In this article, we will take a look at 12 best dividend paying stocks to buy now. If you want to see more best dividend paying stocks to buy, go directly to 5 Best Dividend Paying Stocks to Buy Now.
Dividend paying stocks are stocks of companies that pay dividends to their shareholders. Companies pay dividends to their shareholders as a way to return profits back to the owners. Although not always the case, many dividend paying stocks pay dividends on a quarterly basis.
Given profits can go up and down depending on various factors, dividends can fluctuate over time. During recessions, some companies cut their dividends as a way to strengthen their balance sheet. During more expansionary times, company profits can grow and many companies increase their dividends as a result.
While dividends can fluctuate, the best dividend paying stocks tend to have a more stable dividend payment history given the strength of their businesses. Because many of the best dividend paying stocks are blue chip companies with substantial scale and competitive advantages, the companies are often able to keep or even raise their dividend payments in tough economic times.
As a result, many of the best dividend paying stocks have raised their annual dividends for many consecutive years.
2022
2022 has been a challenging year for the market as the Federal Reserve has raised interest rates six times this year alone to fight inflation.
Although inflation has shown signs of potentially peaking in October, many analysts think the U.S. central bank will raise rates further. If rates go up too far, there's a potential for a recession next year and some companies might decrease their dividends as a result.
With the higher interest rates, Treasury yields have increased and the higher U.S. government bond yields have made dividend yielding stocks less attractive to some investors. Given the uncertainties, it could be a good idea for long term investors to own a well diversified portfolio of stocks across many different sectors.
Nevertheless, the decrease in stock prices have made the valuations of some quality dividend paying blue chip companies more attractive. Although there could be more downside in the near term if economic data fails to meet expectations, some of the quality blue chip companies could do well in the long term given their strong businesses.
New York Wall Street sign.
Methodology
For our list of 12 Best Dividend Paying Stocks to Buy Now, we picked 12 blue chip stocks that paid dividends that also had competitive advantages and growth potential.
We then ranked the stocks based on the number of hedge funds in our database that owned shares of the same stock at the end of the third quarter.
Waste Management, Inc. (NYSE:WM) has a great business given the trash services are essential and an oligopoly. As a result, Waste Management, Inc. (NYSE:WM) has increased its EPS relatively steadily over time and the company has been profitable even during the pandemic. As a result of its durable business with competitive advantages, Waste Management, Inc. (NYSE:WM) has increased its annual dividend for 18 consecutive years. As of December 12, Waste Management, Inc. (NYSE:WM) has a dividend yield of 1.56%.
Alongside JPMorgan Chase & Co. (NYSE:JPM), Apple Inc. (NASDAQ:AAPL), and Microsoft Corporation (NASDAQ:MSFT), Waste Management, Inc. (NYSE:WM) is a dividend paying stock that many hedge funds in our database owned at the end of Q3 2022.
Lockheed Martin Corporation (NYSE:LMT) is one of the most advanced companies in the world given how hard it is to make aircraft like the F-22 and F-35. Given the difficulty to replicate, Lockheed Martin Corporation (NYSE:LMT) has a substantial moat which makes it a great dividend stock. As of December 12, Lockheed Martin Corporation (NYSE:LMT) also has a dividend yield of 2.47% which is fairly attractive given the company's high quality. Given defense spending usually goes up over time, Lockheed Martin Corporation (NYSE:LMT) has growth potential if it maintains its market share.
McDonald's Corporation (NYSE:MCD) has been a dependable dividend payer over the years given the company has increased its annual dividend for 45 consecutive years. As a result of the increases, the fast food chain has a dividend yield of around 2.2% as of December 12. Considering demand doesn't fall very much during tough times, McDonald's Corporation (NYSE:MCD) usually makes more than enough profits to cover its dividend during recessions. In terms of profits, analysts expect McDonald's Corporation (NYSE:MCD) to earn $9.95 per share in 2022, $10.49 per share in 2023, and $11.42 per share in 2024.
Walmart Inc. (NYSE:WMT) has a substantial competitive advantage given its scale which allows it to sell the same goods and groceries at lower costs than its competitors. As a result, Walmart Inc. (NYSE:WMT) has become one of the largest companies in the world in terms of revenue and profits. In terms of dividends, Walmart Inc. (NYSE:WMT) has a strong history given the company has increased its annual dividend for 49 consecutive years. As of December 12, Walmart Inc. (NYSE:WMT) had a dividend yield of 1.51%.
The Procter & Gamble Company (NYSE:PG) has paid a dividend for 132 straight years since its incorporation in 1890 and the company has also increased its annual dividend for 66 straight years given how durable its consumer staples brands business has been. Although inflation has been a headwind this year, The Procter & Gamble Company (NYSE:PG) nevertheless increased its quarterly dividend by 5% to $0.9133 per share in April and as a result, The Procter & Gamble Company (NYSE:PG) has a dividend yield of 2.4% as of December 12.
Union Pacific Corporation (NYSE:UNP) ranks #7 on our list of 12 Best Dividend Paying Stocks to Buy Now given 74 hedge funds in our database of 920 held shares in the railroad company at the end of Q3. Many elite funds like Union Pacific Corporation (NYSE:UNP) considering railroads have pricing power which makes the company's dividend more attractive. As a blue chip business, Union Pacific Corporation (NYSE:UNP)'s dividend yield of 2.41% and its forward P/E ratio of 18.15 at current prices is pretty appealing.
Pfizer Inc. (NYSE:PFE) is a leader in innovation in medicines that has raised its annual dividend for 11 straight years. As a result of the increases, Pfizer Inc. (NYSE:PFE) has a quarterly dividend of $0.40 per share and a dividend yield of 3.07% as of December 12. Although its shares have declined 11.67% year to date, Pfizer Inc. (NYSE:PFE) has a forward P/E ratio of 10.5 which could be attractive if the company maintains its earnings over time.
Like Pfizer Inc. (NYSE:PFE), JPMorgan Chase & Co. (NYSE:JPM), Apple Inc. (NASDAQ:AAPL), and Microsoft Corporation (NASDAQ:MSFT) are dividend paying stocks that many hedge funds in our database owned at the end of the third quarter.
