In this article, we discuss 11 best income stocks to buy right now.
Investors are facing a challenging environment due to plunging stock prices this year. Wall Street posted its third consecutive quarter of losses at the end of September, with the S&P 500 ending the quarter with over 5% decline, according to a report by New York Times. This is the first time the stock market endured such losses since the global financial crisis of 2009. Moreover, the economic downturn culminated in a loss of over $9 trillion from Americans’ wealth at the end of the second quarter, as reported by CNBC.
With persisting inflationary pressures and a possibility of a recession, investors seek options to generate stable income. Dividend stocks have previously dealt smoothly with fluctuating market conditions and boosted investors’ confidence amid uncertainty. According to a report by iShares, dividend growers reported a 12.5% decline in bear markets from 1978 to 2021, compared with a 30.7% drop in non-dividend payers. The report also cited Bloomberg’s data from December 1999 to December 2021 and mentioned that dividend equities have become a chief source of income in a typical 60/40 portfolio.
Companies that have histories of raising their dividends consistently have demonstrated better income-generating abilities compared with their peers. The Coca-Cola Company (NYSE:KO), Exxon Mobil Corporation (NYSE:XOM), and Johnson & Johnson (NYSE:JNJ) boast decades of dividend growth streaks and are outperforming the broader index this year so far. In this article, we will further discuss the best income stocks to buy right now.
Photo by Artem Beliaikin on Unsplash
Our Methodology:
The dividend stocks mentioned below are reliable options for stable income as they have strong dividend histories. In addition to this, these companies have healthy balance sheets and sound financials. The stocks are ranked according to their dividend yields, as of October 20.
Best Income Stocks to Buy Right Now
11. Apple Inc. (NASDAQ:AAPL)
Dividend Yield as of October 20: 0.64%
Apple Inc. (NASDAQ:AAPL) reported strong cash flows in the fiscal Q3 2022. The company’s operating cash flow came in at $23 billion, compared with $21 billion during the same period last year. Its free cash flow also jumped to $20.7 billion, from $19 billion in the prior-year quarter. Moreover, the company paid $20 billion in dividends to shareholders and further plans to invest in long-term growth securities.
Apple Inc. is one of the major tech stocks that pay dividends to shareholders. Though its dividend yield is relatively low, it maintains a nine-year track of consistent dividend growth. Currently, it pays a quarterly dividend of $0.23 per share for a dividend yield of 0.64%, as of October 20.
In October, Morgan Stanley maintained its Outperform rating on Apple Inc. with a $177 price target. The firm expects the company to beat September quarter expectations with constructive guidance for the next quarter.
Berkshire Hathaway was the largest stakeholder of Apple Inc. in Q2 2022.
Wedgewood Partners mentioned Apple Inc. in its Q3 2022 investor letter. Here is what the firm has to say:
“Apple Inc. (NASDAQ:AAPL) grew revenues +5% (foreign exchange adjusted and excluding Russia) driven by record iPhone revenues that were up about +3% on an exceptional year ago comparison of +50%. Apple’s installed base is over 1.8 billion devices which helps drive a software and services business that has generated almost $80 billion of revenue over the past 4 quarters. As we have highlighted in the past, Apple’s relentless focus on the development and integration between hardware (especially ICs) as well as software, continues to add significant value for customers of its products and services. We expect this favorable competitive dynamic to continue for the foreseeable future.”
10. Marathon Oil Corporation (NYSE:MRO)
Dividend Yield as of October 20: 1.13%
Marathon Oil Corporation (NYSE:MRO) is a Texas-based energy company that is involved in the exploration of hydrocarbons and also runs international gas operations. It is one of the best-performing stocks in the S&P 500 this year, returning 71.5% year-to-date, as of the close of October 19.
Marathon Oil Corporation currently pays a quarterly dividend of $0.28 per share for a dividend yield of 1.13%, as of October 20. The company has been raising its dividends consistently for the past five years, which makes it one of the best dividend stocks on our list. Moreover, its shareholder returns remained strong in Q2 2022. The company returned $816 million to shareholders during the quarter, including $56 million in dividends. Its dividend payments were secured within its free cash flow of $1.2 billion.
In October, Piper Sandler raised its price target on Marathon Oil Corporation to $38 with an Overweight rating on the shares, presenting a positive stance on energy stocks before the third quarter.
