Stocks beat bonds, and these dividend stocks offer reliable yields.
Stocks can be volatile, and 2022 has served up a great reminder of that so far. Over the longer term, however, it’s clear that stocks outperform other financial assets like bonds and cash. That’s particularly true in a low interest rate environment, when yields are depressed. But that could be changing; the Federal Reserve seems poised to raise interest rates quickly. As rates rise alongside a historic surge in inflation, economic conditions are changing quickly. Some formerly reliable dividend names are struggling, while new leaders have emerged in sectors such as real estate. Investors should pick their dividend stocks carefully given the changing market environment. Here are 15 of the best dividend stocks to buy for the remainder of 2022.
Exxon Mobil Corp. (ticker: XOM)
Exxon Mobil is the largest oil company in North America by market capitalization. It’s also one of the most reliable for income investors. Exxon Mobil kept its dividend steady even in 2020, when the price of oil briefly crashed below $0 per barrel. While the majority of energy companies slashed their dividends, Exxon Mobil took care of its shareholders. Now that boom times are back, Exxon has resumed its dividend hikes while also paying down debt and focusing on future investment opportunities. Admittedly, the stock has already rallied dramatically over the past year. Despite the surge, shares still yield 4% and are on sale for about 10 times forward earnings. That’s not a bad deal for such a solid blue-chip stock as this one.
Suncor Energy Inc. (SU)
Energy has returned to form as one of the best places to go looking for dividends. With oil topping $100 per barrel again, there are a lot of intriguing dividends on offer in the energy space. Some investors might wonder if the sector has run too far, too fast, however, and if it’s at risk of a quick sell-off. Against that backdrop, large, low-cost oil producers should be a refuge regardless of short-term moves in the price of oil and gas. Suncor, for example, is Canada’s largest integrated energy company. Its crown jewels are its low-cost oil sands projects primarily in the province of Alberta. These assets have lifespans lasting decades, and thus provide stable and reliable energy supplies. As the price of oil has surged, Suncor has strengthened its balance sheet and has raised its dividend. Shares currently yield 4%, and the stock is selling for less than 7 times forward earnings.
Wells Fargo & Co. (WFC)
Wells Fargo had a stunning fall from grace in the late 2010s, as its previously exemplary reputation fell victim to a series of operational scandals. Federal regulators have punished the bank, and the company has turned over its management team. Years have passed and the bank has stabilized its operations and earnings are growing strongly once again. Still, investors don’t seem to have forgiven the bank for its past sins; Wells Fargo’s stock trades at a much lower multiple than it used to compared to its peers. This should change going forward, however, as the bank is aggressively cutting costs and buying back stock. Both of these factors should lead to substantial earnings increases over the next two to three years. Wells Fargo doesn’t have a particularly high dividend today at just more than 2%, but it should grow its dividend rapidly over the next couple of years as its profit growth accelerates.
Citigroup Inc. (C)
Citigroup has a reputation for being a poorly run bank. And sure, it has gotten into its share of problematic loans and lines of business over the decades. However, the firm has unloaded many of its riskier operations since the last financial crisis, and results in recent years have been vastly improved. If there’s a statute of limitations for poor management decisions, Citigroup should be past it by now. Meanwhile, with the recent sell-off, Citigroup shares are once again selling at bargain bin prices relative to other big banks. There simply isn’t a good reason for this. The company’s operational metrics are way up over the past three years, as the bank is doing a much better job of turning its top-line interest income into bottom-line profits. Shares are going for just 7 times forward earnings and provide a 3.9% dividend yield.
Whirlpool Corp. (WHR)
Whirlpool is a leading producer of home appliances such as refrigerators, washing machines and microwaves. The company has seen a dramatic increase in sales over the past two years. With people stuck at home, many folks decided to upgrade their appliances to the latest models. Whirlpool stock initially rallied sharply as traders factored in Whirlpool’s record profits into their outlooks for the company going forward. Over the past year, however, Whirlpool stock has fallen by more than 25% through April 18, as analysts fear a decline in business once the housing boom ends. That may well happen, but Whirlpool stock is now only marginally above where it traded in 2019. That makes little sense because the company’s huge profits of the last two years didn’t hurt its long-term prospects. In any case, shares are at just 7 times forward earnings. The company just hiked its dividend payout by 25% in February, and the stock now yields 4.1%.
