With 2022 featuring a deluge of red ink, the temptation this year centers on scooping up popular names for cheap. Though investors shouldn’t ignore the relatively boring option of dividend stocks to buy. True, companies that provide reliable passive income don’t generate much excitement. However, with so many variables ahead of the markets, a dull but dependable route may be more prudent.
For this list of dividend stocks to buy, every company features a payout ratio – or the proportion of earnings a company pays its shareholders via dividends – below 70%. As well, each enterprise carries a consensus rating among analysts of moderate buy or its equivalent. That way, prospective investors can also enjoy capital gains potential.
|UPS||United Parcel Service||$186.36|
|JNJ||Johnson & Johnson||$163.61|
Texas Instrument (TXN)
One of the top technology firms in the nation, Texas Instruments (NASDAQ:TXN) designs and manufactures semiconductors and various integrated circuits, which it sells to electronics designers and manufacturers globally. So far, TXN has avoided the wild volatility that impacted its peers. In the trailing year, shares gained over 6%. In contrast, the Nasdaq Composite index dropped nearly 15% during the same period.
Currently, Texas Instruments carries a forward yield of 2.7%. This ranks conspicuously above the tech sector’s average yield of 1.37%. Further, its payout ratio pings at 59.28%. As well, the company commands 19 years of consecutive annual dividend increases. Therefore, it’s unlikely that management will give up this trend without a fight.
Financially, Texas Instruments features a stable balance sheet (an Altman Z-Score of 12.85) and excellent profitability margins. These attributes may have contributed to Wall Street analysts rating TXN as a consensus moderate buy. Further, TipRanks notes that hedge fund sentiment rates as “positive.” Therefore, it offers a solid choice among dividend stocks to buy.
United Parcel Service (UPS)
A stalwart in the shipping and receiving industry, United Parcel Service (NYSE:UPS) represents a critical cog in the broader supply chain management complex. Admittedly, though, circumstances have been challenging for UPS amid 2022’s spike in inflation. However, the situation appears to be turning around, with shares gaining over 7% since the January opener.
Presently, UPS carries a forward yield of 3.44%. This rates better than the industrial sector’s average yield of 2.36%. Notably, the company’s payout ratio is 52.73%. In addition, UPS features 14 years of consecutive dividend increases.
Despite wider challenges, UPS commands a three-year revenue growth rate of 10.4%, outpacing 75% of the competition. Also, its net margin stands at 11.51%, beating over 68% of its rivals.
Turning to Wall Street, covering analysts peg UPS as a consensus moderate buy. In addition, their average price target is $194.94, implying potential upside of 3.53%. While not particularly exciting, UPS ranks among the dividend stocks to buy this year.
A multinational software firm, Amdocs (NASDAQ:DOX) specializes in software and services for communications, media and financial services providers and digital enterprises. Contrary to many of its tech peers, Amdocs performed very well in 2022. For instance, in the trailing 365 days, DOX gained nearly 22%. It’s still up almost 4% since the January opener.
At the moment, DOX carries a forward yield of 1.83%. Though not the highest yield, it still rates better than the tech sector’s average yield of 1.37%. Also, Amdocs features a low payout ratio of 26.75%, meaning investors can depend on it for reliable passive income. Plus, the company enjoys 10 consecutive years of dividend increases.
Financially, DOX might attract investors for its value proposition. The market prices shares at a forward multiple of 16.77. As a discount to forward earnings, Amdocs ranks better than 72%.
Finally, Wall Street analysts peg DOX as a consensus moderate buy. Also, their average price target stands at $99, implying 4% upside potential. Combined with its strong market performance, DOX represents one of the dividend stocks to buy.
Tractor Supply (TSCO)
Headquartered in Brentwood, Tennessee, Tractor Supply (NASDAQ:TSCO) is an American retail chain of stores that sells products for various purposes. These include home improvement, agriculture, lawn and garden maintenance, livestock, equine and pet care for recreational farmers and ranchers, pet owners, and landowners.
Although a boring entry among dividend stocks to buy, Tractor did what it does best: keep the ship afloat. In the trailing year, shares gained nearly 5%. While not particularly impressive, it’s a heckuva lot better than falling into negative territory.
Presently, Tractor Supply carries a forward yield of 1.58%. To be fair, this slips a bit below the consumer discretionary sector’s average yield of 1.89%. However, the payout ratio sits at 31.69%, making TSCO one of the more dependable dividend stocks to buy.
Finally, Wall Street analysts assess TSCO as a consensus moderate buy. Further, their average price target pings at $245.78, implying upside potential of almost 6%.
Not to be confused with the similar-sounding social media firm, Snap-on (NYSE:SNA) is an American designer, manufacturer and marketer of high-end tools and equipment for professional use in the transportation industry. These sectors included the automotive, heavy duty, equipment, marine, aviation and railroad industries.
Though another boring behind-the-shadows example of dividend stocks to buy, SNA proves that boring can be profitable. In the trailing year, shares gained nearly 20% of equity value. Further, since the Jan. opener, SNA moved up 11%.
At time of writing, Snap-on carries a forward yield of 2.55%. This rates higher than the consumer discretionary sector’s average yield of 1.89%. Further, the payout ratio sits at 36.65%, making it one of the reliable dividend stocks to buy. As well, Snap-on enjoys 13 years of consecutive dividend increases.
Turning to Wall Street, analysts peg SNA as a consensus moderate buy. Also, their average price target stands at $281, implying upside potential of over 10%.
Johnson & Johnson (JNJ)
Founded in 1886, Johnson & Johnson (NYSE:JNJ) represents an American icon. As a business enterprise, Johnson & Johnson develops medical devices, pharmaceuticals and consumer packaged goods. However, JNJ hasn’t posted a great performance recently. In the trailing year, it fell nearly 5%. And since the January opener, JNJ faces a deficit of more than 8%.
Nevertheless, this may open the door for contrarians to pick up one of the dividend stocks to buy on discount. Currently, the healthcare giant carries a forward yield of 2.77%. This ranks notably higher than the underlying sector’s average yield of 1.58%. Also, its payout ratio of 41.5% provides prospective investors with confidence. Lastly, regarding the passive income, it’s on a 61-year consecutive streak of dividend increases.
Looking to Wall Street, analysts peg JNJ as a consensus moderate buy. As well, their average price target stands at $186.11, implying upside potential of nearly 14%.
Cisco Systems (CSCO)
Headquartered in San Jose, California, Cisco (NASDAQ:CSCO) is a digital communications technology conglomerate. Per its website, Cisco develops, manufactures, and sells networking hardware, software, telecommunications equipment and other high-technology services and products. However, CSCO hasn’t been a great performer last year. In the trailing 365 days, CSCO lost almost 14% of equity value.
Even in the year so far, Cisco presently posts unimpressive numbers, slipping a few basis points below parity. Nonetheless, for bargain hunters, CSCO may be one of the best dividend stocks to buy. Currently, the company offers a forward yield of 3.18%. In contrast, the tech sector’s average yield sits at 1.37%. Moreover, the payout ratio offers confidence, coming in just under 40%. Lastly regarding dividends, it features 12 years of consecutive payout increases.
Right now, analysts peg CSCO as a consensus moderate buy. Additionally, their average price target stands at $54.70, implying upside potential of over 14%.
On the date of publication, Josh Enomoto 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.
Dividend Stocks, Undervalued Stocks