The best dividend stocks for 2022 are a prized commodity amongst income investors. Dividends exceeding the market average are one of the best ways to generate passive income on Wall Street. That said, it’s not enough to start positions in companies offering the highest yields; a lot more needs to be considered. At the very least, prospective investors need to consider numerous factors when determining the quality of high-yield dividend stocks: the company’s health, competitive advantage (moat), financial standing, track record, and industry—to name a few indicators.
Failure to account for every variable will expose investors to risk, which is why it’s so important to understand everything there is to know about high dividend stocks. Before you even think about the best high-yield dividend stocks in 2022, make sure you brush up on your fundamentals.
What Is A Dividend Stock?
A dividend stock is an equity traded on Wall Street, not unlike “growth” stocks. Much like their growth counterparts, dividend stocks are bought and sold on all major indices: the S&P 500, the Dow, the Nasdaq, and more. Dividend stocks and growth stocks share more similarities than differences. It is worth noting that dividend stocks reward patient investors with one thing growth stocks can’t offer: a dividend yield.
As their names suggest, high dividend stocks pay significant dividends to their shareholders, whereas “growth” stocks do not. That’s not to say dividend stocks can’t offer growth (they can), but rather that their dividend yield is coveted.
The dividend is a small payment on behalf of qualifying companies to shareholders. Investors will receive a small percentage of the stock’s value for each share they own in the form of a dividend. The yield of the dividend and how frequently it is paid will depend on the company. In return, the businesses behind the stock will typically receive tax breaks at the corporate level.
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What Is Dividend Yield?
Dividends are payments made on behalf of companies to shareholders (reflected as a percentage of the stock’s price). As such, dividends may be paid monthly, quarterly, biannually, or annually. In addition to the frequency, the companies offering dividends also determine how much they will pay each time. Consequently, some companies prefer to pay larger dividends less frequently, whereas others may pay smaller dividends more regularly.
It can be difficult to compare dividend stocks, especially when considering share price, payment frequency, and the forward dividend rate. Fortunately, a financial ratio allows us to make more accurate comparisons: the dividend yield. The dividend yield is a financial ratio that allows investors to compare dissimilar dividend schedules and amounts.
More specifically, a dividend yield takes the same concept as a dividend and extrapolates it over the course of a year. Always expressed as a percentage, dividend yields are simple financial ratios that tell investors how much each share of a dividend stock will pay in dividends relative to its price each year.
The Best Dividend Stock To Buy Right Now (11/28/2022)
Shares of Prologis, Inc. (NYSE: PLD), the market’s largest real estate investment trust (REIT) by market cap, have had a rough year. Year-to-date, the country’s largest warehouse supplier has seen its shares lose about one-third of their value. As news of a looming recession brings into question the need for more warehouse space, the warehouse provider appears to have lost the faith of today’s investors. Consequently, major retailers like Amazon have stated they are looking to cut back on warehouse space.
There’s no doubt about it; both microeconomic and macroeconomic factors have contributed to a nearly 30% decline in Prologis’ share price. However, the latest decline is less of an indictment on the company itself and more of an opportunity to add one of the best dividend stocks to a diversified portfolio. If for nothing else, the latest concerns which culminated in the price drop appear to be short term. In the event Prologis is able to weather today’s volatile market, it should be able to come out on the other side stronger, and patient investors could be rewarded handsomely.
If Prologis can survive short-term volatility, the warehouse leaser should turn out to be one of the best dividend stocks on the market, which begs the question: Can Prologis survive in today’s economic uncertainty? While there’s no predicting the future, few companies are more capable of weathering today’s economy than Prologis. With exceptional credit backed by a low leverage ratio and lots of liquidity, Prologis has one of the strongest balance sheets in the REIT sector. The company’s financial flexibility will simultaneously guide it through today’s rising rate environment and enable future investments.
Prologis’ pristine balance sheet gave way to a quarterly payout of $0.79 per share in the third quarter. After posting core funds from operations (FFO) of $1.73 per share, Prologis’ core FFO payout ratio was approximately 45%. In other words, Prologis can pay its current dividend easily. The company’s payout ratio is so strong, in fact, that it appears likely to raise its dividend in the future. That’s not to say that a dividend increase is on the table, but rather that it’s possible. After all, Prologis has done well for income investors in the past. Over the last five years, the company has grown its payout at a 12% compound annual rate.
