2 defensive dividend stocks I'd buy for uncertain markets

Today I'm looking at two defensive companies which I believe could be safe and profitable buys, even if markets remain volatile and uncertain.

Profit from convenience

Dublin-based Greencore Group (LSE: GNC) is a major manufacturer of pre-packed sandwiches and ready meals for the UK and US markets.

The market for such products is massive and growing. Greencore is the UK's biggest manufacturer of pre-packed sandwiches, producing more than 690m items each year. Sales of Food to Go products rose by 12.2% during the 13 weeks to 29 December, helping to lift UK revenue by 9.2% to £385.4m during the period.

The UK business is impressive and well established. But it's already a market leader. Much greater growth potential exists in the US. Greencore has operated in this market since 2008, but took a big step up in scale at the end of 2016, when it acquired Peacock Foods for $747m.

An acquisition of this size takes time to digest and the group's profits dipped last year. But this year's results look more promising to me. US sales rose by 5.1% to £255.1m on a pro forma basis during the first quarter, with volume growth of 7%.

Capital spending is expected to fall this year, improving cash flow and positioning the group to start reducing debt levels.

Cheaper than a sandwich

At a last-seen price of 193p per share, Greencore stock is cheaper than a garage sandwich. It's also likely to be a more satisfying buy, in my opinion.

This stock currently trades on a forecast P/E of 11.9, with a prospective yield of 3.1%. I'd rate the shares as a buy at these levels.

A sweet choice

Although Tate & Lyle (LSE: TATE) is often associated with the bags of sugar seen in every supermarket, these retail products are made under licence. The group's main focus these days is producing sweeteners and other bulk ingredients for food manufacturers.

This company has had a difficult few years, including several profit warnings. But the outlook seems to be improving. The last few trading updates have all been positive and in line with expectations, suggesting performance is back on track.

The only ingredient that's missing now is growth. Adjusted earnings are expected to rise by 5% to 49.3p per share this year. This puts the stock on an affordable P/E of 11.6, with a dividend yield of 5%.

This modest valuation may partly be due to an uncertain outlook for growth. Forecasts for 2018/19 suggest sales and earnings will be broadly flat, which could leave shareholders reliant upon the dividend for short-term gains.

It's worth asking questions about growth, but in my view these concerns are not a reason to avoid this stock. The group's balance sheet is strong and the 5% dividend yield should be covered comfortably by free cash flow and earnings.

I believe Tate has the financial capacity to make acquisitions, and it could even become a bid target.

If the core business continues to perform well, then I'm confident that management will find new opportunities for growth and shareholder returns. In the meantime, I'd rate this as a strong income buy.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Greencore. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.