Between the rampant inflation, the Russian invasion of Ukraine and rising interest rates, the stock market remains volatile among the uncertainty. In turn, investors will look for reliability in such an environment, throwing the spotlight on the dividend stocks to buy.
Overall, investing in dividend stocks offers a hedge against rising inflation rates, with investors looking for fixed-income opportunities. Firms often use their dividend policies to signal to investors to take note of their strong prospects. Moreover, they play an integral role in producing total equity returns. Since 1926, capital appreciations have contributed roughly 68% of total returns for the S&P 500, while dividends have accounted for the remaining 32%.
So, with all of this in mind, let’s dive in and take a closer look at seven top dividend stocks to buy.
| Ticker | Company | Price |
| MRK | Merck | $ |
| CVX | Chevron | $ |
| CLX | Clorox | $ |
| PG | Procter & Gamble | $ |
| ABBV | AbbVie | $ |
| XOM | Exxon Mobil | $ |
| V | Visa | $ |
Shares of healthcare giant Merck (NYSE:MRK) have moved sluggishly as investors have rotated out of growth stocks. Nevertheless, Merck continues to perform incredibly well from a fundamentals perspective, growing sales and earnings at a rapid clip. Moreover, it boasts a highly attractive dividend profile, yielding more than 3% with 12 years of growth in payouts. Also, the stock trades at under four times forward sales estimates, slightly below its 5-year average.
The company recently reported its quarterly earnings, which pleased investors. Sales came in at $15.9 billion, of which 20% were attributable to a Covid-19 pill molnupiravir. Excluding molnupiravir, sales increased by 19% in comparison to the first quarter of last year.
It experienced immense strength throughout its portfolio including its top-selling drugs in Keytruda and Gardasil. Net income for the quarter rose 50% to $4.3 billion. As it looks to 2025 and beyond, it expects continued strong growth. Its oncology portfolio is likely to benefit from multiple approvals and likely launches of several additional indications.
Chevron (NYSE:CVX) has been a consistent performer, with double-digit percentage expansion in its revenue and EBITDA growth figures. In turn, recent results have shown that the company isn’t slowing down anytime soon, and will benefit enormously from tighter energy supplies.
Chevron has been a cash-flow generating machine, growing its free cash flow (FCF) per share by a whopping 106% year-over-year (YOY) last quarter to $7 billion. Thanks to its massive cash flows, it has generously rewarded its shareholders through dividends and share buybacks, while lowering its debt ratio to below 11%.
The current energy crisis seems to be overriding the climate crisis for investors. Tighter energy supplies and larger profits may trump climate change concerns for investors, which is apparent in the latest shareholder meetings of the top oil companies. In turn, this could benefit CVX stock.
Clorox (NYSE:CLX) stock is coming back down to Earth after a momentous run during the pandemic. Households across the world stockpiled staples to ride out the health crisis, but those tailwinds are fading fast. Hence, CLX stock presents itself as more of an income-oriented investment, with a dividend profile that’s head and shoulders above its peers.
Moreover, its FCF balance is rock solid and continues to grow at a breathtaking pace each year. Therefore, despite the slowdown in revenue growth, its dividend remains relatively secure. Clorox paid dividends every year since 1977, increasing payouts for 53 consecutive years. In addition to this, its brand value is such that every nine out of ten homes in the U.S. use one of its products.
So, with that in mind, consider CLX stock among the top dividend stocks to buy.
Procter and Gamble (NYSE:PG) is one of the leading consumer-staple giants globally. Its operating performance has been consistent, which has helped build its humongous cash balance of over $8.5 billion. Moreover, its commitment to rewarding its shareholders has been incredible, with a dividend yield of roughly 2.6% and 66 years of growing payouts.
The company has been innovating at a robust pace over the past several tears. Its massive global supply chain allows for effective optimization of costs, and pricing leverage. Last year, PG achieved healthy double-digit organic growth across most of its product lines including Home and Oral Care.
In its third quarter, it set a modern-day record, with a 10% increase in organic sales. Its results are a testament to the company’s remarkable pricing power, which has effectively shielded it from inflationary pressures. Also, it raised its full-year growth outlook and it expects to maintain its 3% to 6% earnings per share guidance.
Humira accounted for over 60% of company revenues for the past several years, which has invited a lot of criticism from investors about its lack of revenue diversity. However, in its recent quarter, we saw how its Immunology division, which includes Humira sales, contributed just 45.3% of its total sales. Humira sales are still impressive but it seems that other drugs are now picking up the pace for the company. Moreover, a number of biosimilars will be hitting the market next year, as Humira loses out on its patent protection in the U.S.AbbVie (NYSE:ABBV) is often described as a one-trick pony of a pharma company. It sells its hugely popular arthritis drug known as Humira, which was the top-selling drug before the Covid 19 vaccine knocked it off its perch in 2021. Nonetheless, its revenues came in at over $20 billion and it finished second on the list.
More importantly, ABBV’s dividend scorecard is second to none. The dividend yield is at a stellar 3.70% with a consistent nine years of dividend payouts. Additionally, its payout ratio is at a tremendous 42%.
Exxon Mobil (NYSE:XOM) stock has a spring in its step amidst a highly conducive economic outlook. The Russia/Ukraine war, and the resultant sanctions on Russian companies have led to a surge in commodity prices. Subsequently, Exxon has seen its FCF soar in the past few months. If the current market situation prevails for long, the firm could potentially return over $20 billion in FCF to shareholders this year.
The company management plans to further solidify its liquidity positioning. The goal is to have its cash balance in the $20 billion to $30 billion range. In its first quarter, the oil giant generated $7.7 billion in earnings, showing a growth of 203% from the prior-year period. The firm is leaving the Russian market, booking a $3.4 billion after-tax charge in relation to the exit. In spite of its exit, its earnings are still outstanding and point to an extraordinary showing this year.
Fintech giant Visa (NYSE:V) is coming off a blow-out year in 2021, where revenues and earnings grew by double-digit percentages. It is shown that it remains a growth company, posting above-average growth rates during the pandemic years. With the uptick in travel demand, its business has been booming, generating $7.2 billion in sales in its second quarter. In addition to the 25% expansion in revenue base, its earnings per share are up 30% in comparison to previous years. Its sales account for a small portion of payment volumes, which were at a colossal 45 billion transactions in its first quarter.
With a profitability profile firmly in the green and a growing cash flow base, its dividend is well protected. Though it yields just 0.75%, its dividend payouts have been increasing at a healthy pace for the past 13 years.
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