It’s been a perfect storm for many dividend stocks in recent months. The Federal Reserve has dramatically increased interest rates. This makes capital more expensive and tends to cause the valuation of conservative dividend stocks to decline as people sell some equities to rotate into risk-free government bonds and certificates of deposit.
In addition, various emerging trends such as remote work, online commerce and weight loss drugs have disrupted many industries that investors have long relied upon to provide stable dividends. Investors should be cautious, as not all higher-yielding dividend stocks will make it through the current headwinds in good health.
These 15 leading dividend stocks, however, are solid bargains today and offer the prospect of both steady income and rising share prices going forward:
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Here are 15 of the best dividend stocks to buy now:
| Stock | Forward dividend yield |
| McCormick & Co. Inc. (ticker: MKC) | 2.6% |
| Hormel Foods Corp. (HRL) | 3.4% |
| Clorox Co. (CLX) | 4% |
| National Storage Affiliates Trust (NSA) | 7.2% |
| Realty Income Corp. (O) | 6.1% |
| Consolidated Edison Inc. (ED) | 3.7% |
| Northwest Natural Holding Co. (NWN) | 5% |
| Wells Fargo & Co. (WFC) | 3.5% |
| Pfizer Inc. (PFE) | 5% |
| Medtronic PLC (MDT) | 3.9% |
| Kimberly-Clark Corp. (KMB) | 3.9% |
| Canadian Natural Resources Ltd. (CNQ) | 4% |
| Mid-America Apartment Communities Inc. (MAA) | 4.3% |
| Lockheed Martin Corp. (LMT) | 2.9% |
| Exxon Mobil Corp. (XOM) | 3.4% |
McCormick & Co. Inc. (MKC)
Consumer staples stocks have gotten hammered in recent months on two primary concerns. One is the broad issue with higher interest rates depressing the value of dividend stocks, which has affected many sectors. And specifically to staples, the rise of the GLP-1 category of weight loss drugs such as Ozempic is provoking fears that people will spend less on packaged foods, which appears to be a valid concern. However, things are getting out of hand.
Take McCormick, which sells primarily spices, hot sauces and seasonings. Its products tend to be low-calorie and aren’t junk foods. Yet even McCormick has gotten caught up in the rush to dump food stocks. Shares recently fell double digits on an earnings report where the company met earnings expectations and raised guidance. Investors, however, should seize the moment and take advantage of the discounts in food companies like McCormick with less exposure to weight loss drugs.
Hormel Foods Corp. (HRL)
Hormel Foods is another food company caught up in the current industry sell-off. However, it is better positioned than most to deal with the changing consumer tides. That’s because Hormel is a protein-focused company. It sells a wide variety of protein and nutrient-rich foods such as nuts, beans and many kinds of fresh and prepared meats. As people use Ozempic or other weight loss drugs, an increasing focus will be on consuming foods high in protein and nutrients to make sure people remain well nourished while eating fewer overall calories. Hormel’s focus on selling healthier protein-rich foods should situate it better than those that sell junk food, soda and other products which are high in calories and relatively low in vitamins or minerals.
In other words, while weight loss drugs pose a real threat to many packaged foods companies, Hormel should stand out from the crowd. Its shares, nonetheless, currently sit near 52-week lows and the stock is offering its highest starting dividend yield in many years, paying 3.4%.
Clorox Co. (CLX)
Clorox marks another opportunity in the broader consumer staples category. The cleaning products company enjoyed an initial boost in demand in 2020 as folks cleaned surfaces more frequently to slow the spread of COVID-19. Since then, however, folks were fully stocked up on cleaning supplies and sales returned to normal. Profit margins slumped as demand leveled off and Clorox saw its earnings fall sharply. Just as the business was recovering, it was recently hit by a cyberattack that greatly impacted its short-term revenue. The cyberattack forced Clorox to slow production and delay fulfillment of products for a time while it restored its systems to working order. Incredibly enough, the company guided to a near-term 25% decline in revenues and an operating loss next quarter due to the cybersecurity breach.
As devastating as the cyber incident was to the firm’s 2023 results, however, it’s hard to see how this will have much impact on the longer-term profitability of brands such as Clorox and Pine-Sol. Investors that endure the current downturn will be rewarded with a refreshing 4% dividend yield.
National Storage Affiliates Trust (NSA)
National Storage Affiliates is a fast-growing real estate investment trust, or REIT, focused on the self-storage market. It is one of the newer firms in the industry, having started operations a decade ago to consolidate the industry through mergers and acquisitions. National Storage has been tremendously successful, growing revenues from $329 million in 2018 to $809 million in 2022 and offering investors rapid dividend growth as well over the years. However, the company’s good times have slowed amid the rapid surge in interest rates. Additionally, with the devastation in valuations of other types of commercial real estate such as offices and shopping malls, investors now fear the worst. That said, storage has held up well in past crises such as the 2008 recession. Turns out, economic downturns can actually create new demand for storage as folks move to different housing when they switch jobs or otherwise see their economic situation change. With the recent panic, NSA stock is now paying out a generous 7.2% dividend yield.