Again, Prologis has not announced a dividend increase. However, recent FFO numbers suggest there’s plenty of room in the budget to do so. In fact, it is starting to look like there will be more room to increase the dividend in the future. In the third quarter of this year, Prologis was able to increase rents on expiring leases by nearly 60%. As more leases expire, the company should be able to ask for more current market rates. Management expects new leases will help grow same-store net operating income at an 8% to 10% annual rate for the foreseeable future.
After a very forgettable year that saw shares drop from a 52-week high of $174.54 to about $112, Prologis yields about 2.72%. Today’s dividend is the highest the company has paid since the crash in 2020, and the FFO payout ratio suggests there’s more room to grow. Therefore, if today’s short-term headwinds dissipate and Prologis is able to capitalize on future rent increases, it could be one of the best dividend stocks to buy for a diversified portfolio.
10 Best Dividend Stocks In 2022
There are a number of high-yield dividend stocks investors should consider in 2022. After learning how to invest in dividend stocks, consult our list of stocks with the most promising futures:
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Walker & Dunlop, Inc. (NYSE: WD)
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Digital Realty Trust, Inc. (NYSE: DLR)
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Crown Castle Inc. (NYSE: CCI)
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Brookfield Renewable Partners L.P. (NYSE: BEP)
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EPR Properties (NYSE: EPR)
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Life Storage, Inc. (NYSE: LSI)
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Devon Energy Corporation (NYSE: DVN)
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Kinder Morgan, Inc. (NYSE: KMI)
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Stanley Black & Decker, Inc. (NYSE: SWK)
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Realty Income Corporation (NYSE: O)
1. Walker & Dunlop, Inc.
Walker & Dunlop is a financial service provider that originates, sells, and services a wide range of loans. In particular, Walker & Dunlop has developed a reputation for specializing in multifamily and other commercial real estate financing products and services. The company’s clientele consists primarily of owners and developers of real estate in the United States. In fact, Walker & Dunlop is now officially the top multifamily lender in the United States. As a result, Walker & Dunlop is set to benefit from the Fed’s latest decision to increase interest rates and essentially put the entire real estate sector in a free fall. With fewer people being able to afford a home, the need for multifamily real estate assets will grow, right along with Walker & Dunlop’s revenue. While sentiment regarding the hosing sector may be down, the lack of activity has actually turned Walker & Dunlop into one of the best dividend stocks to buy now.
As the top multifamily lender in the country, Walker & Dunlop is also expected to benefit from an influx of mortgage refinancing in the coming years. As loans mature and borrowers refinance, Walker & Dunlop will be able to take advantage of a higher-yield environment. With an incoming wave of maturities incoming, Walker & Dunlop looks more than capable of maintaining and increasing its current 2.85% dividend yield.
Shares of Walker & Dunlop have come in a lot in 2022, which has brought the company’s high valuation more in line with what today’s investors are looking for. That said, the company is still relatively expensive. WD trades at a premium relative to its peers, but few have a more attractive dividend yield with more upside than this industry leader. In particular, Walker & Dunlop looks to be in a great position to help the country’s housing inventory shortage. With nowhere near enough homes to keep up with national home demand, many multifamily projects are in the pipeline. Consequently, Walker & Dunlop may be in the best position to finance multifamily projects in the near future. As the country’s need for new builds grows, so too will WD’s bottomline. In other words, today’s inventory shortage may make WD one of the best dividend stocks to buy for 2022 and beyond.
2. Digital Realty Trust
Digital Realty Trust is an REIT that specializes in physical real estate assets that house data centers. In all, Digital Realty’s assets cover 284 facilities in 48 different cities across 23 countries. On the surface, Digital Realty invests in technologically advanced data center facilities. Beneath the surface, however, DLR is a “picks and shovels” play on the entire data industry. That said, the company is simultaneously on the “best dividend stocks 2022” list and the apparent beneficiary of long-term secular tailwinds in one of the fastest growing industries on the planet.
Digital Realty currently has a dividend yield of 4.54%, which makes it one of the highest paying dividend stocks that can also be viewed as a growth stock. At the very least, the need for data centers is increasing exponentially with the advent of technology. As wireless technology transfers and stores more and more data, the need for Digital Realty’s services increases. Or, as research conducted by Allied Market Research suggests, DLR could be the leader in a data center industry that’s expected to grow at an annual rate of 10.5% each year through 2030; that would take the current market cap from $31.1 billion to $517.2 billion by 2030.
