3 Safe Dividend Stocks to Buy in September

Chris MacDonald

Wed, Sep 7, 2022, 7:52 PM 4 min read

Investors looking for passive income now have choices. Bonds, which used to yield next to nothing, now provide a meaningful alternative to equities. That said, investors in safe dividend stocks, which have seen both capital appreciation and dividends in recent years, can attest to the value of owning such securities for the long term.

Unlike most bonds, dividend stocks allow investors to benefit from rising distributions over time.

What about the safety component? Well, how investors decide which dividend stocks are safe is really an art more than a science. Assessing durable competitive advantages and other hard-to-quantify metrics isn’t easy. Accordingly, for most investors, it’s more important to consider company fundamentals.

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These three dividend stocks are ones I believe are safe from both a fundamental and qualitative perspective. Let’s dive in!

Safe Dividend Stocks: Caterpillar (CAT)

A Caterpillar backhoe at the top of a hill

Source: aapsky / Shutterstock.com

Dividend Yield: 2.65%

Based in Deerfield, Illinois, Caterpillar (NYSE:CAT) is the world’s largest maker of mining and heavy construction equipment. Perhaps more notably for dividend investors, in January 2019, the company was added to the renowned list of Dividend Aristocrats. For roughly 28 years, Caterpillar has raised its dividend, providing investors with consistent and meaningful income growth over time.

Caterpillar has also paid a regular dividend since 1933. This streak, which is approaching nine decades, places it among the most impressive non-financial companies in the U.S.

From a fundamentals perspective, there’s a lot to like about Caterpillar’s forward-looking prospects. The company appears to have adequate cash flow to cover its dividend, at least over the medium term.

For those who consider Caterpillar a long-term growth stock, its 2.65% yield is simply the cherry on top.

McDonald’s (MCD)

Source: 8th.creator / Shutterstock.com

Dividend Yield: 2.14%

As many may expect, the world’s largest hamburger chain is a dividend stalwart. Shareholders in McDonald’s (NYSE:MCD) have been receiving burger-related dividends for decades. Since paying its first dividend in 1976, McDonald’s has found a way to provide impressive dividend growth over time.

Aside from impressive domestic growth, McDonald’s has become a global brand. For worldwide consumers, McDonald’s has found a way to successfully adjust its offerings to meet changing tastes.

Thus, from a business model perspective, there’s a lot to like about McDonald’s cash flow growth trajectory. As the company continues to dominate new markets, investors stand to benefit from a very profitable business model.

This past quarter, McDonald’s highlighted its trajectory, posting same-store sales growth of nearly 10%. In uncertain times like these, it appears McDonald’s burgers and fries provide about as consistent an outlook as investors can ask for.

With a dividend yield of 2.14% at the time of writing, McDonald’s remains a top safe dividend pick of mine right now.

Safe Dividend Stocks: Walmart (WMT)

Image of Walmart (WMT) logo on Walmart store with clear blue sky in the background

Source: Jonathan Weiss / Shutterstock.com

Dividend Yield: 1.65%

Last, but certainly not least, we have Walmart (NYSE:WMT).

This multinational supermarket chain has proven to be one of the greatest long-term bets in its sector. Indeed, its simple business model of providing everyday low prices hasn’t gotten old. For consumers and investors, Walmart has been consistent for decades.

With more than 11,000 stores in 26 countries under 54 banners, Walmart really spans the consumer spectrum. This has allowed Walmart to boast $15 billion in average annual free cash flow over the past seven years. As far as cash machines go, Walmart is certainly up there.

For dividend investors, the good news is Walmart has consistently — and generously — returned capital to shareholders. Over nearly five decades, Walmart has increased its dividend. Presently, this distribution stands at $2.24 per year, or a yield of 1.65%. While this yield is smaller than most companies, Walmart has made up for this relatively low distribution via increases each and every year.

Over time, I think Walmart stands to benefit from continued cash flow growth, passing on its cash flow to investors via dividends and buybacks. Those thinking long term ought to consider this stock as a core portfolio holding.

On the date of publication, Chris MacDonald did not have (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.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.