With the monetary paradigm shifting beneath our feet, investors have every reason to consider no-brainer dividend stocks to buy for 2023 and beyond. This is no marketing gimmick – folks need to avoid paralysis by analysis and direct their portfolios based on intuitive dynamics. That’s an overly complicated way of saying don’t fight the current but swim with it.
Earlier for InvestorPlace’s Today’s Market segment, I discussed the conundrum that faces the technology sector. Nevertheless, the below sentiment applies perfectly to no-brainer dividend stocks to buy. “In the trailing five years since September 2022, the real M2 money stock expanded over 30%. Put another way, money was “cheap” (or inflationary), so it incentivized business growth. However, in the trailing year, M2 declined over 5%, making money “expensive” (deflationary).”
You see, one of the criticisms facing dividend stocks to buy is that the issuing firms redirect money that could be used to expand the business and instead rewards their stakeholders. But guess what? With monetary system tightening, business expansion takes a back seat to stability and earnings.
That’s why you need to stop thinking too much and consider these no-brainer dividend stocks to buy.
| MSFT | Microsoft | $239.42 |
| WMT | Walmart | $140.74 |
| AFL | Aflac | $69.13 |
| KO | Coca-Cola | $59.78 |
| CVX | Chevron | $179.47 |
| ABBV | AbbVie | $148.06 |
| IBM | IBM. | $139.18 |
Microsoft (MSFT)
To succinctly sum up the broader bullish case for Microsoft (NASDAQ:MSFT), it owns the language of business. When it comes to operating systems for desktops, Microsoft Windows wins hands down with nearly 76% global market share. That’s at the time of writing so it might be different from the time of your reading. Nevertheless, the point stands. For business applications, Microsoft dominates the wider ecosystem.
Specifically regarding the case for no-brainer dividend stocks to buy, Microsoft provides a forward yield of 1.21%. No, it’s not something that’s going to make you rich. However, do consider that the company’s payout ratio pings at less than 29%. This reflects that investors can trust the stability and reliability of these admittedly small passive income flows. However, also keep in mind that MSFT shed 33%. In my opinion, it’s a great deal considering the stalwart the company represents.
Moreover, Gurufocus.com pegs MSFT as a modestly undervalued play based on its proprietary calculations. For me, what stands out is the combination of balance sheet stability (Altman Z-Score of 7.5 or well into the “safe” zone), double-digit revenue growth over the past three years and extremely high quality of business (return on equity of nearly 43%).
Walmart (WMT)
The big-box retailer that seemingly everyone loves to hate but still shops there anyways, Walmart (NYSE:WMT) will become a necessity. I’ll temper this last statement by saying it will likely become a reality based on the aforementioned monetary paradigm shift. As the World Bank pointed out, with international central banks also tightening their currency supplies, a global recession might materialize.
In other words, hello everyday low pricing!
According to Dividend.com, Walmart offers a forward yield of 1.61%. As with Microsoft above, it’s nothing to write home about. However, the company’s payout ratio pings at 38.3%, which implies a stable and predictable passive income outflow. Just as importantly, WMT offers a slight discount in the market, down almost 4% on a year-to-date basis. Considering the consumer pressure that could be coming our way, WMT may be a steal.
Certainly, I think it’s one of the no-brainer dividend stocks to buy. While it’s not the cheapest name out there (trading at 21-times forward earnings), the company enjoys a decently stable balance sheet along with solid margins for the sector. Plus, it’s gaining relevance so capital appreciation from here is not out of the question.
Aflac (AFL)
One of the world’s biggest suppliers of supplemental insurance coverage, Aflac (NYSE:AFL) always offered fundamental relevance. Stuff (of the darker, smellier variety) happens in life and Aflac covers financial holes imposed by insurance coverage gaps. Now, the coronavirus pandemic sharply reinforced the idea that stuff can happen at any time. Moreover, it can be utterly devastating, thus cynically bolstering interest toward Aflac.
Per Dividend.com, Aflac provides a forward yield of 2.37%. Again, we’re not talking about millionaire-making material here, though it’s an improvement over the other dividend stocks to buy. Currently, Aflac features a payout ratio of just under 30%, reflecting a dependable passive income outflow. Also, keep in mind that the company owns a track record of 39 years of consecutive dividend increases.
Another factor to consider for AFL centers on its market performance. Since the start of the year, the security gained nearly 16%. In contrast, the benchmark S&P 500 shed a very worrying 22% of market value. Part of Aflac’s outperformance stems from the direct correlation between rising rates and rising valuations of insurance stocks.
