Inflation and its effects on corporate earnings going forward is the headline story taking over the stock market. The Consumer Price Index rose at a 6.8% pace on a year-over-year (YOY) basis. That marked the fastest rate since June 1982.
And even when the CPI stripped away food and energy prices (because who buys groceries or puts gas in their car?), the CPI was still 4.9% on a YOY level, the highest since 1991.
The market is coming to grips with the idea that not only is inflation is not transitory, but that it’s drawn the attention of the Federal Reserve. And after the Federal Reserve’s last meeting, investors are starting to see how the market may be affected in 2022.
Growth investors may be able to ride out whatever comes next. The same can’t be said for income investors, particularly those who are at or nearing retirement age. The effect of inflation may be having a stark effect on their portfolios at a time when they need money the most.
One great way to offset the effect of inflation in their portfolios is by buying high-quality dividend stocks. And that’s the focus of this special presentation. Dividends can help provide a source of income. And for investors who don’t need the money right away, reinvesting dividends can allow for a greater total return.
In this special presentation, we’ll highlight seven stocks that made the MarketBeat list of 100 dividend-paying companies that received the highest average rating among analysts in the last 12 months.
Quick Links
- Enterprise Product Partners
- Marathon Petroleum
- Chevron
- Kilroy Realty
- AbbVie
- Newell Brands
- Reynolds Consumer Products
#1 - Enterprise Product Partners (NYSE:EPD)
Dividend Yield: 8.60%
Market Capitalization: $46.04 billion
Dividend yield can be a misleading metric. A high dividend yield can sometimes be a trap because it gets investors plowing money into laggard stocks. Enterprise Product Partners (NYSE:EPD) is no yield trap. The company operates as a holding company engaging in the production and trade of natural gas and petrochemicals. This has been a sector that’s seen a renaissance as awareness grows that natural gas will be an important point of our transition away from traditional fossil fuels.
Through three quarters of the year, Enterprise Product Partners has already delivered $29.44 billion in revenue, surpassing its revenue for all of 2020. And the company is also likely to beat 2020 earnings when it reports its fourth-quarter in February 2022.
And the company has increased its dividend in each of the last 24 years, putting it one year shy of Dividend Aristocrat status. Some may quibble with its three-year dividend growth which is well below the sector average. However, a 24-year track record of increasing its dividend offers security that more than makes up for the softer year-over-year growth.
About Enterprise Products Partners
Enterprise Products Partners L.P. provides midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, petrochemicals, and refined products. It operates in four segments: NGL Pipelines & Services, Crude Oil Pipelines & Services, Natural Gas Pipelines & Services, and Petrochemical & Refined Products Services.
Read More - Current Price
- $31.79
- Consensus Rating
- Buy
- Ratings Breakdown
- 10 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $34.00 (7.0% Upside)
#2 - Marathon Petroleum (NYSE:MPC)
Dividend yield: 3.71%
Market capitalization: $38.54 billion
Sticking with oil and gas stocks, Marathon Petroleum (NYSE:MPC) is another solid choice. Oil stocks have made a recovery this year, and MPC stock is no exception with a gain of 51.6%. Not surprisingly, revenue through the first three quarters of the year has surpassed that of 2020. And the company is once again posting positive earnings, a sharp contrast to the negative earnings of 2020.
Between July and October, the company repurchased $1.5 billion of its own stock as part of its prior announcement that it would be buying back $10 billion in common stock as part of the sale of its Speedway business earlier in the year.
That’s one reason that analysts continue to see upside for MPC stock and have a price target of $72.58, a 15% increase from its current level. Marathon has increased its dividend for the last nine years. That’s no small feat considering the tough market conditions that the sector faced in 2020. And the company’s three-year dividend growth of over 52% is well above the sector average.
About Marathon Petroleum
Marathon Petroleum Corporation, together with its subsidiaries, operates as an integrated downstream energy company primarily in the United States. The company operates through Refining & Marketing, and Midstream segments. The Refining & Marketing segment refines crude oil and other feedstocks at its refineries in the Gulf Coast, Mid-Continent, and West Coast regions of the United States; and purchases refined products and ethanol for resale and distributes refined products, including renewable diesel, through transportation, storage, distribution, and marketing services.