In the event DLR can grow its market share, which it appears perfectly capable of doing, its current share price makes it look like one of the best stocks to buy right now for growth. Additionally, DLR is a REIT, which means it has to pay the majority of its profits to shareholders in the form of dividends. As a result, Digital Realty looks like a strong candidate to grow its current dividend yield in the wake of a strong secular tailwind. If everything goes according to plan, DLR won’t only be one of the best dividend stocks in 2022; it may even be one of the highest paying dividend stocks to own over the next decade. In the event investors don’t interrupt DLR’s potential to compound, there’s no reason to think it won’t be one of the top dividend paying stocks for the next decade. That’s not to say compound dividend growth is guaranteed, but rather that DLR is in one of the best positions to do so.
3. Crown Castle Inc.
Crown Castle is a real estate investment trust which specializes in telecommunications. More specifically, Crown Castle owns, operates and leases more than 40,000 cell towers and approximately 80,000 miles of fiber networking solutions scattered across nearly every major metropolitan area.
As a major player in the communications infrastructure industry, Crown Castle’s real estate assets are an integral and necessary component in the advent of technology. With society growing increasingly dependent on connected devices, Crown Castle’s real estate assets are an invaluable component of America’s infrastructure. The unique convergence of this company’s irreplaceable assets and its recent selloff on Wall Street make it one of the best dividend stocks to buy for 2022 and beyond.
To be perfectly clear, Crown Castle hasn’t had a great year in the market. Shares are down about 40% from their 2022 peak due to several macroeconomic headwinds. Most notably, the Federal Reserve’s decision to increase interest rates expected to increase expenses on non-fixed-rate debt, which accounts for about 15% of the company’s total debt. Subsequently, two of Crown Castle’s biggest tenants (Sprint and T-Mobile) are merging and consolidating leases. The culmination of headwinds is expected to drop Crown Castle’s adjusted funds from operation to 4% per share in 2023, down from 6% this year.
A drop in Crown Castle’s share price has been warranted, but the selloff may have gone too far. If for nothing else, Crown Castle’s real estate assets will play an invaluable role in the future of American infrastructure. Cell towers and fiber optic networks aren’t going anywhere; in fact, they are only going to grow more and more necessary as technology improves.
Most of Crown Castle’s headwinds appear to be short term, which means the latest drop in its stock represents more of an opportunity than anything else. For starters, Crown Castle’s price-to-earnings growth multiple of 3.45x is right in line with the Equity Real Estate Investment Trusts industry median; that means investors can add shares of one of the best dividend stocks on the market to their portfolios at an extremely fair valuation.
Additionally, the drop in shares has increased the company’s very stable dividend to 4.95%. Income-seeking investors should take solace in the fact that this market-being yield should not only persist but also grow over time. In fact, management expects to be able to grow its dividend at a 7% to 8% annual rate for the foreseeable future.
As the backbone of America’s growing 5G Network, the short-term headwinds facing Crown Castle shouldn’t cause investors to lose any sleep at night. The latest drop in shares represents a great opportunity and makes Crown Castle one of the best dividend stocks to buy right now for those seeking income.
4. Brookfield Renewable Partners
Brookfield Renewable Partners is an extension of Brookfield Asset Management and a company that looks positioned to benefit from a “greener” future. As the company’s name suggests, Brookfield Renewable Partners owns and operates renewable energy infrastructure. With most already moving on from fossil fuels, Brookfield Renewable is expected to pick up a lot of the slack. In doing so, Brookfield has one of the safest, most diversified portfolios of clean energy assets. As the world shifts away from carbon fuels, there’s no reason to think Brookfield Renewable Partners won’t take its place as the green industry leader. To be clear, Brookfield Renewable Partners isn’t necessarily the highest paying dividend stock, but it shouldn’t surprise anyone to see the company become one of the best dividend stocks in the next decade.
With multiple contracts signed for decades down the road, its dividend is very safe and expected to grow. At 4.43%, BEP’s dividend yield is enough to place it in the “best high-yield dividend” discussion, but the real potential is in the company’s growth. Management expects to continue growing the dividend payout by at least 5% per year for the foreseeable future. Few renewable energy companies look better positioned to power a greener world than BEP, and the company’s dividend should only strengthen as it contributes more to the world’s power grid. Brookfield has a proven track record; one investors can feel confident in investing in for decades.
