dividend stocks
Some of the best investments for income investors in a volatile 2022 have come from the Dogs of the Dow.All portfolio doctors should prescribe high dividends to remedy rising interest rates and stiff inflation.
In 2022, the first year in recent memory pockmarked by those twin afflictions, dividend-heavy stocks such as utilities, pharmaceuticals, pipelines and many consumer-oriented blue chips like those found in the Dogs of the Dow have held up fine. There is a massive disparity of results within this year’s stock, mutual fund and exchange-traded fund (ETF) listings.
The FAANGs – or whatever we call them now after the renaming of Facebook and Google – are a ball and chain. Your basic core S&P 500 Index fund? Down double digits. I have never liked indexing anyway. That aversion goes doubly for bonds, real estate investment trusts (REITs) and master limited partnerships (MLPs). But I digress.
A Passion for Dividend StocksAs we hit 2022’s midpoint, the most upbeat performance stories underscore my perpetual passion for dividends.
The Dogs of the Dow – the 10 members of the Dow Jones Industrial Average that begin the year with the highest dividend yields – are clearly this year’s best in show. Through June 3, seven Dogs have positive returns, and only one, Chevron (CVX), is an oil company. Dow (DOW), the chemical giant, is up 20.7%. The Dogs sport dividend yields ranging from 2.8% – Coca-Cola (KO) – to 4.7% with International Business Machines (IBM). I think IBM’s 4.7% yield is a leading reason it is up 8% while a typical tech fund has coughed up a quarter of its value.
A pair of ETFs – ALPS Sector Dividend Dogs (SDOG, $55) and ALPS International Sector Dividend Dogs (IDOG, $28) – are also scaring off the bears, with year-to-date returns of 4.4% and 2.6% respectively. These funds are not replicas of the Dogs of the Dow but use a similar methodology across numerous sectors; SDOG’s past four quarterly distributions combined work out to a 3.6% yield, and better yet, the payments have been growing with each distribution. (Securities I recommend are in bold. Prices and other data are as of June 3.)
To further this furry-friend theme, Caterpillar (CAT) – in the Dow index, but not a 2022 Dog – is up 8.9% this year, one of the best in its sector. CAT is swimming in cash, and in May promised dividend increases in “the high single digits” shortly and for each of the next three years, although its 2% yield already exceeds the S&P 500’s 1.6%.
Caterpillar could write still bigger checks if it opts to emphasize cash payouts over stock buybacks, a practice investment managers sometimes clearly prefer. “You can’t fudge dividends,” says Henry “Hank” Smith, a dividend fan who is head of investment strategy for Haverford Trust Company. Smith says paying hard cash “is the most tangible statement management can make about future prospects.”
Another of my most esteemed dividend investments, Legg Mason Low Volatility High Dividend ETF (LVHD, $39). It’s off 1.3% so far this year, but that is excellent compared with the broad market. The ETF’s 3% yield is reliable. Two thumbs up.
Dividends catch regular criticism as a lazy use of capital or a drag on future growth. Those, however, are untimely complaints when you need high current income and shelter from what might still end up as a losing year for the S&P 500 and certainly for the Nasdaq.
I’m Retired. Should I Pay Off My Mortgage?
retirement
I’m Retired. Should I Pay Off My Mortgage?It’s a simple question. The right answer for you could depend on this: Where would you pull the money from to do it?
June 20, 2022
Your Guide to Roth Conversions
Special Report
Tax Breaks
Your Guide to Roth ConversionsA Kiplinger Special Report
February 25, 2021
The 15 Best Stocks for the Rest of 2022
stocks to buy
The 15 Best Stocks for the Rest of 2022The lesson of the past two years: Be ready for anything. Our 15 best stocks to buy for the rest of 2022 reflect several possible outcomes for the seco…
June 21, 2022
Kiplinger’s Weekly Earnings Calendar
stocks
Kiplinger’s Weekly Earnings CalendarCheck out our earnings calendar for the upcoming week, as well as our previews of the more noteworthy reports.
June 24, 2022
Should You Prefer Preferred Stocks?
ETFs
Should You Prefer Preferred Stocks?Preferred stocks and preferred stock ETFs may serve as a steady hand for income investors in an uncertain market.
June 23, 2022
Dividend Stocks Are Paying Off for Income Investors
dividend stocks
Dividend Stocks Are Paying Off for Income InvestorsInvestors can weather the storm of a volatile market with dividend-paying stocks.
June 23, 2022
The 15 Best Stocks for the Rest of 2022
stocks to buy
The 15 Best Stocks for the Rest of 2022The lesson of the past two years: Be ready for anything. Our 15 best stocks to buy for the rest of 2022 reflect several possible outcomes for the seco…
June 21, 2022