The macroeconomic outlook remains highly uncertain but you still find some of the best income stocks that offer juicy yields and strong upside potential.
The Federal Reserve continues its campaign to bring down inflation. The war rages on in Ukraine, and geopolitical tensions are mounting between the U.S. and China. Investors have a lot to worry about. Thankfully, with these income stocks to buy, investors can earn some serious yield while waiting for conditions to improve.
One of the biggest struggles in investing is to keep emotions in check. Market volatility causes many people to make unforced errors. But by sticking to strong income stocks, a portfolio keeps generating cash regardless of what is happening in the world. This makes it easier to stay the course.
What sorts of firms make the best sense to fill this role? These are seven of the best income stocks to buy now, and as a bonus, all offer a starting dividend yield of at least 4% at today’s prices.
|CNQ||Canadian Natural Resources||$61.09|
|SWK||Stanley Black & Decker||$80.94|
|BCH||Banco de Chile||$20.46|
Verizon Communications (VZ)
Verizon Communications (NYSE:VZ) is one of the three large American mobile telecom providers. Traditionally, investors have gravitated to these as stable blue chips that pay reliable and large dividend streams.
This view came into question last year as rival AT&T (NYSE:T) slashed its dividend as part of its turnaround plans. VZ stock got swept up in the general negativity around the sector.
However, investors should give Verizon another look. Its earnings are quite stable; analysts expect a less than 10% decline in earnings this year, followed by a return to profit growth for Verizon in 2024. Hardly a disaster.
And yet Verizon shares are off by a third from their 2021 levels. That’s an overreaction. At today’s price, Verizon trades for less than 8.5 times forward earnings and offers a 6.6% dividend yield.
Duke Energy (DUK)
Duke Energy (NYSE:DUK) is one of the country’s largest utilities. It has a sizable position in Florida, which has been a fast-growing market which has delivered attractive returns on capital for local power generation firms.
Florida also has offered excellent opportunities for Duke to deploy solar power generation at scale.
The company is aiming to put $65 billion to work through 2027, with a ton of that going into clean energy. The way regulated utilities work, firms earn a fixed return on investment on these plans, giving Duke a clear runway for earnings and dividend growth in coming years.
DUK stock has sold off 15% over the past year amid concerns around higher interest rates. This offers income investors an opportunity as Duke’s dividend yield has crept up to 4.1%.
Canadian Natural Resources (CNQ)
Canadian Natural Resources (NYSE:CNQ) is one of Canada’s largest energy companies. Over the decades, it has built up its business primarily on the strength of the Alberta oil sands.
The oil sands are proving to be invaluable today. That’s because oil sands production functions more like traditional mining rather than an oil well.
This means that oil sands have a far more predictable and stable production level than something like fracking, where production levels plunge over time. By contrast, analysts expect oil sands production, to continue rising well into the 2030s.
This steady production function is essential now because there is so much opposition to new oil and gas drilling.
With politicians, environmentalists, and ESG-driven investors all against new oil drilling, it’s increasingly difficult to bring new oil production to market. This gives a firm like Canadian Natural — whose assets can produce out into the 2050s — a tremendous position.
Canadian Natural is also highly profitable; CNQ stock goes for just 9 times earnings. In addition to the dividend, the company is buying back huge piles of its own stock.
With the price of oil on an upswing and the long-term supply picture looking uncertain, Canadian Natural’s large and long-lasting reserves should generate huge amounts of income for investors in the coming years.
3M (NYSE:MMM) is an American manufacturing powerhouse. The firm has more than 90,000 employees and produces thousands of unique products across a dizzying area of fields ranging from safety helmets to automotive repair tools, dental equipment, adhesives, and dozens of others.
In recent years, MMM stock has fallen sharply. Various factors have accounted for this including slow organic growth, product liability lawsuits, and concerns around the health of the overall economy.
However, the sell-off has gone much too far. Shares now sell for just 12 times forward earnings and offer a nearly 6% dividend yield.
That’s a great offer for such a blue chip American industrial giant as this one. 3M is also spinning off its healthcare business later this year which could be a catalyst for helping realize shareholder value.
Public Storage (PSA)
The self-storage industry has traditionally been one of the best categories in terms of total returns within the real estate investment trust (REITs) category.
A big part of this is because storage is a recession-resistant category. People need a place to store their stuff regardless of what the economy is doing.
In fact, recessions have a way of causing people to change their living conditions, which can drive incremental demand for additional storage capacity. While foreclosures and downsizing are bad news for most real estate, it isn’t anything for a storage investor to fear.
Public Storage (NYSE:PSA) has been a tremendous performer over the decades. PSA stock has risen from $13 in 1993 to nearly $300 today, and that doesn’t even count the dividends.
Public Storage is the industry leader, and it is currently on the hunt for more acquisitions which will further entrench its position.
Shares have fallen recently around concerns around higher interest rates, but that’s nothing for long-term investors to worry about. Meanwhile, with the decline in the share price, PSA stock now yields 4.1%.
Stanley Black & Decker (SWK)
Stanley Black & Decker (NYSE:SWK) is a leading maker of power tools and appliances. The company, like many, got caught up in the pandemic-driven boom/bust cycle.
SWK stock soared in 2021 amid a surge in demand. People were doing home maintenance and repair projects at a record rate and bought Stanley Black & Decker tools to aid those endeavors.
Since then, however, demand has cooled. And since power tools are durable goods, many people that bought products in 2020 or 2021 won’t need any more Stanley Black & Decker equipment for a while. Sales went from record highs to well below trend now.
However, the market has punished SWK stock far too harshly, with shares trading down 50% from where they were prior to the onset of the pandemic. This is a wild move for a firm that has such a storied track record of earnings and dividend growth. On that latter point, Stanley Black & Decker has increased its dividend for a stunning 55 years in a row, and shares now yield 4%.
Banco de Chile (BCH)
Banco de Chile (NYSE:BCH) is the largest bank in Chile by market share. The case for owning Chilean banks is two-fold.
One, Chile will become a central hub of the green revolution. Chile has among the world’s largest untapped reserves of both copper and lithium.
To electrify cars and build batteries at scale, we’ll need far more of both materials. This should set off an 1849-style mining boom in Chile as it steps up to fill the need for these materials to power the green revolution.
The second factor is that Latin American banks, including Banco de Chile, tend to earn far higher profit margins than U.S. banks. This is thanks to multiple reasons including less competition, higher market share, and lower compensation to employees as a proportion of revenues.
BCH stock is still selling at a rock bottom valuation of just 5 times forward earnings while offering a juicy 11% dividend yield. Investors are understandably irritated with Chilean assets thanks to the limited economic growth over the past decade. But with the race for copper and lithium heating up, Chile is set to have a notable economic expansion, and its largest bank is set to profit.
On the date of publication, Ian Bezek held a long position in BCH, VZ, CNQ, MMM, SWK stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.