Editor’s Note: “7 Dividend Stocks to Buy for 2022 and Hold Forever” was originally published in October 2021. It has been updated to include the latest available information.
The allure of dividend stocks should be increasing right now. The Fed has signaled that it will soon begin tapering the market stimulus it provided during the pandemic. Following the news in late September, there hasn’t been any immediate shock.
In general, broader markets including the S&P 500 index traded down after Labor Day. But with markets flagging and volatility likely to rise, it does make sense to look toward the less risky areas of the stock market.
That’s precisely why dividend stocks make sense now: They are designed to carry low price volatility with upside provided in reliable dividend income.
So, there’s a short-term catalyst for dividend stocks in general, but these are also equities to buy and hold forever. I’m not sure how long an investor can define “forever” as being, but I’d say at least a decade.
I believe the stocks below have the ability to remain attractive for at least that long. They’ll grow with the market and provide investable dividend income as well.
- Chevron (NYSE:CVX)
- Exxon Mobil (NYSE:XOM)
- Lockheed Martin (NYSE:LMT)
- Johnson & Johnson (NYSE:JNJ)
- McDonald’s (NYSE:MCD)
- Apple (NASDAQ:AAPL)
- PepsiCo (NYSE:PEP)
Dividend Stocks: Chevron (CVX)
Chevron might seem a curious choice to lead off this list. The energy landscape is certainly changing and oil is the most at risk.
There are lots of prognosticators who suggest that an oil demand peak has already occurred, and the dinosaur, made from dead dinosaurs, is dying.
Well, OPEC doesn’t believe that at all. I’ll be the first to admit they’re likely biased but they have allowed for declines in past projections. A recent about-face bodes well for Chevron.
According to the alliance of oil-exporting nations: “World oil demand will plateau in the late 2030s and could by then have begun to decline, OPEC said on Thursday, in a major shift for the producer group that reflects the lasting impact of the coronavirus crisis on the economy and consumer habits.”
Chevron makes sense right now as a rebound play as we approach the tail end of the pandemic. It trades at $114 and consensus estimates suggest it is moving toward $129. So, there’s a clear upside in the form of price appreciation.
Then investors get a dividend yielding 4.89%. The company hasn’t reduced that dividend since 1984. In fact, Chevron raised it recently by a nickel in May. That increase bumped it up to $1.34, where it remains.
OPEC projections and current oil demand make it difficult to ignore CVX stock despite an overarching green revolution.
Exxon Mobil (XOM)
The narrative that surrounds Chevron is similar to that which surrounds Exxon Mobil: Its best days are behind it. Again, for the same reasons I outlined above I also think XOM stock is worthwhile.
At $63.60 currently, ExxonMobil is approaching consensus estimates of $60. So, there’s a bit of upside inherent in that projection. On the other hand, oil prices aren’t going to pull back soon even as they approach $80 per barrel.
A recent Reuters article points out that the supply deficit is forecast to continue for months. Oil Majors including Exxon Mobil stand to benefit. So, a purchase of XOM shares could act as something of a hedge against the rising prices you pay at the pump.
Broader indicators like that OPEC report mentioned above indicate Exxon Mobil is favorable over the longer term as well. According to Yahoo Finance, investors should expect the company to report somewhere in the neighborhood of $287.7 billion in revenue this year. That should rise to $296.75 billion in 2022.
That ought to result in relatively stable prices which will be bolstered by the firm’s dividend yielding 5.55%. It has remained at 87 cents since May of 2019 but hasn’t been reduced since 2002.
Dividend Stocks: Lockheed Martin (LMT)
Lockheed Martin hasn’t had what many would call an outstanding year. Investors could just as easily avoid LMT stock altogether in favor of growth opportunities, but that would be missing the point of Lockheed Martin.
The company has long-term growth potential and durable competitive advantages. Each of the company’s four business segments reported growth recently, with overall revenue increasing 5% year-on-year. That’s a significant number for a firm of Lockheed Martin’s scope and scale.
