7 Rock-Solid Dividend Stocks to Buy Amid Volatility
March 1, 2022
There’s that old cliché for stock investors that the “market hates uncertainty”. There’s certainly been a lot of that around given the Russian invasion of Ukraine.
What you can expect that to mean for your portfolio short term was thoughtfully articulated by my colleague Say Boon.
However, what about the long-term implications for investors? It is a buying opportunity for specific stocks? Well, stock markets tend to rise over time.
Yet, inevitably, human emotion can throw us off being disciplined with our investments and sticking to a regular plan.
That’s why in times of distress and uncertainty, dividend stocks tend to have such appeal. Among other things, businesses that pay dividends tend to provide regular cash flows and – most importantly – predictability.
With that, here are seven rock-solid dividend stocks that any investor can consider buying right now as volatility roils global markets.
1. Home Depot
The residential housing market in the US is an unbelievably huge market – with the total value of private residential real estate in the US at the end of 2021 estimated to be worth a whopping US$43 trillion.
And that’s the market that home improvement chain and retailer Home Depot Inc (NYSE: HD) serves. The company estimates that its total addressable market (TAM) is at US$900 billion.
Home Depot’s sales for the full fiscal year (FY) 2021 (for the 12 months ending 30 January 2022) were a whopping US$151.2 billion, up 14.4% from FY 2020.
Meanwhile, its net earnings were US$16.4 billion over the same period, up from US$12.9 billion in FY 2020.
That massive earnings base has supported strong dividend growth, with the company recently raising its quarterly dividend per share (DPS) by 15% to US$1.90.
Giving investors a 12-month forward dividend yield of 2.4%, Home Depot is one to hold for the long term.
2. Tractor Supply
Serving the bucolic communities in the US is big business, as rural retailer Tractor Supply Company (NASDAQ: TSCO) can attest to.
The great thing about Tractor Supply is that it provides all the tools and equipment necessary for farming communities as well as other supplies.
In its latest fourth-quarter 2021 earnings, sales grew an impressive 15.3% year-on-year to US$3.3 billion while comparative sales were up 12.7% year-on-year.
For the full year 2021, sales hit a record high of US$12.7 billion. Tractor Supply is also making inroads with its e-commerce strategy, with its e-commerce sales notching up double-digit growth for 38 consecutive quarters.
With strong free cash flow generation, Tractor Supply raised its latest quarterly DPS by an enormous 77% to US$0.92.
With a 12-month forward dividend yield of 1.8%, Tractor Supply is set to continue winning.
Massive consumer staples giant Procter & Gamble Co (NYSE: PG) needs no introduction. The firm, which produces well-known brands such as Tide detergent, is an instantly-recognisable consumer brand.
Its latest quarterly earnings proved what we all know – it’s a stable but steady grower – as its organic sales grew 6% year-on-year.
With 65 consecutive years of dividend increases, P&G easily classifies as a “Dividend Aristocrat” (companies that have paid stable or rising dividends for 25 consecutive years).
Over the last decade, P&G has grown its dividend at a compound annual growth rate (CAGR) of 5.1%, easily beating inflation (see below).
Source: P&G FY 2021 earnings presentation
With a 12-month forward dividend yield of 2.2%, P&G stock gives investors some dividend stability.
As with any sector, in times of volatility you want a defensive business. Nothing is arguably more defensive than Medtronic PLC (NYSE: MDT), a large medical devices company.
Serving medical markets as diverse as diabetes and cardiovascular, Medtronic provides all the necessary medical equipment for hospitals.
While revenue growth was only around 2.2% in its latest quarter, Medtronic has a well-funded quarterly DPS of US$0.63.
Given its latest share price of close to US$105, Medtronic investors can receive a 12-month forward dividend yield of 2.4% right now.
Any time you go into a kitchen, whether at home or in a restaurant, you’ll likely see some flavourings and herbs produced by McCormick & Co (NYSE: MKC).
The global giant of food flavourings, herbs and sauces, McCormick has built a strong business on both the consumer and business fronts.
In the full-year 2021, McCormick posted respectable sales growth of 13% year-on-year from 2020 as consumers worldwide ventured back out to restaurants.
Producing goods that the world needs no matter what has helped McCormick become a Dividend Aristocrat.
With a 12-month forward dividend yield of 1.6%, McCormick shares offer solid value for dividend investors.
6. NextEra Energy
For investors in clean energy, NextEra Energy Inc (NYSE: NEE) needs no introduction. The world’s largest generator of renewable energy, NextEra also owns two big Florida utilities.
Over the past decade, as the costs of renewable energy have dropped, NextEra has managed to grow its adjusted earnings per share (EPS) at a CAGR of 9%.
During the same period it has deployed over US$16 billion in capital to help build out more capacity. This has come alongside a solid dividend track record.
Recently, the company raised its dividend by just over 10% with its DPS now sitting at US$0.425. With a 12-month forward dividend yield of 2.2%, NextEra offers investors both dividend income and structural growth.
7. Texas Instruments
Finally, we have analog semiconductor specialist Texas Instruments Incorporated (NASDAQ: TXN), which provides less complex chips for devices ranging from cars to smart toasters.
In its latest fourth-quarter 2021 results, Texas Instruments posted revenue growth of 19% year-on-year to US$4.8 billion.
Meanwhile, the company’s operating profit was even better, rising 38% year-on-year to US$2.5 billion over the same period.
This strong cash generation has seen Texas Instruments grow its dividend over the past decade at a CAGR of 22.4%.
With a 12-month forward dividend yield of 2.7%, Texas Instruments stock offers investors both a reasonable yield with strong growth in the DPS.
Buy “anti-fragile” companies
In times of distress, it’s best to focus on companies that are what author Nassim Nicholas Taleb describes as “anti-fragile”.
In this sense, focusing on owning some companies that pay solid dividends is one way to build a level of resilience in your portfolio.
With Home Depot, Tractor Supply, P&G, Medtronic, McCormick, NextEra Energy and Texas Instruments, investors can be assured that dividends will be paid out for years to come.
Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips owns shares in Home Depot and NextEra Energy.
Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.
He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer.
In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.