Realty Income Corp. (O)
Realty Income is a triple-net REIT. This is a unique structure of real estate contract where the tenant, rather than the landlord, is responsible for key costs such as maintenance and taxes. With the recent spike in inflation, triple-net landlords have been more protected than other peers from the rise in costs associated with operating properties. Realty Income was also wise to unload its office properties into a separate publicly traded REIT several years ago before the bottom totally fell out of that market. While Realty Income has a long track record of consistent dividend increases and well-thought-out investment decisions, the market is not giving Realty Income the benefit of the doubt right now. That has created a tremendous buy-the-dip situation as shares go for just 12 times forward funds-from-operations and offer a juicy 6.1% yield.
[SEE: 7 Best Monthly Dividend Stocks to Buy Now.]
Consolidated Edison Inc. (ED)
Consolidated Edison’s predecessor was founded in 1823 as the New York Gas Light Company. The company became one of the world’s first electric utilities in 1882, when Thomas Edison began supplying electricity to customers in lower Manhattan. As is befitting for a company with such a storied history in America’s largest city, Consolidated Edison has been a rock-solid, blue-chip stock over the decades. While the stock’s performance is rarely flashy, Consolidated Edison regularly gives its shareholders dividend checks. Based in New York City, the utility company never lacks for customers or growth opportunities.
In recent years, it became one of the biggest solar operators in the country before selling that business in 2023. That turned out to be an astute move, as other solar players such as NextEra Energy Inc. (NEE) have seen their share prices tumble over the past month amid falling profitability for renewables. ConEd’s management wisely stepped aside just in time, and its smart capital allocation should generate decades more growth and income for its shareholders.
Northwest Natural Holding Co. (NWN)
Northwest Natural is a natural gas utility and a so-called dividend king — defined as a company that has increased its dividend payout for at least 50 consecutive years. This sort of consistency should be highly prized at a time when the utility sector is facing unprecedented volatility amid soaring interest rates and a slump in the renewables sector. Northwest Natural’s focus on natural gas, however, should shield it from the issues in renewables. Despite Northwest Natural’s admirable track record and steady business prospects, shares have gotten battered over the past three years, falling nearly 50% since their all-time high reached back in 2020. Shares are now flat since the 2008 Great Recession, even as earnings and dividends have grown considerably. This sets up a 5% dividend yield from this reliable utility firm.
Wells Fargo & Co. (WFC)
Wells Fargo is one of America’s largest banks. It has both a massive retail banking footprint along with a sizable investment banking operation. The firm was long known for stability and was once a favorite of Warren Buffett. However, Wells Fargo trashed its reputation with a series of bogus accounts scandals in the late 2010s. The cost to the firm in both direct fines and remediation and legal expenses has been profound. However, Wells Fargo is back on the upswing. There is an entirely new management team, many of the legal issues have been resolved, and Wells Fargo has returned to growth.
After years of lying low, Wells Fargo is now competing aggressively with new card offerings, an expanding wealth advisory operation and increased investments in internal operations. The company’s earnings per share are also expected to hit a record high this year. Wells Fargo’s valuation is still depressed due to its past sins. But the Wells Fargo of today is well positioned for the current interest rate environment and will reward investors with increasing dividends.
Pfizer Inc. (PFE)
Pharmaceutical giant Pfizer has gotten caught in a tailspin. The company saw its business reach record heights during the pandemic as its COVID-19 vaccine generated tens of billions of dollars in revenue. Investors had been bracing for the end of that revenue stream, but a recent uptick in COVID-19 cases may cause renewed interest in the vaccines. Even discounting future vaccine revenues, Pfizer is in a better place now than in 2019. Analysts project that the company will bring in $66 billion in revenue next year; that’s light years ahead of 2019’s $41 billion. While Pfizer smartly invested its recent profits into new growth opportunities, the market hasn’t rewarded that decision. In fact, with shares down more than 20% over the past year, PFE stock now sells for just 10 times forward earnings. The stock also yields a healthy 5%.
Medtronic PLC (MDT)
With about 95,000 employees globally, Medtronic is a behemoth within the medical devices space. It offers pacemakers, defibrillators, heart valves, stents, surgical tools, neurovascular devices and a variety of other devices and products. Medtronic has gotten caught up in the sell-off related to obesity drugs. In theory, a falling obesity rate could lead to fewer chronic ailments and thus less medical device demand. In practice, it seems premature to be dumping medical device stocks down to multiyear-low valuations on this development. Medtronic is a dividend aristocrat with a long track record of stability and growing profits. With the share price plunge, it now goes for less than 14 times forward earnings.