Blackstone Inc. (BX)
Blackstone is one of the world’s leading alternative asset managers. The company has built a tremendous business over the years, providing large-scale exposure to less-common asset classes. Big institutions such as pension funds have long needed a way to invest in non-listed assets such as real estate, private equity, venture capital and hedge funds. Blackstone provides these products to institutional investors and earns healthy fees for doing so. The business is a cyclical one, as it is tied to the ups and downs of various financial markets. Investors are clearly worried about a down cycle, and the potential impact of higher interest rates on the business. In due time, however, Blackstone should resume its upward trajectory. Meanwhile, with shares down more than 20% from their recent peak, the dividend yield has now risen to 3.6%.
Pinnacle West Capital Corp. (PNW)
Utility stocks have rallied sharply over the past six months. With investors moving into defensive stocks, power, gas and water utilities have become favorite safe haven asset categories. This has driven down yields on many of these stocks to less compelling levels. However, there’s at least one cheap utility left. That would be Pinnacle West, which operates Arizona Public Service and Bright Canyon Energy. The company has faced some short-term setbacks over the past year, including rate disputes with local regulators and some analyst downgrades. These headwinds on the stock have kept Pinnacle West at a more attractive valuation than peers, which have already moved to new highs. Over the long term, Pinnacle West should enjoy favorable demographic drivers. Utility earnings tend to follow population growth, and Arizona is one of the fastest-growing states in the country, thanks to its favorable weather and taxation levels. PNW pays a 4.4% dividend.
Banco Latinoamericano de Comercio Exterior SA (BLX)
Banco Latinoamericano de Comercio Exterio, or Bladex for short, is a unique bank. It’s a commercial bank that primarily finances short-term, trade-related loans. Think of short-term loans to support industrial, shipping or other such customers. The bank’s main offices are in Panama, which is logical as it is a free trade hub and home of the Panama Canal. Its board of directors is full of various heads of central banks around Latin America, and the bank exists in large part to promote the free flow of commercial goods around the region. Due to its short-term loans and central banking ties, Bladex has been remarkably stable over the years. That said, recent earnings results were muted with most of Latin America in a slump. With commodity prices now through the roof, however, Bladex’s loan demand should surge. In the meantime, Bladex pays out most of its earnings as a dividend and currently yields 6.7%.
Honda Motor Co. Ltd. (HMC)
Turning from Latin America to Japan, Honda is another attractive higher-dividend stock. The maker of automobiles, motorcycles, all-terrain vehicles and many other machines probably isn’t on the top of most investors’ dividend stock watchlists. However, given the recent sharp sell-off in Honda’s stock price, shares now yield 5.4%. There are two reasons for the decline. The supply chain shortage has hurt most motor vehicle companies dramatically. And Japanese companies in particular are under pressure after one of the sharpest drops in the value of the Japanese yen in decades. For people buying Japanese stocks, however, the slumping yen makes for bargain-priced opportunities, as dollars go further when buying Japanese stocks listed on U.S. exchanges. Supply chain problems will clear up sooner or later for Honda. Meanwhile, the stock is going for just seven times earnings.
CubeSmart (CUBE)
Self-storage operator CubeSmart is a smart way to profit from rising inflation. Generally, storage units are rented on a month-to-month basis, and operators can raise prices quickly to adjust to changing market conditions. In addition, these businesses don’t typically require much staff to operate, meaning that inflation’s impact on labor costs is modest. More broadly, real estate investment trusts, or REITs, are advantaged in a rising interest rate environment because they carry a lot of debt on their balance sheets. As inflation takes hold, the value of said properties increases, while the debt burden is inflated away. This is a win-win for owners of storage REITs such as CubeSmart in current market conditions. At the moment, shares yield a reasonable 3.2%.
