The beautiful thing about cash-rich companies is not just that they perform well. Yes, their prices often rise exactly because their profits allow for the stockpiling of cash. That’s a strong sign of a company’s overall health, making their stocks investment-worthy in most cases. However, many of these companies are also dividend stocks to buy, as they return this excess cash to shareholders over time.
It’s simply math really. Companies that have more cash are those most likely to continue to pay dividends (and grow them over time). At the beginning of 2022, thirteen companies collectively held $1 trillion in reported cash and investments. Several of those companies are listed below as cash-rich dividend stocks to buy.
Dividend stocks are strong investments in any economy. That’s as true as we head toward a recession as it was in early 2021, because dividends soften the blow of any capital losses. These cash payouts can allow investors to take the money if needed, or reinvest in more shares. Either way, long-term investors win.
Here are a list of seven top dividend stocks to buy for long-term investors in search of excellent total returns.
|JNJ||Johnson & Johnson||$173.97|
|PG||Procter & Gamble||$134.67|
Johnson & Johnson (JNJ)
Starting off our list of dividend stocks to buy is Johnson & Johnson (NYSE:JNJ). Indeed, this company is in an enviable position right now. It has roughly $34 billion in cash on hand. Accordingly, this is a healthcare giant which may be looking for different pathways of how to utilize this capital right now.
Many cash-rich pharmaceutical firms are taking advantage of this weaker economy by acquiring competitors at lower valuations. For now, it looks like JNJ will use the excess cash from its Covid-19 sales to strategize the splitting of its consumer division, Kenvue, by 2023. This move runs counter to other pharma firms that are rushing to snap up competitors currently.
One thing is for sure: Johnson & Johnson is as sure to provide a dividend in the future. The company is among a select group of dividend stocks known as dividend kings. Dividend kings are stocks that have reported 50 or more years of dividend increases. To begin October, there were 46 such firms in existence. Johnson & Johnson will pay shareholders $1.13 per share on Dec. 6, and likely raise the dividend by a few cents again in 2023.
Coca-Cola (NYSE:KO) continues to do very well, despite macroeconomic conditions. While most consumers continue to get poorer, Coca-Cola gets stronger and stronger. The company just released very strong earnings, and although the company’s prices were raised by 7%, Coca-Cola reported revenues that were 10% higher. So, despite inflation and other concerns, consumers remained more than willing to absorb price increases for Coca-Cola products.
This surge in year-over-year revenue prompted the company to raise its sales and profit guidance for the year. However, at the same time, the company introduced packages at lower prices in preparation for a global economic slowdown.
Coca-Cola’s cash position exceeded $10 billion at the end of the quarter. A year earlier, that position was roughly $500 million smaller. The company is another dividend king, and its increasing cash position only further secures that dividend’s future.
Based on historical trends, it’s logical to anticipate that Coca-Cola will increase its quarterly dividend, now 44 cents per quarter, by a few cents in the coming quarters.
Broadcom (NASDAQ:AVGO) is one of two semiconductor firms that JPMorgan (NYSE:JPM) believes can outperform, despite an overall weakening forecast. Even though demand for the application specific integrated circuits (ASICs) Broadcom makes is shrinking, JPMorgan remains steadfast that AVGO stock is a strong investment.
Broadcom provides semiconductor design solutions tailored to meet the needs of chip companies. So, even as spending slows, Broadcom should thrive as it should receive greater amounts of the strategically-spent capital from the companies it serves.
But Broadcom isn’t unique solely due to its adaptability. The company also provides a dividend, which isn’t a common feature in the growth-first tech world. That quarterly dividend amounted to $4.10 and was last paid on Sept. 30.
The money to pay that dividend came from cash on hand which totaled nearly $10 billion, as per its most recent earnings report. This dividend distribution hasn’t been reduced in more than a decade, and given the company’s unique position, it doesn’t look to be in jeopardy any time soon.
