgraded by Goldman Sachs, as well. Yet Heinz's stock is up 9 percent for the year. The stock yields 3.6 percent, by the way.
In a similar fashion, Johnson & Johnson's stock has posted an 8 percent return despite a flurry of product recalls. It pays a 3.6 percent dividend yield.
Despite increased scrutiny from the federal government and omnipresent smoking bans, dividend-paying tobacco stocks are also doing well. Altria Group has rallied 11 percent for the year and yields 5 percent. Reynolds American has climbed by 17 percent and yields 5.6 percent. Lorillard's stock has shot up by 35 percent, bringing its yield down to 4.5 percent. (Read More: Cramer's 5 Obama-Proof Dividend Plays)
What this tells us, Cramer said, is that the market wants protection. Stock buyers want the total return and people will pay up for the safety of a juicy dividend. Chances are, if a stock doesn't pay a dividend in this environment, it's not going to work.
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