At the end of June 2022, 41 hedge funds tracked by Insider Monkey reported owning stakes in Marathon Oil Corporation, down from 43 in the previous quarter. These stakes have a collective value of over $1.26 billion.
Carillon Tower Advisers mentioned Marathon Oil Corporation in its Q1 2022 investor letter. Here is what the firm has to say:
“Stock selection contributed the most while sector allocation was also positive. An underweight to communication services and an overweight to energy helped performance, while an underweight to consumer staples and an overweight to materials detracted. Stock selection was strong within healthcare and materials but was weak within information technology and industrials. Marathon Oil (NYSE:MRO) increased its quarterly dividend and executed an impressive share buyback that blew by the target it originally announced.”
9. Erie Indemnity Company (NASDAQ:ERIE)
Dividend Yield as of October 20: 1.86%
Erie Indemnity Company (NASDAQ:ERIE) sells auto, home, business, and life insurance to its consumers in the US. The company is one of the best dividend stocks on our list as it has raised its dividend consistently for the past 31 years. It currently offers $1.11 per share in quarterly dividends for a dividend yield of 1.86%, as recorded on October 20.
Erie Indemnity Company has been performing well this year. The stock delivered a 22.9% return to shareholders since the start of 2022 while its 12-month return came in at 19.4%, as of the market close of October 19. The company also reported growth in its free cash flow and operating cash flow to $70.1 million and $82.7 million during the second of the year, respectively. This strong cash position indicates further dividend growth, which is rewarding in the present economic condition.
As per Insider Monkey’s database, the number of hedge funds owning stakes in Erie Indemnity Company stood at 20 in Q2 2022, growing from 18 in the previous quarter. The collective value of these stakes is over $63.1 million. Among these hedge funds, Citadel Investment Group owned the largest position in the company in Q2.
8. The Travelers Companies, Inc. (NYSE:TRV)
Dividend Yield as of October 20: 2.14%
The Travelers Companies, Inc. (NYSE:TRV) is an American insurance company that provides commercial property casualty insurance in the country. The company’s business insurance continued to generate strong margins and has also shown strong pricing power, as noted by Raymond James in October. The firm raised its price target on the stock to $180 with a Sector Perform rating on the shares.
The Travelers Companies, Inc. recently announced its Q3 2022 results, posting an EPS of $2.20, which beat estimates by $0.60. The company’s revenue for the quarter showed a 10.2% growth from the same period last year at $8.62 billion. Its total revenues were $9.30 billion, up from $8.81 billion in the prior-year quarter.
The Travelers Companies, Inc. is one of the best dividend stocks on our list because of its strong dividend policy. The company has paid consistent dividends to shareholders for the past 33 years while maintaining a 16-year streak of dividend growth. It currently pays a quarterly dividend of $0.93 per share with a dividend yield of 2.14%, as of October 20.
As of the close of Q2 2022, 31 hedge funds tracked by Insider Monkey owned stakes in The Travelers Companies, Inc., down from 37 in the previous quarter. These stakes hold a collective value of over $433.8 million. With over 3 million shares, First Eagle Investment Management owned the largest position in the company in Q2.
7. Honeywell International Inc. (NASDAQ:HON)
Dividend Yield as of October 20: 2.30%
Honeywell International Inc. (NASDAQ:HON) is a North Carolina-based company that specializes in a wide range of products, including building controls, alarms, medical instruments, and space systems. In October, Citigroup maintained a Buy rating on the stock with a $213 price target. The firm mentioned that the company’s sales and earnings growth could remain resilient in the current environment because of its diversified businesses.
In the second quarter of 2022, Honeywell International Inc. reported an operating cash flow of $800 million and its free cash flow came in at $631 million. The company expects its free cash flow to fall between $4.7 billion to $5.1 billion in FY22. It had $8.2 billion in cash and cash equivalents at the end of the quarter with $62.2 billion in total assets.
On September 30, Honeywell International Inc. declared a 5% hike in its quarterly dividend to $1.03 per share. This marked the company’s 13th consecutive year of dividend growth, coming through as one of the best dividend stocks on our list. As of October 20, the stock has a dividend yield of 2.30%.
At the end of Q2 2022, 42 hedge funds in Insider Monkey’s database owned stakes in Honeywell International Inc., compared with 50 in the previous quarter. These stakes hold a collective value of over $1.02 billion.
