The easiest way to make money in the stock market isn't by frantically searching for the next meme stock. Instead, a simple buy-and-hold approach can lead to the safest, most consistent gains you can make from the stock market. Stocks that pay dividends are typically safer than most and can also provide you with recurring cash flow as you hold on to them.
Three great dividend stocks that have been beaten up this year, falling more than 10%, include: Medical Properties Trust (MPW -8.68%), Home Depot (HD 0.74%), and Cisco Systems (CSCO 0.44%). All are worth considering for your portfolio.
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1. Medical Properties
A real estate investment trust (REIT) can be an excellent option for income investors to consider. Since it needs to pay out 90% of its profits to investors, all you really need is to ensure that the business fundamentals are strong and that it can continue making payments.
The REIT's focus on healthcare makes it a bit of a safer investment than most as its tenants are mainly hospitals, accounting for 72.5% of its portfolio. Behavioral health facilities make up another 11.5% while inpatient rehab hospitals represent 9.2% of the company's total properties.
Medical Properties currently pays a quarterly dividend of $0.29 which yields 5.7% annually -- that's well above the S&P 500 average of 1.3%. To assess the safety of that payout, investors should focus on the company's funds from operations (FFO), which is a metric REITs rely on instead of net income to assess their performance. FFO in Medical Properties' most recent quarter, for the period ended Dec. 31, was $0.43, which leaves plenty of room to cover the dividend.
For buy-and-hold investors, Medical Properties can make for a safe income stock to hold. Despite a 15% drop in its shares this year (the S&P 500 has fallen by more than 9%), now can be an optimal time to add this high-yielding investment to your portfolio as the recent stock performance does not reflect the strength of the overall business.
2. Home Depot
Home Depot's stock doesn't pay nearly as high a yield as Medical Properties, but at 2.4%, it's still an above-average payout. The home improvement retailer can make for a great stock to own amid the hot U.S. housing market. For example, according to a survey from insurance company Hippo, 77% of new homeowners will need to address an unexpected repair within their first year of ownership.
And Home Depot has been a popular spot for any type of home repair. The company has been doing exceptionally well amid the pandemic as people have been spending more time at home and fixing things around the house. In its fiscal 2021 (ended Jan. 30), Home Depot's sales hit a record of $151.2 billion. That's a 14% improvement from the previous year when sales growth was already stronger than usual, rising by 20%. In the fiscal year just before the pandemic, the company's top line rose by less than 2%.
Home Depot knows it may be running out of steam, but it still expects sales growth to be "slightly positive" for fiscal 2022 with its per-share earnings also rising modestly by single digits. Amid the strong results, however, the company hiked its dividend by 15% up to $1.90 per share, which is well below the $3.21 earnings per share (EPS) it reported last quarter.
A slowdown is inevitable for Home Depot, especially amid inflation, and that's likely a key reason this is the worst-performing stock on this list, down 23% in 2022. But while growth investors may be disappointed with Home Depot, income investors should be capitalizing on this opportunity to add a stable dividend stock to their portfolios.
3. Cisco Systems
Rounding out this list is tech stock Cisco Systems. At 2.7%, its dividend yield is slightly higher than Home Depot's. What I like about this business is that it's in a great position to meet the needs of companies that are moving more of their operations to the cloud. From networking to security to data center products, Cisco can give businesses the tools they need to facilitate the digitization process.
Although it's not a high-growth stock, the business is moving in the right direction. Cisco released its second-quarter numbers last month, and for the period ended Jan. 29, revenue rose 6% year over year to $12.7 billion. Its diluted EPS jumped 18% to $0.71. On those strong results, the company increased its dividend by 3% to a quarterly payment of $0.38, which leaves plenty of room for more rate hikes in the future.
Cisco is also rewarding its investors in other ways, announcing that it has authorized a fresh $15 billion in stock repurchases. With the increase, the company can now buy back up to $18 billion in its shares (with no fixed date for doing so).
Cisco's shares are down 14% this year despite the company's encouraging numbers. However, that may be simply a result of the stock finishing 2021 near a high and investors cashing out some of those gains. Long term, Cisco can be a solid stock for both dividend and growth investors.