Coca-Cola (KO)
If you had to summarize the U.S. and its distinct take on capitalism, Coca-Cola (NYSE:KO) would be right up there with this country’s most iconic brands. Indeed, travel pretty much anywhere in the world – for you trolls, I’m not talking about North Korea or other dictatorships – and you’ll see the Coca-Cola imagery plastered throughout major metropolises.
At time of writing, Coca-Cola carries a forward yield of 2.99%. We’re getting into the healthier realm of no-brainer dividend stocks to buy in terms of payout. Now, it does come with a higher rate of risk. Currently, its payout ratio stands at just under 70%. I wouldn’t call it ideal but I also don’t think it’s unstable – just something to watch. Still, on a positive note, Coca-Cola enjoys 60 years of consecutive dividend increases.
So yeah, management will likely do whatever it takes to maintain this lofty status.
To be fair, KO isn’t cheap, priced at 23-times forward earnings. However, it features a double-digit book growth rate over the last three years. Also, it enjoys very strong margins, bolstering confidence in that yield. Therefore, it’s easily one of the no-brainer dividend stocks to buy.
Chevron (CVX)
Although a somewhat controversial figure because of its underlying hydrocarbon business, Chevron (NYSE:CVX) simply represents a necessity at this juncture. Sure, at the end of 2021, we were probably looking forward to building the infrastructure of a clean, renewable future. Well, someone named Vladimir Putin had other ideas regarding global stability. And with Russia blackmailing the west with hydrocarbon outflow cuts, CVX looks cynically attractive.
Per Dividend.com, Chevron offers a forward yield of 3.19%. While one of the more generous dividend stocks to buy compared to the major blue chips, it lags the sector average of 4.24%. But here’s the deal with Chevron. First, its payout ratio sits at under 34%. Compared to other energy plays (which features high-yield dividend traps), it’s a solid, dependable ratio. Also, we’re talking about 35 years of consecutive dividend increases.
As with some of the other dividend stocks to buy, CVX isn’t cheap. It trades for 11-times forward earnings, ranking it “worse” than over 72% of the industry. However, it features fiscal stability and a very strong return on asset of 13.7%, indicative of a high-quality business.
AbbVie (ABBV)
One of the pharmaceutical companies that I’ve discussed several times in recent years, AbbVie (NYSE:ABBV) brings plenty of relevance to the table. However, I’m mostly interested in its Botox unit under its acquisition of Allergan. The benefit here is that as society normalizes, people will inherently prioritize their physical appearance. Cynically, that’s a net positive for ABBV stock.
Another checkmark favoring AbbVie centers of course on its inclusion of no-brainer dividend stocks to buy. Currently, the company offers a forward yield of just over 4%. Now, it’s payout ratio pings at 50.5%. From a stability standpoint, it’s not astoundingly great but it’s certainly not something that will keep you up at night. Also, don’t forget that AbbVie features 50 years of consecutive dividend increases.
As with the other aristocrats in the space, management will not let that go without a fight.
Interestingly, Gurufocus.com rates ABBV as modestly overvalued. However, it trades at 12.6-times forward earnings, which is undervalued for the industry. More broadly, investors will likely focus on its growth and profitability metrics, which are excellent across the board.
IBM (IBM)
Legacy tech firm IBM (NYSE:IBM) generates some controversy not because of anything it did. Rather, it’s a painfully boring investment. For years, IBM lagged its tech peers as they dove headfirst into cloud computing initiatives. Unfortunately, Big Blue was late to the party. That said, it’s been making up for lost time. As well, it commands leadership in compelling areas such as artificial intelligence and machine learning.
Per Dividend.com, IBM features a forward yield of 4.8%. This ranks very favorably to the tech sector’s average yield of only 1.37%. Investors of dividend stocks to buy should also note that IBM actually gained 1% so far this year. I know, I know – it’s nothing to write home about. However, have you seen the Nasdaq Composite index lately?
To be fair, Big Blue also carries a big payout ratio (nearly 69%), which isn’t the most favorable statistic. Still, the bottom line is that the company has 28 years of consecutive dividend increases. No way management will let that stat slip. Finally, IBM offers itself for I would say a more than fair price. Particularly, the stock trades at 14.3-times forward earnings, below the industry median of 22.5 times.
On the date of publication, Josh Enomoto 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.
