There are several signs that the economy is improving. Inflation is coming down and interest rates could soon follow. However, as an investor, you need to be prepared for it all. In inflation or recession, you should build a stock portfolio that can thrive over the years. If you are an income investor like me, you’d want to play safe and look for stocks that not only generate passive income but also grow with time.
When looking for stocks with strong dividends, look for stable companies that have a dividend-paying history and a solid balance sheet. Here are my picks of the must-own dividend stocks that every income investor should pick now.
Chevron Corporation (CVX)
Chevron Corporation (NYSE: CVX) is the world’s third-largest oil stock and there are many reasons to bet on it. A well-known name in the industry, Chevron had a difficult year in 2020, and it still managed to cut production as well as reduce the capital spending. This was also a period when crude prices were dropping.
In 2022, it saw high cash flow and significant growth in earnings. It has even bigger plans this year and has set aside a higher capital expenditure budget. The company has reported stellar financial numbers for the last eight consecutive quarters and there is no stopping its momentum. Its shareholder’s distributions have hit a record of over $7 billion which is much better than several of its competitors.
The company invests heavily in capital expenditure and it has development projects in place, which include the Tengizchevroil and Future Growth Project. The completion of these projects will lead to a huge increase in the oil production per day and it could lead to a higher free cash flow over the next three years. CVX stock is exchanging hands at $160 today and looks undervalued to me. The company has a deep resource inventory and enjoys a favorable position in the industry.
While it has recently paid a quarterly dividend of $1.51 and with the increasing cash flow, this amount could be higher over the next few years. This is one company that will continue to generate profits even if oil drops below $60. We may see some volatility in the industry but there will never come a time when the oil demand will end. This makes Chevron one of the highly relevant stocks for income boost today.
Chevron is poised for long-term growth and it has a dividend yield of 3.77%.
One of my all-time favorite and must-own dividend stocks, Coca-Cola (NYSE:KO) should be a part of every income investor’s portfolio. The company is a perfect dividend king and has a history of increasing dividends for 61 consecutive years. It is a highly reliable company that has grown even in an uncertain market. It offers a range of products that have become a part of everyone’s lives.
Despite the price rises, the company reported stellar financials thanks to a leadership team that keeps the brand relevant. In the recent quarter, the company saw a 6% rise in net revenue over last year and the organic revenue saw an 11% rise. Its EPS came in at $0.78, up 11%. Coca-Cola managed to report better numbers than the pre-pandemic results and the rise in revenue is proof that the company’s affordable products are still in demand.
That said, it has a robust balance sheet and enough liquidity to keep rewarding investors. KO stock is trading at $60 today and looks highly undervalued to me. It has a dividend yield of 3.04% and recently paid a quarterly dividend of $0.46.
A dividend king in every sense, Coca-Cola is a defensive stock that should be a part of your portfolio for many years to come. KO stock is one of the most reliable dividend payers today.
Another personal favorite dividend stock, McDonald’s (NYSE:MCD) has impressed investors with solid revenue numbers. A very stable company with a global presence, it has an excellent franchise model which has been working in its favor.
McDonald’s has an unusually high profitability due to the franchise selling model which ensures a steady stream of fees and franchise charges. It ensures steady growth even in times of inflation. Recently, McDonald’s saw a steady rise in revenue due to the affordability of its products. The company reported an 11.7% rise in global comparable sales in the recent quarter, and I believe this growth momentum is set to continue.
Additionally, the company has been winning market share and is steadily expanding its presence across multiple geographical locations. McDonald’s is one of the top income generating stock picks right now.
It enjoys a strong profit margin which has allowed it to maintain a steady dividend. MCD stock has a dividend yield of 2.14% and the stock is exchanging hands at $284, inching closer to the 52-week high of $299.
However, I believe the stock will be able to go beyond $300 this year. The stock is up 7% year to date and the company has recently announced a quarterly dividend of $1.52. It has the cash and ability to increase the dividends in the future.
It is never too late to buy MCD stock. Income investors seeking steady earnings will be happy to pay a premium for the stock.
On the date of publication, Vandita Jadeja did not have (either directly or indirecItly) 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.