These dividend stocks reward investors willing to hold on during unstable economic conditions.
The stock market is having a rough 2022. The combination of high inflation and slowing economic growth has made investors nervous, and understandably so. Past market winners such as technology and aggressive growth stocks simply aren’t delivering the same sorts of returns that they used to. However, a great deal of economic research has shown that, over the long haul, stocks still tend to outperform most other major asset classes. Investors should resist the urge to abandon the market even during a difficult stretch. One way to stay the course with stocks is to own dividend-paying companies, which give investors income today and make it easier to remain patient during the inevitable market corrections. These 15 dividend stocks all pay at least a 3% yield and have strong prospects over the next year.
Exxon Mobil Corp. (ticker: XOM)
Energy has been one of the few bright spots for the stock market in 2022. Natural gas has moved to decade-long highs in recent weeks. Crude oil has slid a bit from its spring peak, but remains near the $100 per barrel mark, which is far above where it was trading in recent years. Refined energy products such as gasoline, heating oil and petrochemicals are also attracting huge premiums. That’s great news for integrated oil leaders such as Exxon Mobil. Exxon maintained its dividend even in 2020, when many rivals had to slash theirs. And now it’s earning record profits as the industry has recovered. Investors might think it’s too late to buy into Exxon after its big run-up over the past year. However, shares are still selling for less than 8 times forward earnings while paying a solid 3.6% dividend yield.
Shell PLC (SHEL)
Like Exxon Mobil, Shell has become an absolute cash flow machine with the rise in energy prices. The company’s earnings for the second quarter soared to $11.5 billion, up dramatically from the $5.5 billion it raked in during the second quarter of 2021. The company saw $13.7 billion in free cash flow, which was nearly double that of 2021’s second quarter figure. Shell spread the wealth, returning $7.4 billion to shareholders through dividends and share buybacks during the quarter. Despite being on pace to generate $50 billion or so of annualized free cash flow, Shell’s whole market capitalization is just $200 billion today, and shares trade at an estimated 5.3 times forward earnings. In addition to the large buybacks, SHEL stock is also throwing off a 3.6% dividend yield.
Unilever PLC (UL)
Packaged foods and consumer goods company Unilever finds itself in an interesting position. It has struggled to achieve much revenue growth in recent years as consumer preferences have shifted. However, the current inflationary environment has changed things up. Unilever saw sales growth of nearly 9% in its most recent quarter, which is a big jump from past performance. That was entirely driven by price hikes, as sales volumes failed to increase. Right now, Unilever is seeing falling profit margins, as its cost inflation is running faster than 9%. Over time, however, inflation should moderate while Unilever profits from the price hikes it has already worked through the supply chain. American investors also benefit because Unilever is based out of Europe and thus shares are depressed in part due to the recent plunge in the value of European currencies in comparison to the dollar. Shares currently yield 4.1%.
Walgreens Boots Alliance Inc. (WBA)
Walgreens Boots Alliance is going through a rough patch. The firm’s Boots acquisition in the U.K. failed to play out as management had hoped. Meanwhile, Walgreens’ sales trajectory has softened following the stronger period it saw at the height of the pandemic. There are also longer-term concerns around a decline in the company’s convenience retail segment of stores along with uncertainty about potential changes in the pharmacy business, as the government and insurers seek to limit cost increases. These are all valid objections. On the other hand, Walgreens is down to 7.6 times forward earnings. And it’s been incredibly reliable over the decades; Walgreens has raised its dividend for 46 years in a row, and the stock currently yields 5.3%.
Citigroup Inc. (C)
Citigroup is one of America’s largest banks. Citigroup is one of the most diversified global financial firms out there with a franchise spanning investment banking, retail banking and a large international footprint. Citigroup has also become a leading value-oriented dividend stock. That’s because Warren Buffett’s Berkshire Hathaway Inc. (BRK.B, BRK.A) picked up 55 million shares of Citigroup stock earlier this year. With Berkshire putting nearly $3 billion into Citigroup, it’s a sign that Buffett is on board with Citigroup’s corporate turnaround. And that vote of confidence is worth a lot, given that Buffett has a long and skillful track record of investing within the American banking industry. Citigroup now trades for less than 8 times forward earnings and offers a 4.1% dividend yield.
Banco Latinoamericano de Comercio Exterior SA (BLX)
Banco Latinoamericano de Comercio Exterior, 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 regional commerce. Bladex relies on commercial growth in Latin America rather than the housing market to prosper. As some regional economies have reached double-digit GDP growth rates, Bladex is now building a more aggressive loan book to cash in on new commercial opportunities. Shares trade for less than 8 times earnings and offer a 7% dividend yield.
Life Storage Inc. (LSI)
Real estate investment trusts, or REITs, can work well during inflationary times. That’s especially true for self-storage owners such as Life Storage. 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. REITs also tend to carry a lot of long-term debt on their balance sheets to finance their holdings, which is a plus during inflationary periods. Storage is also enjoying huge tail winds from the current economic environment. In August, Life Storage announced a fantastic quarter with earnings and revenues easily beating expectations. The company also guided to same-store revenue growth of almost 14%, which was far ahead of prior guidance. There’s good news for income investors as well, as Life Storage just raised its dividend to 3.3%.