Procter & Gamble (PG)
Procter & Gamble (NYSE:PG) stock has been an investor favorite this year as capital has fled technology and other growth sectors, pivoting into safer sectors. This has been a boon to Procter & Gamble, which has fared better than the broader market, although still shedding significant value thus far.
The result is that PG stock currently trades around $131 which is only about $9 from its 52-week low. That said, Procter & Gamble topped estimates when it reported earnings on Oct. 19. While the company trimmed its fiscal year sales guidance, overall, PG stock has held up relatively well (all things considered).
A global company in nature, Procter & Gamble relies on international sales for a large portion of its revenues. When the dollar is weak, that’s a positive. The company can take those foreign currency-denominated sales, repatriate them to U.S. dollars, and receive a relatively decent exchange rate. The opposite of this scenario is what is happening now.
Despite a broadly negative macro backdrop, PG stock has managed to hold in there and outperform relative to the market. As far as dividend goes, this company is as steady as they come, bolstered by a massive cash position of $6.71 billion reported this past quarter.
Apple (NASDAQ:AAPL) is a stock to buy for many reasons, but chiefly among these reasons is the company’s cash hoard. As per its most recent earnings report, Apple maintained a cash position of $23.65 billion. That was significantly lower than the $34.94 billion in cash it had at the same point a year earlier. However, the company’s deployment of cash has allowed the company to maintain a strong position relative to the other tech giants.
Further, Apple continues to impress even as detractors continue to assume it will falter at some point. Thus far, they’ve been wrong. Apple reported record September quarter revenues of $90.1 billion, the last in its fiscal year calendar. It was a year in which sales increased 8%, reaching $394.3 billion.
Some readers might be surprised to find out that Apple is a dividend stock. That dividend yields a modest 0.6%, but on the plus side, it has also grown at a rate of 9.5% over the past 5 years. This is just another reason to like AAPL stock as, it continues to provide strong growth while also showing signs of maturing.
Pfizer’s (NYSE:PFE) cash position, which came in at $1.78 billion to end Q2, may seem relatively small compared to other firms on this list. However, it hardly matters in terms of the company’s ability to continue to pay dividends.
For one, Pfizer boasts a payout ratio of 0.31, a range that remains very healthy given the company’s current margins and market dynamics. In general, a company’s dividends are paid from a firm’s net income. Accordingly, Pfizer’s net income reached $9.91 billion in the most recent quarter, up from $5.5 billion a year earlier. In short, Pfizer is highly capable of paying shareholders a dividend. In fact, it has done so since 2010, without reductions, and began paying dividends in 1986.
As a long-term investment, Pfizer continues to make sense. In the short-term, Pfizer has reasonable tailwinds as well. The company received FDA approval for its new Covid-19 booster shots that are updated to combat recent versions of the Omicron variant. Pricing has also been increased for this shot, which could see even more cash flow into the company’s coffers.
United Health (UNH)
Last on our list of dividend stocks to buy is one that provides a lot to like for long-term investors. In terms of revenue growth, United Health (NYSE:UNH) is among the best in its category. This integrated healthcare company posted strong Q3 numbers recently, with revenues reaching $80.9 billion, growing 12% on a year-over-year basis. This strong performance allowed the company’s management team to increase guidance to the top of its previous range.
While United Health expects to continue to provide earnings growth in the 13% to 16% range, the company is wrestling with rising costs. This healthcare giant noted that 2023 projections remain in-line with previous expectations, but also noted potential cost increases. The question is whether the company will be able to effectively absorb these cost increases, or if margins will deteriorate.
That said, United Health provides a dividend yielding 1.2%, at the time of writing. The company’s payout ratio is 0.3, which means it remains in a very strong position to retain this payout for a long time. United Health’s dividend hasn’t been reduced since 1990, making it a dividend aristocrat worth considering.
Finally, United Health is also cash-rich, with more than $42 billion in cash on its books, which is up from $23.9 billion a year earlier.
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.