3 SWAN Stocks for Defensive Growth Amid Market Volatility

As market volatility persists and interest rates hover near historic highs, investors are increasingly seeking SWAN stocks—those offering Safe Withdrawal And Nest Egg potential. These are companies with sustainable dividends, low volatility (beta), and exposure to essential services, acting as bond proxies in a yield-starved environment. Below are three standout picks from utilities, consumer staples, and healthcare sectors, contrasted with interest-rate-sensitive REITs.

Utilities: Eversource Energy (ES) – The Regulated Dividend Giant

Why ES?
- Dividend Resilience: With a 5.1% yield and a 25-year dividend growth streak, ES offers one of the highest payouts in regulated utilities. Its "Safe" Dividend Safety Score™ reflects stable cash flows from its New England electricity and gas operations.
- Low Beta: Utilities typically have beta values between 0.7–0.9, meaning they move less than the broader market (S&P 500 beta = 1). ES's regulated business model insulates it from economic swings.
- Bond Proxy Appeal: Unlike REITs like Realty Income (O), which face rising rate headwinds, ES's regulated rates and inflation-linked contracts make it a better hedge against interest-rate risk.

Consumer Staples: Church & Dwight (CHD) – Household Necessities in a Volatile World

Why CHD?
- Essential Products: Brands like ARM & HAMMER, TROJAN, and WATERPIK are recession-proof. CHD's 27-year dividend growth streak and "Very Safe" rating underscore its financial discipline.
- Yield vs. Stability: While its 1.3% yield is modest, its payout ratio (implied to be sustainable based on its safety score) and low beta (common for staples) make it a conservative income play.
- Contrast with REITs: CHD's dividend is less tied to interest rates than REITs. For instance, Realty Income (O)'s 5.6% yield comes with beta risks (REITs often correlate with rate-sensitive real estate markets).

Healthcare: UnitedHealth Group (UNH) – The Defensive Payer Play

Why UNH?
- Stable Demand: As the largest U.S. health insurer, UNH benefits from aging demographics and mandatory healthcare spending. Its 1.54% yield is paired with a beta of 0.62—a rare combination of income and low volatility.
- Dividend Growth: A 15-year streak of increases reflects its dominance in Medicare Advantage and pharmacy benefits. Unlike REITs, UNH's cash flows are shielded from rising rates.
- Financial Strength: A 54.7% payout ratio (implied via its Dividend Safety Score) and $389 billion in annual revenue ensure dividend safety.

Why SWANs Over REITs in a High-Rate Environment?

REITs like Realty Income (O) offer juicy yields but are highly sensitive to interest rates. When rates rise, their valuations compress, and refinancing costs climb. In contrast, SWAN stocks in utilities, staples, and healthcare:
1. Have inelastic demand (people need energy, soap, and healthcare regardless of the economy).
2. Low beta buffers against market swings.
3. Regulated or contractual pricing (e.g., ES's rate approvals, UNH's Medicare contracts) insulates cash flows.

Investment Recommendation

For defensive growth, allocate 20% of a conservative portfolio to each of the three SWAN stocks:
1. ES for high yield and regulated stability.
2. CHD for household essentials and dividend longevity.
3. UNH for healthcare's demand certainty and low volatility.

Avoid REITs like O unless you're willing to accept beta risks. These SWAN picks offer a total yield of ~2.6%, complemented by steady dividend growth and minimal downside in a volatile market.

Final Take: In a world of uncertainty, SWAN stocks are the bedrock of defensive portfolios. Their dividends, low volatility, and essential service moats make them superior to rate-sensitive alternatives like REITs.