BEP’s current portfolio generates a great deal of cash flow, 52% of which is derived from hydroelectric, 21% from wind energy, 15% from solar, and 12% from other sustainable solutions like solar panels on community rooftops. All of these segments allow BEP to generate dependable income on a regular bases, which spells great news for income investors.
In a recent report, Brookfield Renewable Partners announced it expects to grow funds from operation per unit by as much as 10% 2026. Growth will be facilitated by a combination of development and acquisition. As an extension of Brookfield Asset Management, Brookfield Renewable Partners has a large purse to tap into in order to grow and meet the world’s demand for greener energy. The company is run by proven leaders who have nothing but make investors happy for decades, and if they are able to meet projections, BEP could easily be one of the best high dividend stocks of the next 10 years.
5. EPR Properties
The highest dividend stocks are usually more of a red flag or dividend trap than a sound investment. That said, there are always exceptions to the rule. Every now and then, some of the highest paying dividend stocks are worth adding to a portfolio, and EPR Properties appears to fit the description. Of the market’s high yield stocks, EPR Properties’ 8.19% dividend yield not only looks sustainable, but may even have room to grow.
As a real estate investment trust which invests in experimental real estate, EPR Properties’ portfolio consists primarily of entertainment venues like theme parks, music theaters, movie theaters, restaurants and museums. Due—in large part—to its portfolio, EPR Properties was hit hard during the pandemic, but the company’s triple net lease business model and strong management team were able to use the downtime over the last two years to build a strong cash position. Subsequently, it’s the cash on hand that makes EPR one of the best stocks to buy now for income investors.
EPR Properties’ current dividend yield is already enough for even the strict income investors, but the real reason this company made the “Best Dividend Stocks for 2022” list is because of its future potential. According to Greg Silvers, the CEO of EPR Properties, the company is currently looking to take advantage of a number of opportunities created in the wake of COVID-19.
“We are ramping up our investment spending as our pipeline of experiential real estate opportunities continues to grow,” said Silvers in a recent press release. As of this writing, Silvers has already put his money where his mouth is, using $142 million of the cash reserves the company has saved over the last two years to buy a resort in Quebec and a water park in Ontario.
EPR Properties tightened up its balance sheet in order to survive the pandemic and remained largely stagnant over the last 24 months. As a result, the company now has a lot of cash on hand to toast investing in what it sees as a $100 billion market opportunity. In the event EPR Properties is able to put its cash to good use, which management has proven it can do, this REIT looks like a great addition to any portfolio.
Despite its strong balance sheet and constant inclusion in “best dividend stocks 2022” discussions, EPR Properties is currently trading at a discount relative to its peers. In fact, EPR trades at 10.5 times its expected 2022 funds from operation (FFO), which should give investors peace of mind that they’ll continue to receive their monthly dividend payments.
All things considered, EPR properties is one of the highest paying dividend stocks whose balance sheet looks perfectly capable of maintaining its payouts. If that wasn’t enough, however, EPR is undervalued with what looks like plenty of room to grow. With upwards of $300 million in cash to put to work and a $1 billion credit line that hasn’t even been touched, EPR properties is shaping up to be one of the best dividend stocks for 2022.
6. Life Storage, Inc.
The best dividend stock to buy right now may very well be Life Storage, Inc. In fact, Life Storage not only looks like a great addition to any portfolio today, but it has been in the past and should continue to be in the future. That said, it’s never a good idea to invest in a stock for past performance; investors should allocate cash based on future earnings, and Life Storage looks like it has the fundamentals in place to reward patient owners, regardless of the macroeconomic landscape.
As its name suggests, Life Storage owns and operates more than 900 storage facilities across 30 states and in the province of Ontario, Canada. Perhaps even more importantly, however, Life Storage is a self-administered and self-managed equity REIT, which means the company is required by law to pay out at least 90% of its taxable income to shareholders annually in the form of dividends. Fortunately, for old and new investors, Life Storage’s business has been performing well, which means it’s easily in the discussion of today’s best dividend stocks.