6. A. O. Smith Corporation (NYSE:AOS)
Dividend Yield as of October 20: 2.36%
A. O. Smith Corporation (NYSE:AOS) is widely known for manufacturing residential and commercial water heaters and boilers. The company is the largest marketer of water heaters in North Carolina. On October 13, the company announced a 7% growth in its quarterly dividend to $0.30 per share. This was the company’s 29th consecutive year of dividend growth. Moreover, the company has been making dividend payments consistently for the past 82 years, which makes it one of the best dividend stocks for regular income. As of October 20, the stock has a dividend yield of 2.36%.
In October, DA Davidson maintained its Buy rating on A. O. Smith Corporation with a $65 price target. The firm maintained a skeptical stance on the company’s negative guidance for the third quarter.
At the end of Q2 2022, Impax Asset Management owned roughly $215 million shares in A. O. Smith Corporation, becoming the company’s largest stakeholder. In addition to this, 27 hedge funds owned stakes in the company in Q2, down from 38 in the previous quarter. These stakes hold a combined value of over $387 million.
LRT Capital Management mentioned A. O. Smith Corporation in its Q2 2022 investor letter. Here is what the firm has to say:
“A.O. Smith is the largest US manufacturer of residential and commercial water heaters, boilers and water treatment products. The company generates close to $3 billion in annual sales. The majority of the company’s business (73%) is done in North America, with the balance coming from China and India. Approximately 80% of demand is replacing existing heaters and 20% is tied to new construction. The company continues to benefit from a shift towards higher efficiency, but more expensive, tankless heaters.
A.O. Smith generates returns on invested capital in the high teens. The company uses its earnings to consistently grow its dividends and share repurchases. Over the past three years the company’s performance has been hurt by its exposure to China as its business there suffered due to the US-China trade war and poor execution. We believe the China business is back on track and the all-important US business is doing better than ever as housing demand heats up in the US. The company beat earnings estimates over the past several quarters and is currently enjoying very good performance as the hot U.S housing market continues to be strong.19 A.O. Smith also recently increased its share repurchase authorization.”
5. Weyerhaeuser Company (NYSE:WY)
Dividend Yield as of October 20: 2.48%
Weyerhaeuser Company (NYSE:WY) is a Washington-based timberland company that owns over 12 million acres of timberlands across the country. The company also specializes in the manufacturing of wood products. It reported strong earnings in Q2 2022 with its operating cash flow of $1.14 billion, up from $957 million in the previous quarter. The company generated over $800 million in free cash flow.
On August 12, Weyerhaeuser Company declared a quarterly dividend of $0.18 per share, in line with its previous dividend. The company is committed to raise its sustainable base dividend by 5% annually through 2025. As of October 20, the stock has a dividend yield of 2.48%.
In October, DA Davidson maintained its Neutral rating on Weyerhaeuser Company with a $33 price target ahead of the company’s Q3 results. The firm mentioned that the ongoing work stoppages has impacted the company’s western lumber mills and harvest operations.
At the end of Q2 2022, 41 hedge funds in Insider Monkey’s database owned stakes in Weyerhaeuser Company, up from 40 in the previous quarter. The total value of these stakes is over $328.6 million, compared with $280 million worth of stakes owned by hedge funds a quarter earlier.
4. Caterpillar Inc. (NYSE:CAT)
Dividend Yield as of October 20: 2.60%
Caterpillar Inc. (NYSE:CAT) is one of America’s leading manufacturers of industrial and construction equipment. The company is one of the best dividend stocks on our list as it has been raising its dividends consistently for the past 28 years. Currently, it offers a quarterly dividend of $1.20 per share for a dividend yield of 2.60%, as of October 20.
Caterpillar Inc. remained obligated to its shareholder returns in the second quarter of 2022. The company returned $1.7 billion to shareholders in dividends and share repurchases during the quarter. In the first half of the year, it generated over $2.5 billion in free cash flow, returning $600 million in dividends.
In October, JPMorgan raised its price target on Caterpillar Inc. to $220 with an Overweight rating on the shares, appreciating the company’s high-end user demand. The firm also expects resilient demand and improved deliveries for the company.
At the end of the June quarter, 45 hedge funds tracked by Insider Monkey owned stakes in Caterpillar Inc., compared with 54 in the previous quarter. These stakes are collectively valued at over $3.25 billion. Fisher Asset Management was the company’s leading stakeholder in Q2, owning shares worth over $1.3 billion.
