During periods of high inflation and a hawkish stance on interest rates from the Federal Reserve, investors may be wise to protect their wealth through dividend-paying stocks which will offer regular payouts depending on performance. 

When utilized effectively, dividend-paying stocks are great for ensuring that portfolios can continue to retain their value even as historically high inflation threatens to cause depreciation in actual terms. 

In addition to this, dividends hold excellent tax advantages for investors, with qualified dividends taxed at far lower rates than other forms of income. According to the Internal Revenue Service (IRS), can even be tax-free for individuals falling in the lower 10% or 12% tax brackets, while the maximum amount taxable on dividends for the highest tax bracket of 35% or 37% is still only a 20% rate. 

One of the leading reasons why investors actively seek out dividend stocks is because they offer a passive income on a long-term basis when held in a portfolio. With this in mind, let’s explore three of the best dividend-paying stocks to buy and hold: 

ExxonMobil (XOM)

In the years that followed the pandemic, ExxonMobil (NYSE:XOM) enjoyed significant growth driven by rising oil prices and a fundamental balance in the supply and demand of crude oil. 

While a calmer outlook took hold in 2023, Exxon has been busy plotting its next steps, which should enter the fray in 2024. 

Crucially, Exxon appears set to complete its $59.5 billion acquisition of Pioneer Natural Resources in Q2 2024, which is set to boost its Permian Basin production and improve its credentials as the year progresses. 

Because of its position in the energy industry, ExxonMobil remains a strong option for investors even as inflation continues to behave unpredictably in the United States. Despite uncertain markets, Exxon has the potential to continue performing due to unwavering global demand for oil. 

In 2023, Exxon earned $36.1 billion in free cash flow and paid $14.9bn in dividends to shareholders. With dividend yields reaching 3.7% and a current payout rate of around $3.80 per share, XOM could be a great option for investors to buy and hold into the future. 

PepsiCo (PEP)

Known as a counter-cyclical stock, PepsiCo (NASDAQ:PEP) remains desirable even during economic downturns, which should help to allay the fears of investors who may be concerned about the difficulties the Federal Reserve has had of late in controlling inflation rates. 

PepsiCo is a manufacturer of a range of leading US snacks such as Pepsi-Cola, Gatorade, Mountain Dew, Cheetos, and Quaker. 

While sales figures grew for the stock in 2023, much of this was down to growing inflation rates and sales volumes were actually lower. However, with adjusted earnings per share weighing in at 14% growth, there are plenty more signs for optimism over the year ahead. 

Despite lower volumes serving as a timely warning that consumers aren’t always willing to cough up more money during inflationary periods, we’re likely to see wider acceptance of inflation-adjusted product prices in 2024 as they become the norm. It’s definitely one of those dividend-paying stocks to consider.

Although PepsiCo’s annual dividend yield is lower than the likes of ExxonMobil at 3%, the stock’s annual dividend stands at an attractive $5.06 per stock, making it a great source of passive income for investors looking to hold the stock. 

Verizon Communications (VZ)

After struggling to find momentum in 2023, Verizon Communications (NYSE:VZ) hasn’t offered a significant level of growth within its dividend yield.

Total revenue actually declined by 2.1% last year while adjusted earnings per share tumbled 9% to $4.71. 

One of the biggest confounding factors that Verizon had to contend with included a consumer base that became slower to upgrade their smartphones, with wireless equipment revenue dropping 10.6% year-over-year. Causes of this slowdown can include a lack of innovation in new smartphone launches and customers having to deal with inflationary pressures. 

However, there is plenty of cause for optimism among Verizon investors thanks to its performance in delivering wireless services. In Q4 2023, the telecommunications giant reported its fifth consecutive quarter in which more than 400,000 net new broadband subscribers signed up for Verizon’s services. 

Although more consumers are waiting longer to upgrade their smartphones, it’s less likely that we’ll see heavy volumes of cancelled broadband subscriptions any time soon. 

The annual dividend yield for Verizon weighs in at $2.66, which may be lower than the other stocks on this list but its 6.57% dividend yield rate is among the highest if investors want to buy and sell high volumes of stock. 

Verizon, much like the other options available in this list, is a dividend stock that holds plenty of upside for investors during periods of lingering economic headwinds. 

On the date of publication, Dmytro Spilka did not hold (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.