For starters, the storage facility industry has been one of the best performing market segments in the wake of the pandemic. People needed extra space in their homes since they were going to be spending more time in them, whether that meant working or simply quarantining. Whatever the case, the pandemic made more people move their things into storage units in order to free up space in their homes.
As a result, Life Storage has done well for itself. According to the company’s latest earnings report, same-store revenue grew 14.9%. The jump in revenue translated into a 26.3% increase in funds from operations (the REIT equivalent of net income). All things considered, Life Storage had a great third quarter.
For all intents and purposes, Life Storage has served inverses well over the last few years. It is worth noting, however, that this dividend stock looks perfectly capable of maintaining its momentum in today’s inflationary economy. In particular, the slowdown in the housing sector will play to Life Storage’s benefit. With housing inventories well below traditional balanced market indicators and plenty of pent-up demand waiting on the sidelines, there is a large contingent of prospective buyers just waiting to get into a home. In the meantime, those relegated to the renter pool will most likely need a place to store their extra things. By offering a low-cost storage solution to those stuck on the sidelines in the housing market, Life Storage should have no problem covering expenses, increasing funds from operation and boosting dividend payments.
A fundamental analysis of the stock won’t reveal a discount in share prices, but Life Storage is down a lot in 2022. The selloff has less to do with the company itself and more to do with macroeconomic questions surrounding the broader market. As a result, the unique convergence of an artificially suppressed share price and the potential to thrive in a retracting economy should make Life Storage one of the best dividend stocks to buy right now.
7. Devon Energy Corporation
Devon Energy, as its name suggests, primarily engages in the exploration, development, and production of oil, natural gas, and natural gas liquids in the United States. With more than 5,134 wells, Devon has become an integral component of the oil and gas supply chain. Despite the headwinds the entire oil and gas industry has faced in recent years, Devon Energy looks like one of the best dividend stocks for 2022.
Devon Energy is a pioneer in both the oil industry and within the framework of dividend payouts. The latter, however, is particularly important to note, as Devon was recently credited with introducing income investors to the oil and gas industry’s first fixed plus variable dividend. In doing so, Devon Energy simultaneously promised investors access to a base dividend and a variable dividend which could reach as high as 50% of the company’s free cash flow (after accounting for the previously mentioned base dividend and capital expenses).
Devon Energy’s fixed plus variable dividend framework is made even more attractive in today’s global economy, when gas prices are rising from geopolitical turmoil. With the United States and many of its Western allies sanctioning Russian oil, the cost per barrel has skyrocketed in recent weeks and increased Devon’s free cash flow. In its most recent quarter, Devon Energy’s unique divided structure resulted in a 7.77% dividend yield, well above The Street’s average.
However, it is worth noting that the international crisis has shown no signs of cooling off. While the whole world is hoping for an immediate truce, there’s a chance the conflict will continue for at least the foreseeable future; if that’s the case, it is safe to assume oil prices will keep rising. As a producer of both oil and natural gas, Devon Energy will benefit from subsequent increases. On the other hand, investors will see their dividend yield increase in conjunction with Devon’s free cash flow.
While forecasts are in no way guaranteed, many industry experts are predicting a 10- to 15-year window of growth for today’s leading oil and gas plays. Demand will undoubtedly wane in more mature markets, but there’s reason to believe the need for oil and gas will remain significant in emerging markets for years, if not decades. Therein lies the real reason Devon looks like one of today’s best dividend stocks: its current share price looks like a bargain when you account for years of growth complemented by a fixed plus variable dividend.
The advent of electric vehicles and green technology has turned many investors off of the oil and gas industry for the better part of a decade. If for nothing else, the global economy is demanding cleaner energy sources. Still, only a small percentage of the world is ready to make the transition to clean energy. In the meantime, the entire planet needs to rely on traditional sources of energy.
It is forward looking thinking, however, that has discounted the entire oil and gas sector. More investors are putting their long-term capital in clean energy companies, effectively selling the oil and gas sector short.
The impending move away from oil and gas appears to be discounting companies like Devon energy. Devon energy not only boasts one of the lowest PEG ratios in the Oil, Gas & Consumable Fuels industry, but it also looks to be trading at a discount relative to its peers. Additionally, Devon Energy’s price/earnings ratio comes in just below the industry average. The unique combination of a low PEG and PE ratios suggests Devon Energy has an attractive risk/reward profile complimented by an undervalued share price.
