Are you not sure about where to invest right now? Dividend stocks can be a great place to start looking. Their financials are generally sound, and they can enable you to collect some recurring cash flow while you hang on to your investment. And at a time when investors have been looking for safety, some of them have also been outperforming the markets in 2022 by a wide margin.
A couple of Dividend Kings that have been doing particularly well this year are AbbVie (ABBV -0.91%) and Altria Group (MO 0.08%). They are both up more than 9% since the first of January, and they look like rockstars compared to the S&P 500 and its 16% fall thus far. And those returns don't even factor in their respective yields.
Image source: Getty Images.
1. AbbVie
AbbVie is a top healthcare stock that yields 3.7% annually, which is more than double the S&P 500 average of less than 1.4%. The company's dividend-increasing streak goes back 50 years if you include when it was part of Abbott Laboratories; AbbVie spun off in 2013, and has been making its own regular rate hikes since then. This year the company raised its dividend payments by 8.5%, and shareholders will now collect $1.41 every quarter, up from $1.30 previously.
What risk-averse investors will love about this stock is how broad and diverse its business is. While top-selling inflammation drug Humira generated $4.7 billion for the company through the first three months of 2022, that represented a little more than one-third of AbbVie's total sales. Other drugs from oncology, neuroscience, eye care, and other areas help account for the rest. Psoriasis drug Skyrizi brought in revenue of $940 million during the period, growing at an impressive rate of 64%. And the company's Botox Cosmetic business reported revenue of $641 million, which was up 34%.
AbbVie's broad business can provide some solid stability at a time when other less-diversified companies struggle. The company also generates a ton of cash flow. Last quarter, operating cash flow was $4.9 billion, nearly unchanged from the same period last year. That's nearly double the $2.5 billion that the company paid out in dividends during the past three months.
AbbVie's solid financials make this an incredibly safe place to not just park your money right now, but to also hold it for the long haul and collect its payout. It would take a $26,800 investment in the stock to generate $1,000 in annual dividend income from AbbVie at its current rate. And that income would likely rise in the future.
2. Altria
Tobacco giant Altria is a promising defensive stock that income investors will likely be drawn to right now. Not only can it provide stability, but its yield of 7% is among the highest payouts investors will find among large-cap stocks.
Net revenue of $5.9 billion for the period ended March 31 was down 2.4% year-over-year but the company's operating income was still up 7.2% as Altria kept its costs firm and reduced marketing, administration, and research costs by 18%. It's a positive sign that the business can generate positive earnings growth despite having a top line that isn't terribly strong, and that's what makes Altria an attractive defensive stock to hold -- its financials are fairly stable.
This year, the company projects that its adjusted diluted per-share earnings will come in between $4.79 and $4.93. At the lower end of that guidance, its payout ratio would still only be 75%. That suggests the dividend is in little danger. And it would probably take a lot for the company to break its streak of 50+ years of increasing dividends.
To collect $1,000 in dividends from Altria, you would need to invest around $14,200. And like with AbbVie, that dividend income will likely increase over the years. Both stocks could make for attractive investment options right now, especially if you're worried about the state of the stock market.
