In this article, we discuss 10 safe dividend stocks to buy before 2023.
As the global economy experienced a major slowdown this year, analysts around the world are predicting a recession in the initial months of 2023. According to TD Securities’ head of global strategy Richard Kelly, there is a 50% chance that the US economy would fall into a recessionary period by 2023. He further mentioned that two consecutive quarters of negative growth and continuous rise in interest rates have contributed to the growing recession fears. Similarly, Wells Fargo also changed its outlook for 2023, expecting the economy to enter a ‘mild recession’ in the first quarter of the year. Additionally, the bank mentioned that due to a possible recession, the unemployment rate could also reach 5% by the end of 2023.
This global crisis has resulted in heightened uncertainty for investors, who are looking for ways to preserve their capital. Dividend stocks are gaining ground among investors in this regard, as they offer means of generating passive income. According to analysts, this year would mark the 11th consecutive year of record dividend payments, considering the recent quarter’s dividend payouts of $140.6 billion of the S&P 500 companies, as reported by Wall Street Journal. In this context, shares of solid dividend-paying companies like The Coca-Cola Company (NYSE:KO), Johnson & Johnson (NYSE:JNJ), and Exxon Mobil Corporation (NYSE:XOM) rebounded strongly, generating positive returns for shareholders in 2022 so far.
According to Jamie Cox of Harris Financial Group, there has been a positive correlation between bond yields and dividend-paying stocks in the past three years, where high dividend stocks are gaining more. This is because dividend companies are following progressive payouts and also try to bring special dividends in addition to their regular dividends. He further mentioned that dividend companies are reaping profits this year as they are targeting the payout ratios. From this point of view, these stocks are expected to gain more in the upcoming months and investors should add them to their current portfolios to survive the possible recession.
Dividend-focused exchange-traded funds have also experienced record inflows this year. Schwab US Dividend Equity raked in $7.4 billion through July, taking its total net assets to $34.4 billion. Similarly, Vanguard High Dividend Yield Index Fund took in $5.8 billion during this time, with its total assets amounting to over $44 billion. Given this, we will discuss safe dividend stocks to buy before 2023.
Photo by Nathan Dumlao on Unsplash
Our Methodology:
We selected companies that have raised their dividends steadily for years and are considered safe due to their strong balance sheets. We considered analysts’ ratings and hedge fund sentiment around each stock, according to Insider Monkey’s Q1 2022 database of 900+ elite funds.
10 Safe Dividend Stocks to Buy Before 2023
10. The Sherwin-Williams Company (NYSE:SHW)
Dividend Yield as of August 3: 1.00%
The Sherwin-Williams Company (NYSE:SHW) is an Ohio-based paint and coating manufacturing company that mainly provides paint solutions to its consumers.
The Sherwin-Williams Company ended Q2 2022 with $312.6 million available in cash and cash equivalents, up from $219.6 million at the end of December 2021. In the first six months of the year, the company returned over $1 billion to shareholders in form of dividends and share repurchases. In Q2, its free cash flow came in at $484 million and paid $156.2 million in dividends, indicating strong FCF generation.
The Sherwin-Williams Company currently pays a quarterly dividend of $0.60 per share. The company holds a 44-year streak of consistent dividend growth, coming through as one of the safest dividend stocks. As of August 3, the stock’s dividend yield stood at 1%.
In July, Deutsche Bank set a $275 price target on The Sherwin-Williams Company with a Buy rating on the shares, highlighting the company’s Q2 earnings.
At the end of Q1 2022, The Sherwin-Williams Company was part of 54 hedge fund portfolios as tracked by Insider Monkey. The stakes owned by these hedge funds hold a collective value of over $1.7 billion. Among these hedge funds, Chilton Investment Company owned the largest stake in the company in Q1.
In addition to The Coca-Cola Company, Johnson & Johnson, and Exxon Mobil Corporation, The Sherwin-Williams Company is also one of the prominent dividend candidates because of its consistent dividend growth.
9. Dover Corporation (NYSE:DOV)
Dividend Yield as of August 3: 1.51%
Dover Corporation (NYSE:DOV) is an American manufacturing company that specializes in industrial products. In Q2 2022, the company reported an operating cash flow of $178.7 million, up tremendously from $23.6 million in the previous quarter. The company’s cash flow has also remained stable over the years, standing at $128.5 million in Q2. It deems free cash flow important to complete mandatory payment obligations and investment opportunities.
Dover Corporation holds one of the longest dividend growth streaks in the market, raising its dividends consecutively for the past 66 years. Its current quarterly payout stands at $0.50 per share, with a yield of 1.51%, as of August 3.
In June, Citigroup added Dover Corporation to its Focus List and maintained its Buy rating on the stock.
At the end of Q1 2022, 27 hedge funds recorded by Insider Monkey owned stakes in Dover Corporation, down from 30 a quarter earlier. The consolidated value of these stakes is nearly $429 million.