The oil and gas industry has seen better days, but the fact remains: the world needs access to energy now more than ever, and green alternatives simply aren’t ready to supply the whole planet. Instead, companies like Devon Energy will need to bridge the gap for what could turn out to be decades. As a result, the unique undervaluation of the entire oil industry, years of potential tailwinds, and an attractive dividend framework make Devon Energy one of the best dividend stocks to buy right now.
8. Kinder Morgan, Inc.
Kinder Morgan is widely recognized as a pivotal component in the North American energy sector. As an energy infrastructure company, however, Kinder Morgan isn’t responsible for the creation or extortion of natural gas, but rather its transportation. In doing so, KMI owns and controls oil and gas pipelines and terminals. In total, Kinder Morgan has at least an invested interest in approximately 85,000 miles of pipelines and 152 terminals.
Despite its prominent position in the oil and gas industry, however, Kinder Morgan’s share price has been relatively suppressed by the pandemic. For the better part of two years, energy has been trailing the broader industries because of obstacles created by COVID-19. While the S&P 500 is up considerably since the market crashed in the wake of COVID-19, KMI’s move has been more or less negligent.
Energy appears to be breaking out despite its underperformance over the past two years, and KMI is no exception. At the end of last year, even before Kinder Morgan reported its full-year 2021 earnings, the U.S. leader in natural gas pipeline infrastructure forecasted its full-year 2022 results. In the forecast, investors were reminded why they have invested in KMI in the first place: a strong balance sheet, higher net income, and higher earnings before interest, taxes, depreciation, and amortization (EBITDA). More importantly, KMI was so confident in the tailwinds the energy industry would experience in 2022 that it raised its dividend yield. As one of the best dividend stocks for 2022, KMI is now yielding 6.01%.
Kinder Morgan continues to be dependable in a market fraught with volatility. Even at a time when the world is trying to pivot away from oil and gas, KMI looks to be a safe transition play. If for nothing else, KMI is well positioned to cater to the lower-carbon energy sources in the future. As a result, few companies look more ready than KMI to generate consistent, dependable cash flow for their shareholders than KMI. With the ability to cater to both today’s and tomorrow’s energy sources, KMI looks ready to take its place as one of the highest paying dividend stocks in 2022 and beyond.
9. Stanley Black & Decker, Inc.
While not surprising to those who have owned the stock for decades, it may shock many to learn Stanley Black & Decker is still one of the highest dividend stocks on income investors’ wishlists. Despite the company’s share price coming in a lot from its 52-week high, there are a number of reasons to be excited for one of the world’s most popular tool manufacturers.
To be perfectly clear, the company’s suppressed share price isn’t without warrant. Shares have been more than cut in half year-to-date thanks to the convergence of several headwinds. For starters, fears of a looming recession have tempered sales. Much like most other companies that rely on consumers to spend money, Stanley Black & Decker has had to revise revenues and earnings to the downside, citing more budget-conscious consumers, supply chain issues, and increased production costs. At the same time, geopolitical tensions forced the company to stop doing business in Russia.
Stanley Black & Decker has done nothing but decline over the course of 2022. However, the latest decline indicates a short-term speed bump more than a long-term concern. While headwinds are complicating things for the stock at the moment, investors should rest assured that management has their best interests in mind. Following the latest earrings report, it is growing more apparent that Stanley Black & Decker is dedicated to preserving their dividend for loyal shareholders.
In a recent report, Donald Allan Jr., Stanley Black & Decker’s President and CEO, acknowledged “a strong and growing dividend is a key element of our shareholder value proposition and is consistent with our capital deployment philosophy, which has delivered approximately half of our excess capital to shareholders over the long term.”
The company holds the record for the longest consecutive annual and quarterly dividend payments among industrial companies on the New York Stock Exchange, and there’s nothing to suggest it wants to disrupt the 146 year trend. As recently as July, Stanley Black & Decker’s board of directors approved a $0.01 per-share increase to its quarterly dividend, marking the company’s 55th consecutive annual dividend increase.
Stanley Black & Decker remains committed to being one of the best dividend stocks for 2022, as evidenced by its latest actions. In an attempt to address the latest investor concerns, management is working on a plan that should reduce business expenses by about $2 billion; investors can expect about half of those costs to be cut as soon as next year.
