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3 Solid Dividend Stocks to Let You Sleep at Night: Costco Wholesale Corporation (COST), Verizon Communications Inc. (VZ)

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The $78 Billion Question Affecting Dividend Stocks TodayNoted economist Paul Samuelson once said, “Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.”

Of course, that’s doesn’t mean investing can’t be exciting. To the contrary, it’s a great feeling to watch your due diligence pay off over time as an investment thesis comes to fruition. That said, it’s a safe bet Samuelson would agree that your investments shouldn’t keep you awake at night.

On one hand, some of us have no problem weathering the extreme ups and downs of more speculative, high-beta growth stocks. After all, with greater risk comes greater reward, right? On the other hand, other investors would rather put their money to work in larger, stronger, well-established companies. While the potential reward may not be as great, you can be sure your chances of losing a substantial sum of money are much lower.

With that, here are three solid businesses with which any sleep-deprived investor might find relief:

Company Market Cap Beta Dividend Yield CAPS Rating (out of five)
Costco $45 billion 0.44 1.1% *****
Verizon $136 billion 0.36 4.4% ****
Diageo $75.4 billion 0.80 1.9% *****

Sources: Yahoo! Finance, Motley Fool CAPS.

Profits in bulk
First up, consider loading your cart with warehouse specialist Costco Wholesale Corporation (NASDAQ:COST). Compared with traditional stores such as Target Corporation (NYSE:TGT) or Wal-Mart Stores, Inc. (NYSE:WMT), Costco generally stocks a fraction of the number of items in its locations at any given time with a general emphasis on bulk purchases. Thanks to its no-frills locations and reasonable annual membership fees, Costco is also able to generate plenty of cash while consistently offering rock-bottom prices on products to its fanatically loyal customer base.

In addition, while Costco Wholesale Corporation (NASDAQ:COST) maintains a core group of products in its stores — I can’t remember, for example, the last time I bought diapers, milk, or butter anywhere else — it also maintains a sort of “treasure hunting” atmosphere in an effort to lure consumers into buying not-so-common items that may not be around the next time they visit. As a result, rather than being frustrated with Costco for not stocking any given item, shoppers are generally disappointed they didn’t buy when they had the chance.

In the end, I can’t help but wonder whether potential investors might suffer a similar disappointment if they don’t buy shares of Costco Wholesale Corporation (NASDAQ:COST), especially considering the fact the company offers a solid 1.1% dividend, repurchased 7.3 million of its shares last year, and plans to continue expanding its store count by building 30 new locations in 2013.

Big red for the win
If Costco’s not your bag, maybe I can talk you into buying shares of Verizon Communications Inc. (NYSE:VZ). Why, you ask, would any conservative investor want to purchase stock in a company with a trailing price-to-earnings ratio north of 150? In short, as fellow Fool Tim Brugger recently pointed out, things weren’t exactly as they seemed during Verizon’s latest earnings report, thanks primarily to massive non-operational charges of $1.86 per share — including a $1.55-per-share charge to account for pension liabilities.

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