8. NextEra Energy, Inc. (NYSE:NEE)
Dividend Yield as of August 3: 1.98%
NextEra Energy, Inc. (NYSE:NEE) is a Florida-based electric services company that also invests in energy infrastructure.
In Q2 2022, NextEra Energy, Inc. reported $2.8 billion in operating cash flow, up from $1.9 billion in the previous quarter. The company generated $606 million in free cash flow and had nearly $639 million available in cash and cash equivalents at the end of Q2. NextEra Energy, Inc. has been boosting its dividends consecutively for the past 28 years. The company pays a quarterly dividend of $0.425 per share and had a yield of 1.98%, as of August 3. Moreover, its 5-year average payout ratio stands at 70.7%, which shows that its dividend payments are well-covered.
In July, Morgan Stanley maintained its Overweight rating on NextEra Energy, Inc. considering the growth of solar panels in the US.
NextEra Energy, Inc. experienced a positive hedge fund sentiment in Q2 2022, as 64 hedge funds in Insider Monkey’s database presented a bullish stance on the company, up from 55 in the previous quarter. The stakes owned by these hedge funds are collectively valued at over $2.8 billion. Fisher Asset Management was the company’s leading stakeholder in Q1.
7. General Dynamics Corporation (NYSE:GD)
Dividend Yield as of August 3: 2.20%
General Dynamics Corporation (NYSE:GD) is an American aerospace and defense company that manufactures business jets, combat vehicles, and communication systems.
General Dynamics Corporation generated $435 million in free cash flow in Q2 2022 and paid $349 million in dividends. This validates that the company’s dividends are safe within its FCF. The company’s operating cash flow for the quarter came in at $659 million and it ended the quarter with $2.2 billion available in cash and cash equivalents. General Dynamics Corporation pays a quarterly dividend of $1.26 per share, raising it by 6% in March. This was the company’s 25th consecutive year of dividend growth. As of August 3, the stock’s dividend yield was recorded at 2.20%.
Appreciating the company’s strong cash generation, Wells Fargo set a $256 price target on General Dynamics Corporation with an Overweight rating on the shares.
As per Insider Monkey’s Q1 2022 database, 47 hedge funds owned stakes in General Dynamics Corporation, down from 48 in the previous quarter. These stakes are valued at roughly $8.4 billion, compared with $7.1 billion worth of stakes owned by hedge funds in the previous quarter.
6. Emerson Electric Co. (NYSE:EMR)
Dividend Yield as of August 3: 2.31%
An American multinational manufacturing company, Emerson Electric Co. (NYSE:EMR) has been raising its dividends consecutively for the past 65 years, becoming one of the very few companies to hold a lengthy dividend growth streak. It currently pays a quarterly dividend of $0.515 per share, with a yield of 2.31%, as of August 3. Its payout ratio is also healthy at 42.6%.
Emerson Electric Co. reported $442 million in operating cash flow while its free cash flow came in at $333 million. For FY22, the company expects to generate over $3 billion in free cash flow and $3.6 billion in operating cash flow due to increased inventory.
In July, Wells Fargo raised its price target on Emerson Electric Co. to $90 but kept an Equal Weight rating on the shares, highlighting the difficult environment for electric equipment and the multi-industry sector. Analysts have also given a positive outlook for major dividend stocks like The Coca-Cola Company, Johnson & Johnson, and Exxon Mobil Corporation.
At the end of Q1 2022, 45 hedge funds tracked by Insider Monkey owned stakes in Emerson Electric Co., valued at over $1.47 billion. Israel Englander’s Millennium Management held the largest stake in the company in Q1, valued at over $207.5 million.
5. Colgate-Palmolive Company (NYSE:CL)
Dividend Yield as of August 3: 2.33%
Colgate-Palmolive Company (NYSE:CL) is a New York-based multinational consumer products company that specializes in the production and distribution of household, healthcare, and personal care products.
At the end of Q2 2022, Colgate-Palmolive Company reported $858 million in cash and cash equivalents, up from $832 million at the end of December 2021. The company’s operating cash flow came in at $528 million, compared with $386 million in the previous quarter. It generated $350 million in free cash flow during the quarter, up from $264 million at the end of March. Colgate-Palmolive Company pays a quarterly dividend of $0.47 per share, with a dividend yield of 2.33%, as of August 3. The company maintains a 60-year track record of consistent dividend growth.
In August, Wells Fargo upgraded Colgate-Palmolive Company to Equal Weight as the company showed strong financials in Q2 and has the potential to improve its profits.
At the end of Q1 2022, 50 hedge funds in Insider Monkey’s database owned stakes in Colgate-Palmolive Company, up from 48 a quarter earlier. These stakes hold a value of nearly $2.6 billion. With over 11.2 million shares, First Eagle Investment Management was the company’s leading stakeholder in Q1 2022.