Realty Income Corp. (O)
Realty Income is another REIT that stands out in a world of rising rates. Realty Income offers a 4.1% dividend yield, which is attractive in its own right. On top of that, dividends are paid monthly, making it an intriguing option for income seekers. Realty Income is a triple-net-lease REIT focusing on industrial and retail properties. Top tenants include firms such as 7-Eleven, Walgreens Boots Alliance Inc. (WBA) and FedEx Corp. (FDX). The company has largely avoided the e-commerce effect that has hammered malls, and Realty Income also spun off its office holdings recently to step away from work-from-home pressures. Realty Income’s properties tend to be single free-standing buildings, which are much easier to lease and reposition as economic conditions change. Due to Realty Income’s large size, it can obtain cheap capital to purchase more properties and further grow its business. And, like CubeSmart, Realty Income should benefit from rising inflation.
Washington Trust Bancorp Inc. (WASH)
Investors generally think of big banks for dividends. However, in many cases, smaller regional banks are often more stable than the national titans. For example, Rhode Island-based Washington Trust Bancorp was founded in 1800 to serve mills sprouting up along the Pawcatuck River. The economy has changed a lot since then, but Washington Trust keeps humming along. It’s paid dividends for more than a century and managed to grow its profitability and keep the dividend going even during the Great Recession. The bank’s conservative nature has served it well and has positioned it for decades of future success. In fact, during the 2008 financial crisis, Washington Trust was able to take market share locally, as it still had excess reserves to lend while the bigger banks had to cut back their operations. Washington Trust shares currently offer a generous 4.4% yield.
Southern Copper Corp. (SCCO)
Southern Copper is a copper mining company with operations primarily focused in Mexico and Peru. The price of copper has exploded over the past two years, as pandemic-driven demand for housing, electronics and other end goods that require copper has risen. Throw in supply disruptions and geopolitical unrest in copper-producing countries, and it’s been a great time for copper producers. It’s not just an economic reopening story, either. The move to renewable energy will require mountains of copper, as it’s a key ingredient in things such as batteries, wind turbines and solar panels. Southern Copper is one mining firm that can take advantage of the bull market in the metal. Its stock currently offers a 5.5% dividend yield.
VF Corp. (VFC)
VF Corp. is a clothing and footwear company known for brands such as Vans, The North Face and Timberland. The company is also a dividend aristocrat, meaning that it has increased its dividend for at least 25 consecutive years. That’s rather impressive for a company in a cyclical and fast-moving industry such as apparel. VF Corp. has been able to pull it off since it acquires its brands on the cheap and then transforms them under its ownership. For example, it bought both Vans and The North Face for pennies on the dollar compared to what they’re worth today. Like many companies, VF Corp. is having issues with inflation and its supply chain at the moment. However, that’s more than reflected in the price, as shares are down more than 20% over the last six months. That has pushed the stock’s dividend yield up to 3.6%.
Seagate Technology Holdings PLC (STX)
Seagate is a leader in the market for memory and storage devices. Think of things such as hard drives, solid state drives and cloud storage. This isn’t the most glamorous part of the technology sector by any means, but it’s essential to make products such as laptops and smartphones work efficiently. Valuations on memory stocks have been generally depressed in recent years, as analysts didn’t see much growth ahead. However, the industry surprised to the upside over the past two years as tech spending picked up, and that showed how storage is still a cash cow industry. Over the past few months, Seagate stock has slid off its highs. This puts the stock back in the bargain range, as it sells for about 8 times forward earnings and offers a 3.4% dividend yield.
15 of the best dividend stocks to buy for 2022:
— Exxon Mobil Corp. (XOM)
— Suncor Energy Inc. (SU)
— Wells Fargo & Co. (WFC)
— Citigroup Inc. (C)
— Whirlpool Corp. (WHR)
— Blackstone Inc. (BX)
— Pinnacle West Capital Corp. (PNW)
— Banco Latinoamericano de Comercio Exterior SA (BLX)
— Honda Motor Co. Ltd. (HMC)
— CubeSmart (CUBE)
— Realty Income Corp. (O)
— Washington Trust Bancorp Inc. (WASH)
— Southern Copper Corp. (SCCO)
— VF Corp. (VFC)
— Seagate Technology Holdings PLC (STX)
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15 of the Best Dividend Stocks to Buy for 2022 originally appeared on usnews.com
Update 04/19/22: This story was published at an earlier date and has been updated with new information.
