The simple black dress is considered a foundational piece. It just doesn’t go out of fashion. And in some situations, it’s the most appropriate option. The same can be said with dividend stocks. This article will give you seven dividend stocks to buy while the market appears to be heading lower. If you’re at the stage where preserving wealth is your most important goal, then cash may be king. The good news is that some bonds have yields of 4% or higher. Thus, deciding between dividend stocks and fixed income opportunities may not seem that simple.
That said, for investors in search of total returns, then you don’t need to leave the market. You just need to find a (relatively) safe place to hang out and hang on. Accordingly, certain dividend stocks can be a great option.
The stocks on this list share some common characteristics. These companies deliver must-have products and services that will allow them to provide revenue growth. Analysts are also still forecasting at least the possibility of 10% share price growth and a yield of over 2%. That kind of growth can help you keep pace with inflation, and keep you in the market for whenever the market changes course.
These stocks are also large-cap stocks. This combination makes these stocks all potential foundational pieces for your portfolio. And right now, we all need a firm foundation for whatever comes next.
|AEP||American Electric Power||$90.43|
Verizon Communications (NYSE:VZ) is one of the big three wireless carriers. And when you’re looking for dividend stocks to buy in this downturn, VZ stock looks fairly attractive.
With a price-to-earnings (P/E) ratio of around 7-times earnings, Verizon is undervalued compared to the S&P 500, and fairly valued with other stocks in its sector. Where it really stands out, however, is with its eye-catching dividend, which currently yields 6.7%.
Of course, Verizon isn’t a company without its set of concerns. This is a competitive market, and critics say that the company is too dependent on the consumer side of its business. Accordingly, the stock is down over 27% in the last 12 months.
But most of that loss was in 2022. Thus, now may be the best time to consider this stock as a place to hang out and hold on. Indeed, VZ stock fits that bill nicely. Even if the company’s projections of earnings being down 12% year-over-year, that dividend should still be safe.
Bristol-Myers Squibb (BMY)
Unlike many of the stocks on this list, Bristol-Myers Squibb (NYSE:BMY) stock is up 5.11% in the last 12 months. And over the last five years, BMY stock is up 7.9%. That’s remarkably consistent performance in a market that’s been anything but consistent.
That has to do with the company’s existing pipeline which includes Revlimid, its signature cancer drug along with Eliquis and Opdivo. These three drugs combine for approximately 66% of the company’s revenue. Plus, the company expects to have four more approvals by the end of this year.
If the company comes in on the high side of earnings estimates, it will deliver better earnings this year than in 2022. That will get the attention of investors. And if BMY stock can continue to average single-digit share price growth along with its dividend which currently yields just over 2%, you have a compelling stock to buy to ride out this downturn.
Lowe’s (NYSE:LOW) may seem like a strange inclusion on this list. The February 2023 read on housing shows that 2023 is not going to be much better than 2022. And home improvement stocks rely on the juice from new homeowners looking to make their new house a home. Adding to this list of concerns is that LOW stock has a price-earnings ratio of 19-times earnings.
But there’s reason for optimism. Analysts believe Lowe’s is better positioned to take care of the contract channel when compared to Home Depot (NYSE:HD). And it also has a profit margin that is higher than other companies in its sector. Plus, who knows, if the economy continues to falter, there may be a surge in stay-cations that include home improvement projects.
Ok, hope is not a strategy. But a rock-solid dividend is. And Lowe’s has one. It’s one of the few stocks in the Dividend Kings club having increased its dividend for the last 59 consecutive years.
Union Pacific (UNP)
Railroads have been in the news lately, but for reasons that are not great for railroad stocks. However, with pipelines out of favor, they remain one key method of transportation that provide vital infrastructure to move freight across the country.
Because of that consistent revenue, Union Pacific (NYSE:UNP) makes this list as a good dividend stock to buy. At around 17-times earnings, UNP stock is fairly valued, although perhaps slightly more expensive than the sector average.
But once again, you have to look at this company’s dividend. For Union Pacific, that may not seem particularly impressive on the surface. The stock yields 2.7% as of the time of writing. But the stock has an annual payout of $5.20, and it’s been increasing its dividend for the last 16 years. Even in the face of an earnings recession, there’s room for growth (albeit slightly slower growth) of the company’s dividend.
American Electric Power (AEP)
If railroad stocks aren’t your infrastructure play of choice, how about utilities? Stocks don’t get much safer than those of utility companies. Indeed, American Electric Power (NYSE:AEP) is one of the stocks to watch in this sector.
My InvestorPlace colleague, Josh Enomoto, recently wrote about the advantage AEP had from millennial’s preference for living in its service area. Now consider that electric rates, while likely to stabilize, will be stabilizing at a higher level. That’s a fancy way of saying your electric bill is probably not getting lower anytime soon.
AEP stock delivered a positive return for investors in 2022. Additionally, I think AEP stock should be able to continue delivering share price appreciation. However, at 18-times earnings, you can’t call AEP stock undervalued. That said, with a dividend yield of 3.7% and an annual payout of $3.32, AEP stock is worth consideration among dividend stocks to buy.
Buying consumer staples stocks is a go-to defensive play in times of volatility. The thesis goes that these are products that consumers can’t, or won’t, do without. And Colgate-Palmolive (NYSE:CL) makes many of these products.
If you’re the one that does the shopping in your home, you may be thinking that consumers will “trade down” to private labels. That’s happening for sure. But here’s something to consider – Colgate-Palmolive has one of the best profit margins in the industry. That’s great for the products that they sell today. And it also means the company has pricing power that should allow them to keep its prices competitive.
Trading at over 34-times earnings, I won’t try to convince you that CL is undervalued. And it may not be a stock you want to hold forever. But for right now, this dividend king offers investors an alternative that lets you rest comfortably and collect a dividend along the way. And that’s the name of the game right now.
Another way to invest in consumer staples stocks is to look at where consumers are buying those staples. And Kroger (NYSE:KR) is holding its own in this period of high inflation.
Kroger stock is down just over 1% in the last 12 months. But that’s far better than the broader market. And even though analysts give KR stock a Hold rating, they have a price target of $54.18, that’s a 23% increase from the stock’s current price.
This is a highly competitive space, and I can understand if you might prefer a stock like Costco (NASDAQ:COST). But Kroger has taken strides to improve its digital presence and that appears to be gaining steam. It’s not an exciting stock. But these are times when you don’t need excitement, you need a little boring in your portfolio.
Kroger is expected to show a single-digit increase in both earnings and revenue in 2023. That combined with a solid, but not spectacular, dividend makes KR stock a solid choice among dividend stocks to buy.
On the date of publication, Chris Markoch had a LONG position in LOW. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Healthcare, Biotech, Communications, Consumer Staples, Consumer Discretionary, Retail, Industrial, Shipping, Energy, Utility