There’s a certain reassurance that comes with high-quality dividends. That’s particularly true when we’re in the midst of a downtrend. Many of these dividend stocks not only provide consistent income, but they also tend to hold up better than its high-growth peers. Especially in this environment, investors are looking for blue-chip dividend stocks with plenty of upside.
2022 has not been an easy year. Unlike other periods when the market quickly bounced back to life, we’re slogging through a painful series of events. While the stock market has enjoyed a nice rally off the second-quarter lows, we’re not out of the woods just yet.
The Federal Reserve is in a tightening cycle, while a potential recession looms amid high inflation. Now more than ever, blue-chip dividend stocks with plenty of upside are a focus for investors. The reason why is simple: Dependable companies with quality earnings and consistent cash flows are the stocks that are holding up the best. Here are three of the best picks to consider.
|Procter & Gamble
Blue-Chip Dividend Stocks: PepsiCo (PEP)
Earlier I said investors are looking for blue-chip dividend stocks with plenty of upside that are holding up the best. Well, not only is PepsiCo (NYSE:PEP) holding up, but the stock is fresh off all-time highs. How about that for relative strength?
In May, the company gave a 7% increase to its dividend. Imagine getting a 7% raise at work. Then imagine getting a raise every year for five decades in a row. That’s the case with PEP stock, as the company “has paid consecutive quarterly cash dividends since 1965, and 2022 marks the company’s 50th consecutive annual dividend increase.”
More than just raising dividends, it also recently raised its full-year outlook. In the most-recent quarter, PepsiCo delivered a top- and bottom-line earnings beat. Even better, it boosted its full-year organic revenue growth rate from 8% up to 10%. Even though shares are trading at all-time highs, the stock still pays out a 2.6% dividend yield.
Procter & Gamble (PG)
While investors are impressed with PepsiCo’s dividend streak, Procter & Gamble (NYSE:PG) has had an even more impressive run. In April, the company raised its dividend for the 66th consecutive year when it doled out a 5% increase to its payout.
P&G has one of the longest-running records of consecutive annual dividend increases in the market and it has not gone unnoticed by investors. Like PepsiCo, shares pay out a dividend yield of roughly 2.5%. However, unlike PepsiCo, shares of P&G are not trading at new all-time highs.
While the stock hit new highs in the first and second quarters of 2022, the third quarter has not been as kind. The stock experienced a wave of volatility, as it suffered a peak-to-trough decline of 21.5%.
That selling pressure came after Walmart (NYSE:WMT) and other top retailers warned about the impacts of inflation and inventories. P&G now expects 2023 to have flat to slightly positive growth, but given its consistency, many investors will be looking for a buying opportunity — especially if there’s another pullback.
Blue-Chip Dividend Stocks: Realty Income (O)
Often considered one of the top dividend REITs, Realty Income (NYSE:O) has to be on investors’ radar. Unlike most companies, Realty pays out its dividend monthly rather than quarterly. Further, its 4.2% rate trumps many dividend stocks, even those that investors consider to be high quality.
In mid-August, the stock nearly took out its April high, which was its highest price since the Covid-19 pandemic. Down a quick 6.5% since, the recent pullback could be a buying opportunity for investors. Further, shares are roughly flat on the year versus a 12.9% decline for the S&P 500, while O stock is actually up 3% over the past 12 months. That’s even as the S&P 500 sports a 7.5% loss over the past year.
When it comes to the dividend, this company is magnificent. Realty Income has paid a monthly dividend for more than 50 years and has increased the dividend for 99 consecutive quarters, just one quarter shy of 25 consecutive years.
On the date of publication, Bret Kenwell 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.