Morningstar analyst Debbie Wang agrees that Medtronic shares are sharply undervalued. She believes the stock is worth $112 per share and that the firm’s efforts to enhance its product portfolio are now paying off. Medtronic’s Oct. 12 closing price of $71.29 represents a dramatic discount to that price target.
Kimberly-Clark Corp. (KMB)
Kimberly-Clark is America’s leading consumer paper products company. Like so many consumer staples firms, KMB stock has fallen more than 10% year to date. This sell-off seems quite tenuous, as it is rather difficult to paint any meaningful connection between weight loss drugs and the usage rates of toilet paper and assorted bathroom supplies. In any case, the market is in a “sell everything right now” mood as it relates to the staples category. For investors with patience to sit through the current noise, this represents a great opportunity.
Kimberly-Clark makes indispensable products that have steady demand regardless of economic conditions. And with commodity prices such as lumber sliding, Kimberly-Clark should enjoy more favorable input costs and improving profit margins going forward. With the recent decline, shares are up to a 3.9% dividend yield.
Canadian Natural Resources Ltd. (CNQ)
Canadian Natural Resources is one of Canada’s largest companies. It has built its business over the years by consolidating a variety of oil and gas assets, which are primarily located in the Alberta oil sands. The oil sands are an interesting asset in that they behave more like hard rock mining than a traditional oil well. There is a great deal of expense in setting up an oil sands project, but once it is operational, it can run for many years with a minimal production decline rate. This has become invaluable in a world where environmentalists and political regulations have made it increasingly difficult to develop new oil fields. In addition to Canadian Natural’s massive and long-lasting oil reserves, the firm also benefits from a conservative management team, low operating costs and a strong focus on returning capital to shareholders through the dividend and share buyback program.
With the price of oil seemingly back on the upswing, Canadian Natural’s management team should have room to raise the company’s dividend payments going forward.
Mid-America Apartment Communities Inc. (MAA)
The slump in REITs has also made its way into the apartment category. Many leading apartment owners, including Mid-America Apartment Communities, have seen their stock prices slide in 2023. This seems like a miscalculation on the market’s part. After all, rising interest rates are making it harder for people to purchase homes as mortgages become increasingly unaffordable. This should ensure that demand for apartments remains quite high as people continue to rent given current mortgage market conditions.
Mid-America is well positioned to benefit as it has ownership in 101,986 apartment units primarily located in fast-growing parts of the U.S., such as the Sunbelt states. Many Mid-America properties are located in places that enjoyed strong population increases over the past few years in particular. The company is also conservative, being one of the few REITs to hold an A- credit rating. This gives it more flexibility to take advantage of the current real estate sell-off and potentially pick up more apartment communities at a discount. With the recent drop, shares now yield 4.3%.
Lockheed Martin Corp. (LMT)
Lockheed Martin is a leading defense conglomerate. It has operations across a wide array of defense products. While known for its fighter jets, the company also produces missiles, unmanned air vehicles, combat systems, cyber software and solutions, and even a space unit which makes satellites and transport units. Despite the mounting levels of geopolitical uncertainty in the world recently, Lockheed Martin has seen its shares decline roughly 10% year to date. With conflict now occurring in both the Middle East and Ukraine and potential escalations on the horizon elsewhere, it seems quite probable that various defense departments will be spending more on Lockheed’s defense products in coming months and years. Lockheed shares also go for just 16 times forward earnings, which is a fine entry point for this blue-chip defense giant.
Exxon Mobil Corp. (XOM)
Exxon Mobil is a dominant integrated oil major. It has operations spanning much of the globe, covering oil, gas, refining and chemicals. This diversity of assets and geographic positioning has allowed Exxon to perform well despite a rocky pricing environment for oil and gas over the past decade. Notably, Exxon didn’t cut its dividend during the 2020 oil-price crash, even as most of its peers greatly reduced their dividend payouts.
There tends to be one part of the business that is working well when others aren’t. For example, at the moment, while refining is showing sliding profitability, higher oil prices should offset that and keep Exxon’s operations stable. And, unlike many peers, Exxon Mobil hasn’t stopped investing in new oil and gas assets. Its investments in Guyana, for example, have paid off in spades. To cap it off, the firm now intends to acquire Pioneer Natural Resources Co. (PXD) in a massive $59.5 billion deal that will greatly expand its presence in the Permian Basin.
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15 Best Dividend Stocks to Buy Now originally appeared on usnews.com
Update 10/13/23: This story was previously published at an earlier date and has been updated with new information.