Diamond Hill Capital mentioned Caterpillar Inc. in its Q1 2022 investor letter. Here is what the firm had to say:
“We also initiated a position in Caterpillar (NYSE:CAT), one of the world’s leading manufacturers of construction and mining equipment. It’s a company we know well, as we have owned it in our large cap portfolio for quite some time. Recent share price weakness provided an opportunity for us to add it to our large cap concentrated portfolio at an attractive discount to our estimate of intrinsic value. We believe Caterpillar stands to benefit from increased capital investment supported by a healthier/recovering end market environment, particularly in construction and mining.”
3. The Procter & Gamble Company (NYSE:PG)
Dividend Yield as of October 20: 2.82%
The Procter & Gamble Company is another best dividend stock on our list for stable income. The company reported its fiscal Q1 2023 recently, beating Street expectations. Its operating cash flow was $4.1 billion and its free cash flow productivity stood at 86%. During the quarter, the company returned $6.3 billion to shareholders, including $2.3 billion in dividend payments.
On October 11, The Procter & Gamble Company declared a quarterly dividend of $0.9133 per share, consistent with its previous dividend. The company holds one of the strongest dividend growth track records in the market, having raised its dividends for consecutive 66 years. As of October 20, the stock has a dividend yield of 2.82%.
In October, Barclays raised its price target on The Procter & Gamble Company to $145 with an Overweight rating on the shares, appreciating the company’s recent quarterly earnings beat.
Of the 895 hedge funds tracked by Insider Monkey, 71 funds owned stakes in The Procter & Gamble Company in Q2 2022, compared with 72 a quarter earlier. These stakes hold a consolidated value of over $5.5 billion. Ray Dalio’s Bridgewater Associates was the company’s leading stakeholder in Q2.
2. Tyson Foods, Inc. (NYSE:TSN)
Dividend Yield as of October 20: 2.83%
Tyson Foods, Inc. (NYSE:TSN) is an American food industry company that is one of the largest processors of chicken, beef, and pork worldwide. The company has been raising its dividends consistently for the past 10 years and has a five-year dividend CAGR of 15.38%. The company currently pays a quarterly dividend of $0.46 per share and has a yield of 2.83%, as recorded on October 20.
In its fiscal Q3 2022 report, Tyson Foods, Inc. posted revenue of $13.5 billion, up 8.2% from the same period last year. Its operating cash flow stood at $666 million and it generated $190 million in free cash flow. The company ended the quarter with over $1 billion in cash and cash equivalents and over $9.3 billion in total current assets.
At the end of Q2 2022, 37 hedge funds tracked by Insider Monkey owned stakes in Tyson Foods, Inc., with a total value of $1.15 billion. Cliff Asness’ AQR Capital owned over 3.2 million shares in the company worth $278.4 million, becoming the company’s largest stakeholder in Q2.
1. Cohen & Steers, Inc. (NYSE:CNS)
Dividend Yield as of October 20: 3.81%
Cohen & Steers, Inc. is an American investment management company that specializes in liquid real assets. The company provides income solutions to its consumers worldwide. In Q3 2022, the company reported $79.2 billion in assets under management and $89.7 billion in average assets under management. At the end of the quarter, the company had $270 million in cash and cash equivalents, up from $227 million in the previous quarter.
Cohen & Steers, Inc. currently pays a quarterly dividend of $0.55 per share for a dividend yield of 3.81%, as of October 20. The company is one of the best dividend stocks for regular income as it managed to raise its dividends for 12 straight years.
As of the end of June 2022, Cohen & Steers, Inc. was a part of 11 hedge fund portfolios, down from 14 a quarter earlier, according to Insider Monkey’s database. The stakes owned by these hedge funds hold a combined value of $76.5 million. With over $25 million worth of stakes, GAMCO Investors owned the largest position in the company in Q2.
Carillon Tower Advisers mentioned Cohen & Steers, Inc. in its Q2 2022 investor letter. Here is what the firm has to say:
“Cohen & Steers, Inc. (NYSE:CNS) manages real estate investments for investors. The stock traded down in the quarter despite reporting good quarterly results and gathering additional assets. The broader universe of investment management firms was weak in the quarter as global stock markets declined.”
You can also take a look at 13 Best Long-Term Dividend Stocks to Buy Now and 10 Best MLP Dividend Stocks to Buy
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This article is originally published at Insider Monkey.
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