Stocks had a great year in 2021. If you simply held on to an index fund that tracked the S&P 500, after all, your returns would have approached 27%.
That number rises to 29% after including reinvested dividends, which can be a major source of growth and income in a portfolio.
With that cash focus in mind, let's look at a few attractive dividend stocks for 2022. Read on for some good reasons to buy Microsoft (MSFT -1.27%), Procter & Gamble (PG 0.54%), and Coca-Cola (KO 2.14%).
Image source: Getty Images.
1. Microsoft
There are many ways that investors can gain exposure to global growth trends like the shift toward cloud-based software services and the move toward a hybrid work environment. Owning Microsoft delivers that access along with several other major advantages.
The software titan is no slouch in the growth department, with sales soaring 22% in the most recent quarter thanks to high demand for its productivity, PC, and enterprise cloud services. These divisions cover a wider range of niches than you'd get by owning more focused tech providers.
Microsoft is also a profit machine. Gross profit was $116 billion in fiscal 2021, having roughly doubled in the past four years.
That earnings success has helped fund roughly $60 billion in cash returns to shareholders in the past three years. And, while its current yield is modest at just 0.7%, Microsoft investors can expect to see the payout rise steadily over time as the company capitalizes on multi-year shifts into digital productivity.
2. Procter & Gamble
Procter & Gamble stock had a strong finish to 2021, but shares still look attractive early in the new year. The consumer staples giant currently pays out a 2% annual yield following its latest rally, or a bit more than the 1.9% an investor would get from owning the wider Dow Jones Industrial Average.
More importantly, the business has never been stronger. P&G has seen just a modest growth slowdown since the pandemic boosted demand across its portfolio of home care and fabric care products. Its brand leadership should allow it to raise prices aggressively, too, making it a solid hedge against inflation.
The company announces its next earnings result on Jan. 18, and Wall Street is watching for any signs of struggle in boosting those portfolio prices. But P&G has a long history of market-beating growth, which should be amplified by gushing cash returns in 2022.
3. Coca-Cola
Coca-Cola stock's 8% increase last year was good enough to make it one of the worst-performing stocks in the Dow. But investors can look past short-term swings like that as they hunt for growth and income.
Coca-Cola shares provide a good balance between these two goals.
Start with the growth outlook, which was just boosted in late October thanks to a 14% spike in global sales volumes. After a brief pandemic-related slump, Coke is back to its old habit of soaking up market share in the massive global beverage industry. PepsiCo (PEP 1.08%), by comparison, logged an 8% volume increase in its last outing.
Sure, demand will be volatile over the next few quarters because Coke's business is sensitive to any changes in mobility patterns like the ones caused by social distancing efforts. But this Dividend King has all the ingredients necessary to generate solid long-term returns.
Add robust profitability, soaring cash flow, and a dominant brand to that improving growth outlook, and you've got a complete investment package. Income investors should see the stock's modest performance in 2021 as simply a bonus that will amplify returns from here on out.
