In this article, we discuss 12 best-performing dividend stocks in 2022. You can skip our detailed analysis of dividend investing and returns of dividend stocks in the past, and go directly to read 5 Best Performing Dividend Stocks in 2022.
Major central banks have signaled the likelihood of further interest rate hikes heading into next year. The slow economic growth has increased the risks of a global recession. Ethan Harris, a head of global economics research at Bank of America, spoke to Bloomberg in December about the possibility of a recession at the start of next year. This was also confirmed by World Bank’s president earlier in September, who asserted that the global weakening economy would result in a recession over the next year. In the current market situation, analysts are recommending dividend stocks to generate stable income.
In periods of high inflation, dividend stocks have recorded strong performance relative to the broader market. Companies that hold long dividend growth track records are particularly popular in this regard. Dividend growers and initiators delivered an annual average return of 10.4% from January 1973 to December 1984, as reported by Sterling Capital. During the same period, non-dividend stocks returned 5.1% annually. The report also mentioned that dividend growers outperformed their peers when inflation ranged between 4% to 13% annually over the past five decades.
The best dividend stocks this year exhibited strong performance and hold decades-long dividend growth track records. Companies that consistently grow their dividends can significantly increase portfolio returns for the long term during turbulent market conditions. Some dividend stocks that remained famous this year include AbbVie Inc. (NYSE:ABBV), Johnson & Johnson (NYSE:JNJ), and Merck & Co., Inc. (NYSE:MRK) among others that are mentioned below.
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Our Methodology:
The stocks mentioned below have shown strong returns this year and have solid dividend policies. In addition to this, we analyzed these stocks through their overall financial health and balance sheets. The stocks are ranked according to their dividend yields, as of December 21.
12 Best Performing Dividend Stocks in 2022
12. McKesson Corporation (NYSE:MCK)
Dividend Yield as of December 21: 0.57%
McKesson Corporation (NYSE:MCK) is a Texas-based healthcare company that distributes pharmaceuticals and provides other medical services to its consumers. In the first half of 2022, the company generated $166 million in operating cash flow. It remained committed to its shareholder obligation, returning $139 million in dividends during this period.
McKesson Corporation (NYSE:MCK) currently pays a quarterly dividend of $0.54 per share and has a dividend yield of 0.57%, as of December 21. The company is one of the best dividend stocks on our list as it has raised its payouts for six years consecutively. It can be a good option for dividend portfolios alongside some popular dividend stocks like AbbVie Inc. (NYSE:ABBV), Johnson & Johnson (NYSE:JNJ), and Merck & Co., Inc. (NYSE:MRK).
In November, Cowen raised its price target to McKesson Corporation (NYSE:MCK) to $416 with an Outperform rating on the shares, as the company’s underlying business remained strong this year.
At the end of Q3 2022, 51 hedge funds tracked by Insider Monkey reported owning stakes in McKesson Corporation (NYSE:MCK), compared with 47 in the previous quarter. Berkshire Hathaway owned over 3 million shares in the company. Becoming its largest shareholder in Q3.
Baron Funds mentioned McKesson Corporation (NYSE:MCK) in its Q3 2022 investor letter. Here is what the firm has to say:
“McKesson Corporation (NYSE:MCK) is a leading distributor of pharmaceuticals and medical supplies. The company also provides prescription technology solutions that connect pharmacies, providers, payers, and biopharmaceutical customers. The stock price rose on solid financial results as its business is less exposed to current macroeconomic headwinds. We continue to have the conviction that McKesson can grow earnings per share by an average of 12% to 14% annually and think the stock is still reasonably valued.”
11. Hess Corporation (NYSE:HES)
Dividend Yield as of December 21: 1.07%
Hess Corporation (NYSE:HES) is an American global independent energy company that is involved in the exploration and production of crude oil and natural gas. On December 7, the company declared a quarterly dividend of $0.375 per share, which fell in line with its previous dividend. In the past five years, the company raised its dividend at a CAGR of 8.76%, which makes it one of the best dividend stocks on our list. The stock’s dividend yield on December 21 came in at 1.07%.
Following the company’s third-quarter earnings, Barclays raised its price target on Hess Corporation (NYSE:HES) to $155 in December with an Overweight rating on the shares.
In the third quarter of 2022, Hess Corporation (NYSE:HES) reported revenue of $3.16 billion, up 74.6% from the same period last year. The company returned $265 million to shareholders in dividends and share repurchases.
As of the close of Q3 2022, 33 hedge funds in Insider Monkey’s database owned stakes in Hess Corporation (NYSE:HES), worth $1.22 billion collectively.
10. Marathon Oil Corporation (NYSE:MRO)
Dividend Yield as of December 21: 1.30%
Marathon Oil Corporation (NYSE:MRO) is a Texas-based energy company that is engaged in the exploration of hydrocarbons. The company is one of the best dividend stocks on our list as it returned $1.1 billion to shareholders in the third quarter of 2022, including $54 million in dividends. Through the first three quarters, it returned 61% of its CFO to shareholders.
Marathon Oil Corporation (NYSE:MRO) maintains a six-year streak of consistent dividend growth. The company currently pays a quarterly dividend of $0.09 per share for a dividend yield of 1.30%, as of December 21.
In December, Barclays lifted its price target on Marathon Oil Corporation (NYSE:MRO) to $35 with an Overweight rating on the shares, appreciating the company’s quarterly earnings.
At the end of Q3 2022, 50 hedge funds tracked by Insider Monkey presented a bullish stance on Marathon Oil Corporation (NYSE:MRO), up from 41 funds in the previous quarter. The stakes owned by these hedge funds have a total value of over $1 billion.
