These dividend stocks could be a way to play defense during volatile times

Published Tue, Feb 25 20208:00 AM ESTUpdated Tue, Feb 25 202010:35 AM EST

As stocks plummet and bond yields sink to record lows, investors seeking relatively safer returns might look to some low-volatility stocks that pay a generous dividend. The major stocks average sold off Monday on fears that the deadly coronavirus will dent global growth. Investors were specifically spooked by the spike in cases outside of China. At session lows, the Dow Jones Industrial Average dropped more than 1,000 points, and the S & P 500 went negative for the year. Markets were struggling to rally on Tuesday, but many investors have their doubts the volatility will end here. CNBC used FactSet to screen for stocks with a dividend yield greater than 2% that also have a beta less than 0.9, meaning they are relatively stable stocks that pay an above-average dividend. To narrow the list even more, all of the stocks have more than 60% buy ratings from Wall Street analysts, with an average 12-month price target that forecasts the stock will go up from here. Utilities are the most represented industry on the screened list, surfacing names like NRG Energy , Exelon , Ameren and NiSource . Utilities are generally more stable stocks, as demand for electricity and gas is a steady consumer and business need, even during economic downturns. NRG Energy pays a 3% dividend yield and Exelon pays a 3.1% dividend yield. Ameren and NiSource pay a 2.3% and 2.8% dividend yield, respectively. In addition to being defensive stocks, these stocks have low volatility. Electric services company Ameren has a beta of 0.2, meaning that on a trading day when the S & P 500 might be down 1%, Ameren would only be down 0.2%. The same applies to the upside. Fast-food chain McDonald's and big box retailer Target could also be good stocks to hide out in until the coronavirus fears settle down. McDonald's pays a 2.3% dividend and has a beta of 0.2 and Target has a beta of 0.7 and pays a dividend of 2.3%. In comparison, the yield on the 10-year Treasury is about 1.37%, its lowest level since 2016. Health-care giant Merck & Co . also made the list with a 3% dividend yield and 0.3 beta. Tyson Foods pays a 2.2% dividend and has a 0.5 beta. REIT Alexandria Real Estate Equities could be another good defensive pay with a 0.5 beta and a healthy 2.5% dividend yield, as long as real estate doesn't get hit significantly in a downturn. Amid the market sell-off on Monday, the real estate sector outperformed, bolstered by the low interest rate environment. When yields drop, mortgage rates also go down and more people refinance their mortgages. Alexandria Real Estate Equities fell less than 1%, while the S & P 500 fell 3.35% on Monday. To be sure, because these companies have a low beta they will likely underperform the market if averages bounce back. However, if these tough times continue, these shares are likely to hold up better than the market and pay a decent yield along the way. Subscribe to CNBC PRO for exclusive insights and analysis, and live business day programming from around the world.

A shopper is seen in a Target store in the Brooklyn borough of New York.

Brendan McDermid | Reuters

As stocks plummet and bond yields sink to record lows, investors seeking relatively safer returns might look to some low-volatility stocks that pay a generous dividend.