In this article, we will take a look at 12 best dividend stocks that outperformed in 2022. If you want to see more best dividend stocks that outperformed in 2022, go directly to 5 Best Dividend Stocks That Outperformed in 2022.
Dividend stocks are stocks of companies that pay dividends. Although not always the case, many dividend stocks pay dividends on a quarterly basis as a way to return a share of their profits back to the owners. Given that a company’s profit can increase or decrease depending on various factors, a company’s dividend can also increase or decrease.
2022 has been a challenging year for many companies given the higher inflation and the rising interest rates. As a result, many stocks have not done well this year and the market as a whole has declined. In terms of the three major indexes, the S&P 500 has declined 16.2% year to date, the Dow Jones Industrial Average has declined 6.77%, and the NASDAQ has retreated 28.9% in 2022 as of December 13.
While the market hasn’t done well, a percentage of the leading dividend stocks have outperformed the market this year. Some leading dividend stocks have outperformed because their businesses have pricing power and competitive advantages that make them relatively resistant to rising inflation and increasing interest rates. Other leading dividend stocks have rallied given investors expect their earnings per share to grow substantially in the future.
Of the leading dividend stocks that have outperformed this year, many have increased their annual dividends to return even more capital back to shareholders.
2023
While November’s core inflation data was lower than expected, many analysts still think the Federal Reserve will still raise interest rates further and that there is still a likely probability of a recession in 2023. According to a monthly survey of around 300 institutional investors who represent trillions in funds, for instance, 82% thought recession was the ‘most likely’ scenario in the coming months.
Given the uncertainty, it could be a good idea for long term investors to own a well diversified portfolio of many stocks across many different sectors.
Photo by Roberto Júnior on Unsplash
Methodology
For our list of 12 Best Dividend Stocks That Outperformed in 2022, we picked 12 stocks with competitive advantages that outperformed the S&P 500’s performance in 2022 that also had a dividend yield of over 1% as of December 13.
We then ranked the dividend stocks based on the number of hedge funds in our database that owned shares in the same stock at the end of the third quarter.
12 Best Dividend Stocks That Outperformed in 2022
12. Novartis AG (NYSE:NVS)
Year to Date Return as of December 13: 3.80%
Dividend Yield as of December 13: 3.65%
Number of Hedge Fund Holders: 26
Novartis AG (NYSE:NVS) is a leading pharmaceutical company based in Switerzerland that has increased its annual dividend per share for 25 straight years since its creation in 1996. As a result of the increases, Novartis AG (NYSE:NVS) has a dividend yield of 3.65% as of December 13, which when added to its year to date return of 3.8% yields a fairly attractive return given that the S&P 500 declined 16.2% in the year.
Of the 920 hedge funds in our database, 26 were long Novartis AG (NYSE:NVS) at the end of Q3, ranking the stock #12 on our list of 12 Best Dividend Stocks That Outperformed in 2022.
Alongside McDonald’s Corporation (NYSE:MCD), Walmart Inc. (NYSE:WMT), and Johnson & Johnson (NYSE:JNJ), Novartis AG (NYSE:NVS) is a dividend stock that has outperformed the market in 2022.
11. Restaurant Brands International Inc. (NYSE:QSR)
Year to Date Return as of December 13: 11.84%
Dividend Yield as of December 13: 3.21%
Number of Hedge Fund Holders: 27
Restaurant Brands International Inc. (NYSE:QSR), the owner of Burger King, has outperformed the market given its year to date rally of 11.84% and its dividend yield of 3.21%.
Although inflation has been a headwind for many companies this year, the higher prices have not affected Restaurant Brands International Inc. (NYSE:QSR) given the company’s strong earnings. For Q3, Restaurant Brands International Inc. (NYSE:QSR) reported EPS of $1.17 on sales of $1.73 billion versus the consensus of $0.80 on revenue of $1.66 billion. Q3 global comparable sales rose 9% year over year.
10. International Business Machines Corporation (NYSE:IBM)
Year to Date Return as of December 13: 10.68%
Dividend Yield as of December 13: 4.38%
Number of Hedge Fund Holders: 40
International Business Machines Corporation (NYSE:IBM) is a tech stock that has outperformed both the S&P 500 and the NASDAQ, which are down 16.2% and 28.9% in 2022, respectively. Given its rally of 10.68%, International Business Machines Corporation (NYSE:IBM) has also outperformed many big tech companies too.