Carillon Tower Advisers mentioned Marathon Oil Corporation (NYSE:MRO) 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. Walmart Inc. (NYSE:WMT)
Dividend Yield as of December 21: 1.54%
An American multinational retail corporation, Walmart Inc. (NYSE:WMT) is another best-performing dividend stock on our list. Credit Suisse raised its price target on the stock to $170 in December with an Outperform rating on the shares. The firm mentioned that the company is a well-positioned defensive name in an uncertain economic condition.
Walmart Inc. (NYSE:WMT) currently pays a quarterly dividend of $0.56 per share for a dividend yield of 1.54%, as of December 21. The company has been raising its dividends consistently for the past 49 years, which makes it one of the best dividend stocks on our list. Moreover, it returned $1.5 billion to shareholders in dividends during the first nine months of the year.
As of the end of Q3 2022, 68 hedge funds tracked by Insider Monkey were bullish on Walmart Inc. (NYSE:WMT), compared with 67 in the previous quarter. The collective value of stakes owned by these hedge funds is over $4.08 billion.
Leaven Partners mentioned Walmart Inc. (NYSE:WMT) in its Q3 2022 investor letter. Here is what the firm has to say:
“In our last quarterly letter, I briefly mentioned that the consensus estimates for corporate profits appeared to be a bit too sanguine. I referenced a Reuters article that reported, as of June 17, Wall Street expected S&P 500 earnings to grow by 9.6% in 2022, which was up from 8.8% in April and from 8.4% in January. That tune began to change at the end of July and accelerated in August and September, as major players, such as Walmart (NYSE:WMT), has recently issued profit warnings and/or have withdrawn guidance. In response, Wall Street has altered its outlook: lowering third-quarter profit growth to 4.6%[2] from 7.2% in early August and slashing full-year profit growth to 4.5%.”
8. Archer-Daniels-Midland Company (NYSE:ADM)
Dividend Yield as of December 21: 1.70%
Archer-Daniels-Midland Company (NYSE:ADM) is an American multinational food processing company, headquartered in Chicago. On November 2, the company declared a quarterly dividend of $0.40 per share, which fell in line with its previous dividend. The company is just one year away from becoming a Dividend King, having raised its payouts for 49 years in a row. The stock’s dividend yield on December 21 came in at 1.70%.
UBS initiated its coverage of Archer-Daniels-Midland Company (NYSE:ADM) in December with a $115 price target, highlighting the company’s productivity and innovative initiatives this year.
As of the close of Q3 2022, 37 hedge funds tracked by Insider Monkey reported owning stakes in Archer-Daniels-Midland Company (NYSE:ADM), compared with 42 in the previous quarter. These stakes are valued collectively at nearly $600 million. With over 1.4 million shares, Markel Gayner Asset Management was the company’s leading stakeholder in Q3.
Diamond Hill Capital mentioned Archer-Daniels-Midland Company (NYSE:ADM) in its Q1 2022 investor letter. Here is what the firm has to say:
“ADM is a leading agricultural processor that also operates a global nutrition business focused on the development of ingredients and flavors for food and beverages, supplements and more. The company’s recent operating results have benefited (unfortunately) from the war in Ukraine as grain prices and agricultural markets globally experienced strong price increases. ADM is positioned well to benefit from the volatility due to its stable North American agricultural base.”
7. Caterpillar Inc. (NYSE:CAT)
Dividend Yield as of December 21: 1.99%
Caterpillar Inc. (NYSE:CAT) is a Texas-based construction and machinery equipment company. In December, Stifel raised its price target on the stock to $271 with a Buy rating on the shares. The firm expects the price/cost environment to generally improve.
In the third quarter of 2022, Caterpillar Inc. (NYSE:CAT) reported revenue of $15 billion, up 21% from the same period last year. The company is one of the best dividend stocks on our list as it returned $2 billion to shareholders in dividends and share repurchases.
On December 15, Caterpillar Inc. (NYSE:CAT) declared a quarterly dividend of $1.20 per share, which fell in line with its previous dividend. The company has been raising its dividends consistently for the past 28 years. The stock’s dividend yield on December 21 came in at 1.99%.
As of the end of the June quarter of 2022, 45 hedge funds tracked by Insider Monkey owned stakes in Caterpillar Inc. (NYSE:CAT), compared with 54 in the previous quarter. These stakes are collectively valued at over $3.25 billion.
Diamond Hill Capital mentioned Caterpillar Inc. (NYSE:CAT) 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.”
6. McDonald’s Corporation (NYSE:MCD)
Dividend Yield as of December 21: 2.27%
McDonald’s Corporation (NYSE:MCD) is an American multinational fast-food chain. On October 14, the company declared a 10% hike in its quarterly dividend to $1.52 per share. This was the company’s 46th consecutive year of dividend growth. The company’s strong cash position and strong dividend growth track record make it one of the best dividend stocks on our list. The stock’s dividend yield on December 21 came in at 2.27%.
In December, Jefferies raised its price target on McDonald’s Corporation (NYSE:MCD) to $315 with a Buy rating on the shares, maintaining a positive view on the restaurant and food service distribution sector in the US heading into 2023.
In addition to dividend stocks like AbbVie Inc. (NYSE:ABBV), Johnson & Johnson (NYSE:JNJ), and Merck & Co., Inc. (NYSE:MRK), investors are also paying attention to McDonald’s Corporation (NYSE:MCD) due to its dividend growth streak.
McDonald’s Corporation (NYSE:MCD) was a part of 53 hedge fund portfolios in Q3 2022, up from 50 in the previous quarter, according to Insider Monkey’s data. The stakes owned by these hedge funds are worth over $1.8 billion collectively. With over 2.1 million shares, Bridgewater Associates was the company’s leading stakeholder in Q3.
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Disclosure. None. 12 Best Performing Dividend Stocks in 2022 is originally published on Insider Monkey.