Cost-cutting practices should help the company survive a slowdown in the economy. At the same time, interim CFO Corbin Walburger expects earnings to bounce back by the end of 2023. While the economy may temper over the short-term, high interest rates, historic appreciation and a lack of inventory will also slow down activity in the housing market. As a result, more people are expected to stay in their current homes for longer, creating more of a need for Stanley Black & Decker products.
As one of the best dividend stocks for 2022, Stanley Black & Decker has a lot of tailwinds lining up at its back. With some of the most popular tool brands and services on the planet, Stanley Black & Decker should benefit from the upcoming housing cycle. On top of demand, the company has already proven it can weather economic turmoil; this time should be no different. Last, but certainly not least, management has already suggested it expects business and revenues to increase as early as next year. Therefore, the latest dip should pose as a great buying opportunity for one of today’s best dividend stocks.
10. Realty Income Corporation
Realty Income Corporation is one of the highest dividend stocks on most investors’ watchlists. Otherwise known as “the monthly dividend stock,” Realty Income is a real estate investment trust (REIT) which has become synonymous with consistency and stability. The REIT’s focus on triple net lease (NNN) assets has resulted in 100 consecutive quarterly dividend increases and 117 payout raises since going public more than 28 years ago. Since its initial public offering in 1994, Realty Income has grown its payout at a 4.4% compound annual rate. Despite its amazing performance, however, Realty Income still looks like one of the best dividend stocks for 2022.
The same class of assets which has made Realty Income so attractive over the years is still just as an attractive addition to any portfolio: triple net lease real estate. Realty Income invests in free-standing, single-tenant commercial properties in several countries that are subject to triple net leases.
On its own, real estate is traditionally a great hedge against inflation. Most of Realty Income’s portfolio consists of leases that feature annual rental rate escalation contracts that allow them to increase cash flow at times when capital is harder to come by. In other words, the types of properties Really Income invests in make the REIT a defensive play amidst today’s macroeconomic headwinds; as rates rise, so too does the company’s rental income.
The triple net leases Realty Income’s tenants sign add to the company’s stability in these tough economic times. In addition to containing annual escalation clauses, the company’s triple net leases make tenants responsible for building insurance, maintenance, and real estate taxes. The unique combination of passing on the costs of triple net leases to tenants and escalation clauses allows companies like Realty Income to thrive in an inflationary economy and increase rental income from its existing properties.
As one of the best dividend stocks for 2022, Realty Income should prove resilient in the face of an impending recession. With a relatively high dividend yield distributed on a monthly basis, Realty Income can be depended on for monthly income at a time when most equities are struggling to tread water. It is worth noting, however, that Realty Income may also help investors play a little offense. With the global net lease real estate market estimated to be somewhere in the neighborhood of $12 trillion, Realty Income has plenty of opportunity to grow.
Realty Income is an industry leader in a sector with plenty of room for growth. Subsequently, the cash Realty Income generates from its current assets gives it a huge advantage over the competition. When everyone else is struggling to secure funds for a reasonable price, Realty Income’s portfolio will enable it to both grow and increase its already attractive monthly payout. As a result, today’s investors need to view the company’s latest drop in share price as an opportunity to add one of the best dividend stocks for 2022 to their portfolios.
How To Find High-Yield Dividend Stocks
Finding high-yield dividend stocks is as simple as searching brokerages for companies currently offering the highest yield. The information is displayed front and center, along with the stock price and everything else investors need to know. That said, there’s a huge difference between stocks that offer a large dividend and quality dividend stocks.
In other words, investors shouldn’t make their investment decisions based solely on a company’s dividend size. Oftentimes, in fact, large dividends that seem too good to be true are red flags. According to Jason Hall at the Motley Fool, “High yields can be the result of a stock that’s fallen because the dividend is at risk of being cut. That’s a dividend yield trap.”
While the best dividend stocks are a great addition to any portfolio, it’s not enough to covet the yield itself. Focusing solely on the yield and ignoring everything else is the surest way to make a poor investment. Instead, investors must evaluate everything they can about the stock and the company. Truly great yields will come from companies that have demonstrated an increased propensity for the following:
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Consistency: Identifying a good dividend stock starts with looking at its payment history. Whether in prosperity or downturn, the ability to grow a dividend is a sign of strength. The Dividend Aristocrats, for example, have grown their own dividends for at least 25 consecutive years. While not always the case, companies who have proven they can maintain their dividends in the past are more likely to maintain them moving forward. Track records are invaluable in the world of income investing.
