Inflation concerns and continuous interest rate hikes have left investors worried and anxious. The Federal Reserve has been raising the federal funds rate for many months now. In March it raised the interest rate by 0.25%, which was its ninth consecutive increase. Rising interest rates can be challenging but smart investors know where to park their money in uncertain times. The monetary policy might affect every sector, but there are some companies that perform better than others. In times like this, it makes a lot of sense to invest in dividend stocks. They do experience some headwinds in periods of high interest rates but the impact will also depend on the past dividend yields, dividend history and the financial position of the company.
When looking for dividend stocks to invest in, it is advisable to choose companies that have strong dividend histories and stable balance sheets which can help outperform the broader market while the interest rates are high. One way to pick dividend stocks is to look for companies that have a loyal customer base so that the business never runs out of demand and continues to generate revenue, eventually rewarding the shareholders. Let’s take a look at three dividend stocks to buy.
A household name, Coca-Cola (NYSE:KO) is a stable company, and is also a favorite of Warren Buffet. KO stock is one of the oldest position’s held by Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B). Coca-Cola is not without its weaknesses, but it has created significant wealth for investors over the years. One thing to keep in mind is that Coca-Cola is not a growth stock, so it will not hit new highs or dazzle every year, but it is one stock that is steady and consistent.
KO stock is up almost 15% in the past six months and its 52-week high is $67.20. The company sells products that satisfy consumers at a low price. While some of its products may have a seasonal demand, Coca-Cola was founded over 100 years ago and still going strong. It has also expanded from producing soley drinks and moved into snack products over the years. Due to the low cost, it is possible for the company to raise prices and handle inflation without a lot of hassle for its customers. Coca-Cola has a dividend yield of 2.93% and it recently paid a dividend of 46 cents. It has raised its payout for 60 consecutive years making it a dividend aristocrat and its financial picture looks solid.
The company has managed to maintain a steady share price despite the pandemic and unfavorable market cycles. It is one stock that will continue to reward, no matter the market. The company reports earnings on April 24, and I see the stock as a buy before that.
Tech giant Apple (NASDAQ:AAPL) is another household name with a loyal customer base. It seems like no matter what Apple launches, people love it and want it. The company has seen revenues dip due to negative macroeconomic conditions and production constraints which has led to a drop in the share price from its 52-week high of $176.15. However, AAPL stock is still up 31% year to date and 17% in the past six months. This shows that the stock is steadily moving in the upward direction and could continue at the same pace.
Despite the market turmoil, Apple is worth considering for its dividends. It has a dividend yield of 0.56% and the recent dividend payout was 23 cents. It might not be as high as other dividend-paying companies, but Apple has a massive customer base and is a top tech firm worldwide. Each product launch generates massive hype worldwide leading to a rise in revenues. The company has devoted fans that are always looking forward to purchasing the latest gadgets with eagerness.
Since the consumers are so loyal to the brand, they do not switch easily. In the current period of rising interest rates, investing in AAPL stock could be a smart choice. My colleague at InvestorPlace Chris MacDonald believes now is a golden opportunity to buy the stock. The company will be able to navigate through the economic cycles with little trouble while continuing to reward shareholders.
Next on my list is Chevron (NYSE:CVX). While it can be hard to estimate the customer base for this company, one thing is certain oil is in demand, and will continue to be so. The past year saw crude oil hitting new highs and this led to a massive surge in Chevron’s revenue. The energy sector is one of the best-performing since 2020 and Chevron has been a winner throughout.
It has an impressive cash flow and is a great dividend stock to own. One thing to keep in mind is with the fluctuations in oil prices the stock price can also fluctuate, but if you hold it long enough, you can take home significant gains. Despite the rising interest rates and market uncertainty, CVX stock is one to add to your portfolio. It has a dividend yield of 3.60% and has recently paid a dividend of $1.51.
Chevron has raised dividends for the past 25 years and is considered a dividend aristocrat. The company will make money when there is oil demand, and while the overall demand can be hard to predict, the massive growth opportunity is certainly present. Recently, OPEC+ announced that it will be cutting production output by 1.16 million barrels a day starting in May and this led to the crude oil prices hitting $80 again. It means a lot more revenue for Chevron and a sweet dividend for its investors.
On the date of publication, Vandita Jadeja 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.