Read More - Current Price
- $159.38
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 10 Buy Ratings, 5 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $185.07 (16.1% Upside)
#3 - Chevron (NYSE:CVX)
Dividend yield: 4.64%
Market capitalization: $220.55 billion
Chevron (NYSE:CVX) is the last (but not the least) stock to look at in the oil and gas sector. Chevron is the second-largest oil company in the United States and produces up to 3.1 million barrels of oil equivalent a day.
But fans of a company’s balance sheet will point to the company’s free cash flow (FCF) which reached its highest level of $6.7 billion. And that’s on top of the $47 billion of cash and cash equivalents that the company has on its balance sheet combined with total debt of $37 billion.
This is a reason that CVX stock is given a consensus buy by analysts with a $124.38 price target. That 8.7% upside may not excite investors. However, when you add in the company’s dividend which the company has increased for 33 consecutive years, you have a stock that deserves a place in your portfolio.
About Chevron
Chevron Corporation, through its subsidiaries, engages in the integrated energy and chemicals operations in the United States and internationally. The company operates in two segments, Upstream and Downstream. The Upstream segment is involved in the exploration, development, production, and transportation of crude oil and natural gas; processing, liquefaction, transportation, and regasification of liquefied natural gas; transportation of crude oil through pipelines; transportation, storage, and marketing of natural gas; and carbon capture and storage, as well as a gas-to-liquids plant.
Read More - Current Price
- $161.30
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 13 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $174.93 (8.5% Upside)
#4 - Kilroy Realty (NYSE:KRC)
Dividend yield: 3.10%
Market capitalization: $4.64 billion
It wouldn’t be a list of dividend stocks to buy if we didn’t include at least one real estate investment trust (REIT). And for this presentation, we’re including Kilroy Realty (NYSE:KRC). Ultimately your decision to buy KRC stock will depend on what you believe the office of the future will look like.
For its part, in its most recent earnings report, Kilroy Realty pointed to a survey of 185 companies in which only 9% expected to see a decrease in square footage in the next year. The company also points to its stable of clients which has a lease length of nearly 10 years.
Analysts give the stock an 11% upside from its current level. And with most analysts holding the line on the stock, there may be a wait-and-see sentiment. However, the company has increased its dividend for the last six years and has three-year dividend growth of over 19%.
About Kilroy Realty
Kilroy Realty Corporation (NYSE: KRC, the company, Kilroy) is a leading U.S. landlord and developer, with operations in San Diego, Greater Los Angeles, the San Francisco Bay Area, Greater Seattle and Austin. The company has earned global recognition for sustainability, building operations, innovation and design.
Read More - Current Price
- $38.75
- Consensus Rating
- Hold
- Ratings Breakdown
- 2 Buy Ratings, 5 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $39.43 (1.8% Upside)
#5 - AbbVie (NYSE:ABBV)
Dividend yield: 3.99%
Market capitalization: $230.51 billion
AbbVie (NYSE: ABBV) has a track record of increasing its dividend and has done so for 49 years. That puts it within striking distance of joining the exclusive Dividend King club. Due to concerns about patent expirations in the United States, ABBV stock has “only” gone up 21% this year. But that has to be disappointing for investors who got a 55% jump in the stock from the lows of the pandemic to the end of 2020.
However, some of these patent concerns may be overblown. Sales of the drug in question, Humira, have been slowing. However, AbbVie has been proactive in diversifying its revenue streams including its acquisition of Allergan. That’s the company known for the drug Botox. AbbVie paid $63.4 billion for Allergan in 2020 but should start seeing the fruits of that deal flow through to the company’s bottom line moving forward.
About AbbVie
AbbVie Inc discovers, develops, manufactures, and sells pharmaceuticals worldwide. The company offers Humira, an injection for autoimmune and intestinal Behçet's diseases, and pyoderma gangrenosum; Skyrizi to treat moderate to severe plaque psoriasis, psoriatic disease, and Crohn's disease; Rinvoq to treat rheumatoid and psoriatic arthritis, ankylosing spondylitis, atopic dermatitis, axial spondyloarthropathy, ulcerative colitis, and Crohn's disease; Imbruvica for the treatment of adult patients with blood cancers; Epkinly to treat lymphoma; Elahere to treat cancer; and Venclexta/Venclyxto to treat blood cancers.