The upside underpinning LMT stock exists in the average target stock price of $378 a modest increase from today’s price of around $342. Further, 2022 should be a strong year for the firm with revenues projected to increase by 26%. Those revenues could reach as high as $29.7 billion, but a $27.84 billion consensus has emerged.
Johnson & Johnson (JNJ)
Johnson & Johnson routinely pops up in dividend stock lists. That’s with good reason: It hasn’t reduced its dividend since 1982, and that dividend, though yielding a modest 2.64%, is as reliable as they come.
The company’s 0.62 payout ratio is very sustainable. Every $1 of net income requires 62 cents out of Johnson & Johnson’s net income. Contrast that with some oil companies and it quickly becomes obvious which of the two could falter first.
For the most part, JNJ stock has performed like a dividend aristocrat should, even in 2021. There’s not really been any price volatility worth noting in its shares this year. It last faltered, along with absolutely everyone else, in March of 2020 when the pandemic began.
Johnson & Johnson also has a significant catalyst in the fact that its vaccine has received FDA approval as a booster shot. The shot is sold at a not-for-profit price, so the catalyst isn’t a financial one. Rather, it’s more in the form of brand equity over the longer term.
As well, it’s looking like the company’s efforts to isolate its talc suit liabilities from other assets, a likely first step toward placing tens of thousands of tort claims in chapter 11, The Wall Street Journal reported on Tuesday.
Dividend Stocks: McDonald’s (MCD)
McDonald’s was on many dividend investment lists earlier in 2021 when it was priced around $215. Many predicted that it would rise under the idea that people would soon be returning to work as vaccine rollouts were then in full force.
People did get vaccinated, to a degree, and MCD stock did rise. The narrative then, has become less appealing now that share prices have risen above $250.
But the truth is MCD stock has plenty of gas left even though it is at three-year highs. That’s true based on analysts’ average stock prices of $267.60. That implies a bit more than 7% upside still.
Take the dividend, recently raised to $1.38 from $1.29, and reinvest it into MCD shares and returns increase even more.
Over the longer term it’s difficult to see why McDonald’s should fall off to any discernible degree. It remains an iconic brand worldwide. Global sales are up 40.5% in 2021. That’s primarily a consequence of the pandemic, but the company also increased sales by 6.9% in 2021 relative to 2019. It isn’t slowing down, and it’s going to remain a strong dividend choice for a long time.
I’d venture to guess that most investors don’t even think about Apple when considering dividend stocks. It’s probably fair to assume many don’t know that AAPL stock even has a dividend.
But it does. And although that dividend has a modest forward yield of 0.59%, it is increasing. Over the past five years, Apple has increased its dividend at a rate of 10.4% annually.
So, on the one hand, when you hear that Apple’s dividend is 22 cents it might not seem particularly attractive. But consider that when Apple raised the dividend to 22 cents in May, from 20.5 cents, that it represented a 7.32% increase.
That probably isn’t going to change either. Apple committed to yearly dividend increases in early 2021. When it did so that raised chatter around the idea that it might seek to join the vaunted dividend aristocrat club in the future. If that does happen, it would occur in 2038.
With how well Apple has performed in 2021 there’s already so much to like about it. But if it redirects record profits towards an increasing dividend it could look even better in a decade.
Dividend Stocks: PepsiCo (PEP)
PepsiCo is pretty boring as investments go, and that’s a good thing. Since we’re talking about dividend stocks to hold forever, it’s worth noting. If you take a look at its price chart moving back beyond 10 years you notice how steady it is.
Back in October of 2011, PEP stock traded at $62; now it trades at approximately $163. Thanks are due, in large part to former CEO Indra Noy. Yet even under new leadership, basically, if you play the long game with it, or most other dividend stocks, you’re going to win.
PepsiCo has paid an uninterrupted, increasing dividend dating back to 1973. So investors got that as well. In the last year that quarterly dividend has equated to an additional $4.20 of return from a share of PEP stock.
Investors today should anticipate that Pepsi will continue its trajectory of slow, steady growth. Consensus estimates are that the company will record $81.57 billion in revenue next year, up 4% from the $78.39 billion expected in 2021.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.