4. Johnson & Johnson (NYSE:JNJ)
Dividend Yield as of August 3: 2.59%
An American multinational pharmaceutical company, Johnson & Johnson reported solid results in Q2 2022, posting an EPS of $2.59, which surpassed analysts’ estimates by $0.04. The company’s revenue for the quarter came in at $24 billion, up 3% from the same period last year.
Johnson & Johnson pays a quarterly dividend of $1.13 per share, up 6.6% from the previous dividend. The company has been raising its dividends consistently for the past 60 years and has a 5-year CAGR of 5.87%. As of August 3, the stock’s dividend yield was recorded at 2.59%.
This July, Wells Fargo lifted its price target on Johnson & Johnson to $195 with an Overweight rating on the shares, acknowledging the company’s revenue growth in Q2 2022.
As per Insider Monkey’s Q1 2022 database, 83 hedge funds had stakes in Johnson & Johnson, with a total value of over $7.4 billion. Arrowstreet Capital owned over 6.6 million shares in the New Jersey-based company, becoming its largest stakeholder in Q1.
3. Essex Property Trust, Inc. (NYSE:ESS)
Dividend Yield as of August 3: 3.15%
Essex Property Trust, Inc. (NYSE:ESS) is a California-based real estate investment trust company that invests in rental apartment homes.
Essex Property Trust, Inc. reported an operating cash flow of over $315 million in Q1 2022, up from $205.3 million in the previous quarter. Its free cash flow also grew to $290.2 million during the quarter, from $165.2 million at the end of March 2022. Essex Property Trust, Inc. also raised its quarterly dividend by 5.3% during the quarter to $2.20 per share. This was the company’s 28th consecutive year of dividend growth. As of August 3, the stock’s dividend yield stood at 3.15%.
Highlighting the growth in apartment rents in the US, Piper Sandler set a $320 price target on Essex Property Trust, Inc. in July while maintaining an Overweight rating on the shares.
At the end of Q1 2022, 26 hedge funds tracked by Insider Monkey owned a $175.3 million worth of stake in Essex Property Trust, Inc.. In the previous quarter, 27 hedge funds held positions in the company, with stakes valued at over $190 million.
2. Cardinal Health, Inc. (NYSE:CAH)
Dividend Yield as of August 3: 3.31%
Cardinal Health, Inc. (NYSE:CAH) is an Ohio-based multinational health services company that focuses on patient care while reducing costs. At the end of Q1 2022, the company had over $2.3 billion available in cash and cash equivalents and its total assets amounted to over $30.8 billion. The company’s free cash flow generation remained strong in FY21 at over $2 billion, up from $1.5 billion in 2020. Moreover, it reported over $2.4 billion in operating cash flow, compared with $1.9 billion in 2020.
On May 10, Cardinal Health, Inc. declared a 1% hike in its quarterly dividend to $0.4957 per share. Though the dividend growth is small, the company maintains a 36-year streak of dividend increases. As of August 3, the stock’s dividend yield came in at 3.31%.
In July, Morgan Stanley set a $70 price target on Cardinal Health, Inc. with an Overweight rating on the shares, as the company’s consensus expectations look more reasonable ahead of its Q2 results.
At the end of Q1 2022, 38 hedge funds in Insider Monkey’s database owned stakes in Cardinal Health, Inc., down from 39 a quarter earlier. The stakes owned by these hedge funds are collectively valued at $771.6 million. Cliff Asness and Richard Pzena were the company’s most prominent stakeholders in Q1.
1. 3M Company (NYSE:MMM)
Dividend Yield as of August 3: 4.18%
An American multinational company, 3M Company (NYSE:MMM) reported strong earnings in Q2 2022, with its operating cash flow standing at over $1.12 billion. The company generated $743 million in free cash flow, up from $587 million in the previous quarter. Moreover, the company paid nearly $800 million in dividends during the quarter, which covers 83% of its net income.
3M Company holds a 64-year track record of consistent dividend growth, which makes it one of the safest dividend stocks to buy. The company pays a quarterly dividend of $1.49 per share, with a yield of 4.18%, as of August 3.
Following the company’s Q2 earnings, Street analysts presented a positive outlook on 3M Company. In July, both Deutsche Bank and Wells Fargo raised their price targets on the stock to $148 and $144, respectively.
3M Company was a popular buy among hedge funds in Q1, according to Insider Monkey’s database. The company was a part of 51 hedge fund portfolios, up from 41 in the previous quarter. The stakes owned by these funds are collectively valued at over $1.5 billion.
You can also take a look at 10 Semiconductor Stocks to Buy Today According to Billionaire Ken Fisher and 10 Best Vanguard ETFs to Invest In
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This article is originally published at Insider Monkey.