Read More - Current Price
- $167.74
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 18 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $203.37 (21.2% Upside)
#6 - Newell Brands (NASDAQ:NWL)
Dividend yield: 4.08%
Market capitalization: $9.39 billion
Newell Brands (NASDAQ:NWL) was one of the pandemic winners as the company known for its Rubbermaid brand surged with people sheltering in place. But the stock has had a correction in 2021. However, it looks like NWL stock may have found some support and is ready to move higher.
One reason for that is the company’s pleasing pattern of beating earnings and revenue expectations. The company has done both for the last eight quarters. And for the first three quarters of 2021, Newell’s revenue is higher on a year-over-year (YoY) basis. But the spread is narrowing which is justifying negative sentiment in the stock.
Analysts give the stock a consensus price target of $29.11 which would be a 30% upside from its current level. And regarding the dividend, the dividend yield of over 4% is well above the sector average of around 2.5%. Investors may not love the slow three-year dividend growth of just 4.55%.
About Newell Brands
Newell Brands Inc engages in the design, manufacture, sourcing, and distribution of consumer and commercial products worldwide. The company operates in three segments: Home and Commercial Solutions, Learning and Development, and Outdoor and Recreation. The Commercial Solutions segment provides commercial cleaning and maintenance solution products under the Rubbermaid, Rubbermaid Commercial Products, Mapa, and Spontex brands; closet and garage organization products; hygiene systems and material handling solutions; household products, such as kitchen appliances under the Crockpot, Mr.
Read More - Current Price
- $8.84
- Consensus Rating
- Hold
- Ratings Breakdown
- 2 Buy Ratings, 8 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $9.10 (2.9% Upside)
#7 - Reynolds Consumer Products (NASDAQ:REYN)
Dividend yield: 3.00%
Market capitalization: $6.36 billion
The last stock on our list is Reynolds Consumer Products (NASDAQ:REYN). The company has only been publicly trading for about two years. And the timing couldn’t have been worse. However, the company has been posting consistent revenue and earnings and keeping margins at attractive rates. In the company’s most recent earnings report, they projected mid- to high-teens growth in net revenue.
That’s been attracting the attention of analysts including Zack’s Research. REYN stock is enjoying upgrades. And that’s one reason that analysts give the stock a $33 price target which is an upside of nearly 10% from its current level.
The consistency of the company’s revenue should also be good news for the company’s dividend which has a yield of 3%. The company has increased the dividend in both 2020 and 2021 which puts it in line with other consumer discretionary stocks.
About Reynolds Consumer Products
Reynolds Consumer Products Inc produces and sells products in cooking, waste and storage, and tableware product categories in the United States and internationally. It operates through four segments: Reynolds Cooking & Baking, Hefty Waste & Storage, Hefty Tableware, and Presto Products. The Reynolds Cooking & Baking segment produces aluminum foil, disposable aluminum pans, parchment paper, freezer paper, wax paper, butcher paper, plastic wrap, baking cups, oven bags, and slow cooker liners under the Reynolds Wrap, Reynolds KITCHENS, and EZ Foil brands in the United States, as well as under the ALCAN brand in Canada and under the Diamond brand internationally.
Read More - Current Price
- $27.64
- Consensus Rating
- Hold
- Ratings Breakdown
- 1 Buy Ratings, 5 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $32.17 (16.4% Upside)
As part of the Great Resignation, many workers in their 50s have decided to call it a career. That decision may have looked better when the market was hitting record levels nearly every day.
Today, that decision may be looking a bit frightening. But they may be looking at adjusting their portfolios to reflect the reality of a different retirement than they may have imagined. That includes dividend stocks.
Inflation is not going away anytime soon. And at some point next year, interest rates are going higher. That means that the stock market is likely to remain volatile in 2022. Still, the equities market is still one of the only places for investors to get a decent return. Investing in quality, reliable dividend stocks can be a way to diversify a portfolio.
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