February’s spike in volatility saw the largest one-day drop in the Dow’s history — a rude awakening after several years of stock market calm and rising prices.

Not only has general volatility spiked but headwinds in specific sectors are causing massive disruptions in the larger index. Shares of tech companies now account for 27% of the S&P 500 with Monday’s sell-off largely driven by weakness in the sector.

#-ad_banner-#The 6%-plus drop in shares of Facebook (Nasdaq: FB) alone took 0.1% off the S&P 500 for the day.

With the fiscal stimulus of tax cuts already in the rearview, 2018 lacks a macroeconomic catalyst to support investor enthusiasm. In fact, investor hope has turned to fear of a potential trade war or at least a tariff-induced slowdown.

When uncertainty peaks, I like to seek shelter in best-of-breed dividend names. I look for companies with solid balance sheets and a five-year history of growing dividend payments.

These dividend growth picks won’t be immune to a broad market selloff, but those regular dividend payments represent a source of guaranteed positive returns. The companies’ commitment to growing those dividends also means you earn a progressively higher return for years on that initial investment.

Could 2018 End This Historic Bull Market?
Bull markets don’t die of old age, but there are plenty of catalysts that might lead to a bear mauling the market this year.

Profit margins at S&P 500 companies plunged to 8% in the fourth quarter, down a full percent from the previous quarter, according to Yardeni Research. Analyst expectations may be dangerously high with the 12-month forward margin — based on earnings and revenue guidance — at 12% for companies in the index.

That means profits will need to boom if companies are going to meet earnings expectations. The tax cuts may help boost margins, but what is more likely is the earnings estimates will have to be cut dramatically, taking investor sentiment down with them.

Tax cuts and fiscal spending may have given new life to the aging business cycle, but inflation and worker scarcity are threatening to burden the economy.

The credit cycle could be about to turn lower with the Fed expected to add at least three rate hikes this year on top of the five since December 2016. Rising rates could weigh on household spending and business investment starting in the second half.

The dilemma is that even if the economy slows due to trade or higher rates, the Fed may still have to raise rates on rising prices.

All of this means that investors have likely seen an end to the historically low volatility and daily rising prices we enjoyed in 2017. On a total return basis, the S&P 500 made history last year with 14 consecutive months of gains.

Three Stocks To Weather The Coming Storm
None of this means that stocks can’t do well this year, but don’t fool yourself, a downturn is coming. The nature of the markets means euphoria is ultimately followed by despair. Robert Shiller’s cyclically-adjusted P/E ratio (CAPE) reached 32.8 this month, a valuation it hasn’t seen since 2001 and a 31% premium on its 30-year average of 25 times adjusted earnings.

With correlations increasing between stocks and bonds, the list of safe haven investments is getting smaller, but a dividend growth strategy can help investors position themselves with companies that should weather the market turmoil.

In addition to companies with a history of growing dividend payouts, look for business catalysts that could support sales and investor enthusiasm in best of breed names.

Johnson Controls (NYSE: JCI) yields 2.6% annually and has grown its dividend by 6.8% annually over the last five years. The 2016 merger with Tyco International has transitioned the business to less cyclical segments, including safety systems, and away from automotive manufacturing products.

Johnson Controls announced earlier this month that had completed a strategic review and was considering a sale of its power solutions segment. The segment is the largest producer of lead-acid batteries in the world with 36% of the global market. A sale could bring a boom in cash flow and flexibility to the company.

Tractor Supply (Nasdaq: TSCO) may only yield 1.7%, but the country’s largest consumer farming specialty retailer has boosted its payout by an annualized 23.9% in the last five years. The company pays out just 32% of income as dividends, leaving plenty of room for further increases.

The company acquired Petsense in 2016 to expand its retail footprint and move into the growing pet care market. It was a smart strategy considering 75% of its current customer base has a pet. The acquisition has allowed it to expand services revenue into PetVet clinics and grooming, also helping to pull traffic into the retail stores.

Weakness across the retail sector has weighed on shares despite the fact that revenue has grown an impressive 8.2% annually over the last three years. Shares trade for 19.5-times, trailing earnings against an average of 27 times over the past five years, according to Morningstar data.

Medtronic (NYSE: MDT) yields 2.2% annually and has grown its dividend by 12.1% annually over the last five years. Not only does the company offer an attractive dividend, it also returns cash to investors through an aggressive buyback program. Medtronic generated $5.6 billion in free cash flow last year, returning $3.5 billion through share repurchases and nearly $2.4 billion in dividends.

The 2016 acquisition of Covidien doubled the size of the company to create the largest player in medical devices. Medtronic has partnered with IBM Watson to use its unrivaled scale in medical data to make breakthroughs in medical analytics and predictive healthcare.

Risks To Consider: All three companies book significant revenues internationally that could be threatened in a protracted trade war, though dividends should remain relatively safe.

Action To Take: Look for quality companies with strong dividend yields and growing payments for stability in an uncertain market.

Editor’s Note: It’s the distinctive sign that stocks give just before they take off. We’ve already made $421,000 using this telltale giveaway. Here’s how you can use it too…