One potential reason for the strong performance could be International Business Machines Corporation (NYSE:IBM) expects free cash flow of around $10 billion this year which makes its dividend yield of 4.38% relatively safe if the company can maintain or grow the metric in the future.
9. Canadian Pacific Railway Limited (NYSE:CP)
Year to Date Return as of December 13: 11.28%
Dividend Yield as of December 13: 0.95%
Number of Hedge Fund Holders: 41
Canadian Pacific Railway Limited (NYSE:CP) is a leading railroad whose stock has rallied 11.28% this year given increasing demand. For Q3 2022, Canadian Pacific Railway Limited (NYSE:CP)’s core adjusted diluted EPS rose 15% year over year to C$1.01 while total revenues increased 19% year over year to C$2.312 billion. Canadian Pacific Railway Limited (NYSE:CP) also has a dividend yield of 0.95% as of 12/13.
Hedge fund billionaire Bill Ackman commented on Canadian Pacific Railway Limited (NYSE:CP) in an investor letter,
CP is a high-quality, inflation-protected business led by a best-in-class management team that operates in an oligopolistic industry with significant barriers to entry. With an improving volume and pricing outlook combined with the upcoming transformational acquisition of Kansas City Southern (“KCS”), we believe that CP’s prospects are bright.
CP reported revenue growth of 7% in the second quarter as pricing and mix, fuel surcharge pass-throughs and foreign exchange more than offset a small decline in volumes. CP is leveraging the strong pricing environment to renew contracts at an average price increase of over 6%. Pricing directly benefits earnings as rails pass on increases in fuel and other expenses to customers through contractual fuel surcharges and CPI escalators. In addition to earnings growth, high inflation should help rail transportation take share from trucking and lead to incremental volume growth over time. Customers are choosing cheaper transportation solutions as prices rise, and CP’s mission-critical rail service is often the cheapest or only viable method for transporting heavy freight over long distances. High fuel prices and wage gains also disproportionally increase the cost of trucking, which is up to three times less fuel efficient and much more labor intensive than rail transportation.
8. Canadian National Railway Company (NYSE:CNI)
Year to Date Return as of December 13: 4.24%
Dividend Yield as of December 13: 1.69%
Number of Hedge Fund Holders: 42
Canadian National Railway Company (NYSE:CNI) is another Canadian railroad that has outperformed the market given strong demand. As a result of stronger fundamentals, Canadian National Railway Company (NYSE:CNI) stock has rallied 4.24% year to date while the S&P 500 has declined 16.2% over the same period.
42 owned shares of Canadian National Railway Company (NYSE:CNI) at the end of September, ranking the stock #8 on our list of 12 Best Dividend Stocks That Outperformed in 2022.
7. Northrop Grumman Corporation (NYSE:NOC)
Year to Date Return as of December 13: 36.33%
Dividend Yield as of December 13: 1.32%
Number of Hedge Fund Holders: 46
Northrop Grumman Corporation (NYSE:NOC) is one of the better performing dividend stocks in 2022 given its surge of 36.33% year to date. With the Ukraine Russia war, it is likely U.S. defense spending will likely continue to increase and Northrop Grumman Corporation (NYSE:NOC) could potentially benefit if it maintains its market share.
Northrop Grumman Corporation (NYSE:NOC) certainty has substantial technical expertise given it is the maker of the B-21, which is the successor to the B-2. The company has a dividend yield of 1.32% as of December 13.
6. Automatic Data Processing (NASDAQ:ADP)
Year to Date Return as of December 13: 7.45%
Dividend Yield as of December 13: 1.91%
Number of Hedge Fund Holders: 48
Automatic Data Processing (NASDAQ:ADP) reported strong Q1 results with adjusted EPS of $1.86 on sales of $4.22 billion versus the consensus of $1.79 on revenue of $4.16 billion. For FY23, the company sees adjusted EPS growth of 15% to 17% and revenue growth of 8% to 9%. As a result of the impressive growth, Automatic Data Processing (NASDAQ:ADP) shares have rallied 7.45% as of December 13. The stock has a dividend yield of 1.91% as of the same date.
Like Automatic Data Processing (NASDAQ:ADP), McDonald’s Corporation (NYSE:MCD), Walmart Inc. (NYSE:WMT), and Johnson & Johnson (NYSE:JNJ) are dividend stocks that have outperformed the market this year.
Click to continue reading and see 5 Best Dividend Stocks That Outperformed in 2022.
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Disclosure: None. 12 Best Dividend Stocks That Outperformed in 2022 is originally published on Insider Monkey.
