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With the S&P 500 up a rip-roaring 14.5% in the first half of 2024 alone, a mere 4% annual dividend yield may seem like a consolation prize at best. But long-term investors know that the benefits of quality dividend stocks and exchange-traded funds (ETFs) shine when the stock market is trading sideways or going down, not when it is going up.

Three Motley Fool contributors have identified investments with consistent and growing quarterly payouts that can anchor a diversified portfolio during a downturn. They are Kenvue (NYSE: KVUE), American Electric Power (NASDAQ: AEP), and the VanEck Oil Refiners ETF (NYSEMKT: CRAK) -- three high-yield choices worth considering if you're interested in generating dividend income no matter what the economy is doing.

A worthy consumer-staple stock for income-oriented investors

Daniel Foelber (Kenvue): Kenvue spun off from former parent company, Johnson & Johnson (NYSE: JNJ), in August 2023. The idea was to separate the consumer health business so that J&J could focus on medical devices, diagnostics, and pharmaceuticals.

Breakups and restructurings coincide with uncertainty, so it's understandable that Kenvue and Johnson & Johnson have been struggling stocks recently. However, Kenvue has the makings of an excellent high-yield dividend stock to buy and hold.

Kenvue is chock-full of top brands, from Band-Aid to Tylenol, Listerine, Neutrogena, Aveeno, and more. These products tend to do well no matter what the economy is doing, since changing mouthwash habits may be down the list of household budget cuts compared to pulling back on dining out, vacation spending, etc.

Kenvue pays a $0.20 per-share quarterly dividend. As long as it announces a raise by the end of the year, it will retain its status as a Dividend King, a designation it inherited from J&J. Dividend Kings are companies that have paid and raised their dividends for at least 50 consecutive years. In April, J&J announced its 62nd consecutive annual raise.

Kenvue's solid entry-level dividend, paired with the pressured stock price, has boosted the yield to a respectable 4.4%. That's a far more lucrative passive income source than consumer staples like Procter & Gamble, Coca-Cola, PepsiCo, Walmart, and others.

The biggest reason not to buy Kenvue is that the company could undergo a period of sluggish growth, which may lead to a stagnant stock price and an investment thesis centered around the dividend payout. After all, Kenvue's top brands are good, but they aren't immune from competition.

Larger stalwarts like Procter & Gamble -- which is worth over 10 times Kenvue -- benefit from a wide variety of product categories and a highly sophisticated supply chain. This advantage can be the difference during challenging periods. Even Clorox -- which has roughly half the market cap of Kenvue -- has a more diversified product mix.

Overall, Kenvue stands out as a top buy if you're focused purely on passive income, but there could be better options out there if you're looking for a blend of passive income and upside potential.

Generating consistent cash flow and returning it to shareholders

Scott Levine (American Electric Power): Hardly one of the sexier tickers, American Electric Power is associated with neither generative artificial intelligence nor a breakthrough medical treatment. But that doesn't mean this boring stock won't fuel your excitement.

A leading electric utility operating throughout the U.S., American Electric Power is alluring to income investors and value investors alike. Currently, the stock offers a forward dividend yield of 4%, and it's trading at a discount to its historic valuation, making it a great option for both income and value investors alike.

With 5.6 million customers located throughout 11 states, American Electric Power has a sizable customer base -- a base that provides steady revenue and predictable cash flows for the company. While American Electric Power doesn't have the luxury of raising rates whenever it desires, it is guaranteed a given rate of return since it operates as a regulated utility. This gives management a good perspective on future cash flows, helping it plan according to capital expenditures such as infrastructure upgrades and dividends.

For 113 years, American Electric Power has rewarded shareholders with a dividend -- no small feat -- and it hasn't been nominal increases either. From 2010 through 2023, the company hiked its payout at a compound annual growth rate of 5.4%. Lest you think the company is risking its financial health to placate shareholders, consider the fact that the company's payout ratio has averaged 77% over the past 10 years and 68% over the past five years.

Hanging on the discount rack, shares of American Electric Power are trading at 7.3 times operating cash flow, compared to their five-year average cash-flow multiple of 9.6. For those looking to bolster their passive income streams, American Electric Power is a great opportunity for a variety of powerful reasons.

Oil refining stocks have interesting dynamics

Lee Samaha (VanEck Oil Refiners ETF): This ETF offers a 3.4% dividend yield and exposure to something different in the marketplace.

Traditionally, investors have looked at energy stocks as being cyclical. That's because energy demand tends to be led by economic growth, so energy prices follow in concert. That said, there are periods when, for whatever reason, supply is curtailed (OPEC cuts, etc.) or there is oversupply in the market (overinvestment in capacity, etc.), and that also bears an influence on energy prices.

With oil refiners, it's fair to say that they rely on economic growth to encourage demand for refined oil products. Moreover, an extended period of low oil prices is good for them as it reduces their main input costs. It can also increase demand as relatively low prices for refined oil products might encourage more demand.

As such, the sweet spot for oil refiners and the VanEck Oil Refiners ETF would be a period of economic growth (to increase end demand) with a relatively low price of oil in tandem. Oil refiners also provide a good hedge against oil exploration & production stocks, which would suffer if oil prices fall.

Should you invest $1,000 in Kenvue right now?

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Daniel Foelber has no position in any of the stocks mentioned. Lee Samaha has no position in any of the stocks mentioned. Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Kenvue and Walmart. The Motley Fool recommends Johnson & Johnson and recommends the following options: long January 2026 $13 calls on Kenvue. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.