7 Dividend Darlings to Scoop Up Every Time the Market Dips
Dividend investing is one of the prominent ways to build wealth. Whether you are building a retirement portfolio, want to leave a legacy, or are looking to use the dividend income to cover your expenses, the right dividend stocks can make it possible. However, not all dividend stocks are the same. They can provide regular income but you need to ensure this income is consistent. This is why it makes sense to invest in companies that have a record of paying steady dividends. Consistency and stability are the two things you need to watch out for. Let’s take a look at the seven dividend stocks you should buy with every dip. With an improvement in the economy, we can expect these companies to offer dividend hikes throughout 2024.
Dividend Stocks: Rio Tinto (RIO)
If you are hungry for a high dividend yield, Rio Tinto (NYSE:RIO) is a great stock to own. With a dividend yield of 5.42%, the company could benefit from the rate cuts. One big reason to own the stock is the solid fundamentals. It reported a free cash flow of $ 7.7 billion in 2023.
Rio Tinto has a dividend payout ratio of 80%, which is better than several companies today. It has recently announced an investment in the lithium industry. The company will invest $350 million in Argentina for a lithium project and this could be a massive opportunity for it to cash in on the hot asset.
It has committed to an annual capital investment of $7 billion between 2024 and 2026 and this will pay off in the long-term. With inflation receding, Rio Tinto will see a drop in operating costs and we could see another dividend hike.
Oracle (ORCL)
With a dividend yield of 1.24%, Oracle (NYSE:ORCL) enjoys a strong presence in the tech industry. The company reported impressive financials and beat estimates. Driven by artificial intelligence (AI), Oracle is set to see higher growth in the coming years. It has a dividend payout ratio of 35% and considering the earnings potential, it can easily increase the payouts.
In the fourth quarter, its cloud services saw a 45% increase in sales to hit $4.1 billion and it has robust guidance for the year. Trading at $129, the stock is up 23% year-to-date (YTD) and increased 46% in the year.
The company has been around for a long time and is rapidly building new data centers to meet the growing demand. For the current quarter, it is expecting earnings in the range of $1.62 to $1.66 per share. The management is aiming for sales of $65 billion by 2026.
There is an AI backlog and Oracle is making the most of the momentum. This is one stock that will not only generate passive income but also show capital gains in the next two years. It is a pure-play tech stock with the ability to reward investors significantly.
Dividend Stocks: Exxon Mobil (XOM)
A dividend aristocrat, Exxon Mobil (NYSE:XOM) has raised its dividend payouts for 41 consecutive years. The oil and gas company is a key player in the industry and it will make significant cash flow driven by the oil prices at over $80 a barrel.
The company did not cut dividends even during the pandemic and enjoys a yield of 3.35%. It has a dividend payout ratio of 41% which shows that the dividend is sustainable and there is scope for an increase. The oil company generated $55.4 billion of cash flow in 2023 and distributed $32.4 billion to the shareholders.
It declared a quarterly dividend of 95 cents per share which looks attractive for XOM stock trading at $113. The stock is up 10% YTD but any dip is worth buying. The elections and electric vehicle adoption could have an impact on the stock but I believe Exxon Mobil is relevant right now and has a long way to go.
PepsiCo (PEP)
One of the biggest industry players, PepsiCo (NASDAQ:PEP) enjoys a strong global presence, pricing power and brand loyalty. The demand for caffeinated beverages is expected to increase as summer approaches and I believe this will help the stock.
Multiple price hikes have impacted the sales but I think the company is done with the hikes and the slowdown in sales could be temporary. PepsiCo has a dividend yield of 2.93% and the stock is trading at $172. The company has increased dividend payouts for 52 consecutive years and this speaks about its commitment to reward shareholders.
The stock has also grown 42% over the past five years. The management expects to see a 4% rise in organic revenue this year. PepsiCo has a diversified business which shields it from the market movement and is highly relevant in the current environment.
PepsiCo is growing in international markets and is one passive income stock that wouldn’t disappoint.
Dividend Stocks: Johnson & Johnson (JNJ)
A top healthcare stock, Johnson & Johnson (NYSE:JNJ) has a dividend yield of 3.06% and has been increasing dividend payouts for more than 50 years. Having spun off the consumer products division, Johnson & Johnson is in a good position to see revenue growth driven by medical devices and innovative medicine.
The company saw a 7.3% rise in sales in the recent quarter where the pharmaceutical division surged 4.2% while the medical devices segment grew 13.3%. It enjoys stellar cash flow and has enough liquidity to keep rewarding shareholders.
It is one of the fastest-growing biotech companies with a strong pipeline of drugs and management expects to see annual growth between 5% to 7% between 2025 to 2030. Trading at $155 today, the stock is moving in the range of $145 to $162 and is at a discount right now. This is one stock to load up on whenever the market dips.
McDonald’s (MCD)
Your favorite burger joint is a dividend-paying company. A dividend aristocrat, McDonald’s (NYSE:MCD) has hiked dividends consecutively for 49 years and enjoys a yield of 2.36%. Trading at $283 today, the stock is down 4% YTD. It hit $300 in January but has dropped since then.
The food giant has a global presence and enjoys a competitive advantage in the industry. The company has a franchise business model which helps keep operating costs down and generates steady cash flow. It offers affordable meals which helped it thrive during the inflationary period. Lower prices, implementation of AI and menu innovation can help attract customers and we could see an improvement in sales.
It saw an 8% YOY rise in net sales and a 3.4% rise in the same-store sales for the fourth quarter. Fundamentally, MCD is a strong company with the ability to rebound from the recent slip. Looking at the company’s history and global presence, the stock looks highly undervalued to me.
Coca-Cola (KO)
Trading at $60 today, Coca-Cola (NYSE:KO) enjoys a dividend yield of 3.21% and is one of the top companies globally. It has a strong presence in the beverages industry and is diversifying into healthy drinks to meet the changing needs of consumers. A dividend aristocrat, Coca-Cola believes in rewarding shareholders and has increased dividends for over 60 years.
With Coca-Cola, do not expect any immediate upside because the stock has been moving sideways over the past few months. However, it will bring stability to any portfolio and generate passive income for you. In the recent quarter, it announced a dividend of 49 cents per share. A cultural phenomenon, Coca-Cola has over 200 drink options and caters to every age group.
It saw a 6% YOY rise in revenue in 2023 and the operating cash flow hit $11.6 billion. The company is well-positioned for growth and could see an improvement in sales during the months of summer. With a dividend payout ratio of 76%, KO stock is one of the best dividend stocks out there.
On the date of publication, Vandita Jadeja did not hold (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.