Southern Co. (SO)
Southern is a rapidly transforming power utility. Historically, Southern generated the vast majority of its electricity from coal, but it has pivoted to natural gas, nuclear and renewables in recent years. Southern has experienced significant cost overruns on some of these new generation facilities, such as its nuclear power plants. The solar industry also experienced some hiccups with supply shortages and pricing concerns recently. However, the passage of the Inflation Reduction Act, which includes sizable incentives for renewables, should give Southern a significant tail wind on this front. More broadly, Southern operates in many markets with solid demographics and regulators with a generally favorable outlook for the utility industry. UBS recently upgraded Southern stock thanks to favorable regulatory action on its Vogtle Unit 3 nuclear power project. Shares currently yield 3.5%.
Verizon Communications Inc. (VZ)
Telecom companies have generally been one of the most reliable sectors for high-dividend stocks. However, after AT&T Inc.’s (T) shocking dividend cut last year, some investors have been scared away. Arguably, Verizon has been overly punished by association. The company didn’t take on as much debt as AT&T, nor did it squander so much money on questionable acquisitions. Yes, Verizon has seen profit growth diminish amid rising competition and an expensive 5G rollout. However, Verizon’s balance sheet is fine and profits, while not booming, are stable and easily cover the dividend. In other words, Verizon isn’t the next AT&T. Meanwhile, VZ stock is trading for less than 9 times forward earnings while offering an appealing 5.9% dividend yield.
VF Corp. (VFC)
VF 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 has been able to pull it off since it acquires its brands such as Vans and The North Face for far lower valuations than what they’re worth in today’s market. VFC stock has slumped to new lows this summer amid fears of falling consumer spending. Retailers have reported weak results in consumer discretionary categories such as apparel as well. This has affected VF to an extent, but its diversified lines of business will help soften the blow. With the latest share price decline, the stock now sells for less than 14 times earnings and offers a 4.6% dividend yield.
Suncor Energy Inc. (SU)
Suncor is more than just another large energy company. For one thing, it owns a large amount of oil refining and distribution assets, meaning that Suncor’s fortunes aren’t just tied to the raw price of crude oil. And, to that point, refining margins have surged to historic levels this year, adding profitability to Suncor’s operations. Suncor’s other big advantage is that it is big in the Canadian oil sands. These oil sands are long-life assets that can run for decades with barely any decline in production once they are up and running. In a world where governments and environmentally conscious investors have placed many limits on new oil production assets, Suncor’s existing already-in-operation production stands out as a major competitive advantage. While Suncor’s shares have rallied sharply this year, its valuation remains compelling. The stock is selling for around 5 times forward earnings while offering a 4.2% yield and large stock buyback program.
Northrim BanCorp Inc. (NRIM)
Northrim BanCorp is one of Alaska’s few primary homegrown banking companies. The Alaskan banking market is isolated, with only a handful of national banks operating up north. This leaves the local players, like Northrim, to enjoy much higher net interest margins than their lower 48 state peers thanks to the lower level of competition in the market. Alaska has another unique feature. The state collects royalties on its substantial oil production, and sends out those royalties to Alaskan residents every year in what amounts to an oil dividend. With the price of oil surging, there should be more money directly flowing to Alaskan consumers. Northrim is enjoying this prosperity. Earnings are rising and the bank just gave its shareholders a juicy 22% dividend increase in August. This pushes the bank’s dividend yield up to 4.1%, while shares trade for less than 9 times forward earnings.
Coca-Cola Europacific Partners PLC (CCEP)
Coca-Cola Europacific Partners is a major bottling partner for Coca-Cola Co. (KO) in international markets. It began with a group of Spaniards bottling Coca-Cola in the 1950s and has expanded with a series of mergers and acquisitions in recent years. Today, it is now the largest individual Coca-Cola bottler in the world, with operations spanning much of Europe including key markets like Germany, France, Spain and the U.K. Shares of Coca-Cola Europacific Partners are off 25% over the past year, which is a huge divergence from Coca-Cola itself, which is up 10%. The difference is likely due to the poor economic conditions, geopolitical problems and energy crisis in Europe right now. For longer-term investors, however, this could be an ideal time to buy quality European companies such as Coca-Cola Europacific. Shares currently sell for around 15 times forward earnings and offer a 4.2% dividend yield.
Boston Properties Inc. (BXP)
Boston Properties is one of the nation’s largest commercial office REITs. It has a particular focus on top-tier properties in areas that have historically commanded premium rents, such as New York City. Understandably, since the pandemic began, the office REITs have been under heavy selling pressure as investors question how much occupancy will be lost in coming years. Work-from-home and flexible schedules with less than five days a week in the office will be big headwinds. Arguably, owners such as Boston Properties with the top-tier assets in a market will still be able to find tenants even as lower-tier office buildings struggle. Boston Properties is now trading at just more than half of its pre-pandemic price-to-funds from operations ratio. Meanwhile, the dividend yield has crept up to 4.7%. For investors who believe in the future of high-quality office buildings, BXP stock is a bargain.
15 of the best dividend stocks to buy for 2022:
— Exxon Mobil Corp. (XOM)
— Shell PLC (SHEL)
— Intel Corp. (INTC)
— Unilever PLC (UL)
— Walgreens Boots Alliance Inc. (WBA)
— Citigroup Inc. (C)
— Banco Latinoamericano de Comercio Exterior SA (BLX)
— Life Storage Inc. (LSI)
— Southern Co. (SO)
— Verizon Communications Inc. (VZ)
— VF Corp. (VFC)
— Suncor Energy Inc. (SU)
— Northrim BanCorp Inc. (NRIM)
— Coca-Cola Europacific Partners PLC (CCEP)
— Boston Properties Inc. (BXP)
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Update 08/30/22: This story was published at an earlier date and has been updated with new information.