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Financial Stability: A high-yield dividend stock must be supported by solid financials. For a dividend stock to even be considered by investors, it should have a good balance sheet; that way, it can make sure investors get their payments every time. Poor financials are a sign of a struggling company and could result in a dividend suspension or cut.
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Profit Margins: Businesses are responsible for paying dividends, and they will only be able to do so if their profit margins allow as much. Therefore, it’s important to make sure the company is making enough to continue paying said dividends. Anything less will put even high-yield dividend stocks in jeopardy.
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The Moat A moat is a competitive advantage, and invaluable to the long-term prospects of a dividend stock. Investors can rest assured their dividends will remain protected and continue paying over time with a secure moat.
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Potential: Dividend stocks shine as long-term investments. For a high-yield dividend stock to be worth considering, it must exercise the potential to stick around for years, decades even. Therefore, investors will want to evaluate a company’s potential moving forward. That way, they can ensure their dividend for years.
The Benefits Of High-Yield Dividend Stocks
The advantages of investing in dividend stocks are relatively straightforward. The benefits of high-yield dividend stocks are in their name: dividends. That said, dividends might offer more of an advantage than many new investors realize. Let’s take a closer look at the benefits of high-yield dividend stocks:
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Compounding Income: Dividends are an obvious benefit associated with high-yield stocks. However, the true benefit is brought to light once those returns are reinvested through a DRIP (dividend reinvestment program). Brokerages allow investors to reinvest their dividends in the stocks they originate from, compounding income for years and years.
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Appreciation: While high-yield dividend stocks are inherently incapable of realizing the same growth rates as some of today’s best growth stocks (their dividends prevent them from scaling further), they may still exhibit growth. In fact, the best dividend stocks may be considered growth stocks too. As a result, lucky investors will be able to simultaneously receive income in the form of dividends and watch their portfolios increase in value.
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Sound Fundamentals: For a company to pay a dividend in the first place, it must first be financially sound enough to even make the payments. As a result, most companies don’t start making dividend payments until they are healthy enough to support them. That’s not to say all dividend stocks are “healthy,” but rather that it’s a good indicator of a successful stock.
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Risk Aversion: Dividend stocks can be held in several industries, which increases diversity and reduces risk. Not unlike traditional stocks, dividend stocks can vary dramatically, which can really help investors avoid market volatility.
The Risks Of High-Yield Dividend Stocks
Even the best dividend stocks, not unlike any other investment, are subject to risks under extenuating circumstances. While they have proven they belong in a diversified portfolio, there are certain pitfalls investors need to be aware of, not the least of which include:
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Dividend Traps: High-dividend yields may look attractive to the untrained eye, but companies with dividends that appear too good to be true can be a dangerous investment. While not always the case, businesses in distress may use incredibly high dividends to attract stock traders. It is entirely likely the dividend is still high after a stock price pullback, and the dividend hasn’t been cut, so be aware.
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Poor Financials: Simply because a stock pays a high dividend doesn’t mean it can continue to pay it. If the company doesn’t have enough cash flow or enough money to keep the business up and running, there’s a good chance that dividends won’t last much longer.
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Interest Rates: Dividend stocks are adversely impacted by rising interest rates. When rates rise, dividends become less attractive than other, safer government securities.
Summary
To be clear, the best high-yield dividend stocks in 2022 are entirely subjective. Every dividend stock which is publicly traded carries its own intrinsic value, and that value is worth more to some investors than others. In other words, investors view stocks through different lenses. What one investor views as the best high-yield dividend stock in 2022, another may write off entirely because it fails to see their specific criteria. Nonetheless, those listed above appear to have what it takes to thrive for the foreseeable future and beyond. As a result, they are all candidates for the best dividend stocks in 2022.
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FortuneBuilders is not registered as a securities broker-dealer or an investment adviser with the U.S. Securities and Exchange Commission, the Financial Industry Regulatory Authority (“FINRA”), or any state securities regulatory authority. The information presented is not intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor. Nothing provided shall constitute financial, tax, legal, or accounting advice or individually tailored investment advice. This information is for educational purposes only is not meant to be a solicitation or recommendation to buy, sell, or hold any securities mentioned.
