The bear market of 2022 is taking a toll not just on investment returns, but also on investors' mindsets. Even those who favor growth stocks are turning to stocks paying dividends this year as they search for a way to fight the downturn.

However, the smartest investors know that dividend payments aren't a cure-all for market declines. Even highly profitable companies that exhibit lower volatility aren't immune from this vicious bear. Rather, high-quality dividend stocks are a fantastic way to start building a passive income-generating portfolio of assets. With that in mind, three contributors think Texas Instruments (TXN -1.13%), American Tower (AMT 0.84%), and Visa (V -0.12%) are worth a look right now.

This low-volatility chip stock raised its dividend 55-fold over 20 years

Billy Duberstein (Texas Instruments): While the iShares Semiconductor ETF is down a huge 39% so far this year, blue chip dividend stock Texas Instruments is only down 14.6% on the year. That puts it ahead of most tech companies as well as the S&P 500 index. Even after TI management gave lackluster guidance on a recent third-quarter earnings call, the stock did not go down much and is still 9.3% above its 52-week lows, perhaps reflecting investors believing the bottom is in.

Meanwhile, TI's dividend yield is a respectable 3.1% and was recently raised 8%, even in this downturn. That marks the 19th year in a row for dividend increases. Since 2004, TI's dividend has grown at an incredible 25% annualized rate, growing 55-fold during that time period.

Texas Instruments has been able to grow while retaining a sky-high operating margin that reached 51% of revenue last quarter, thanks to a number of competitive advantages. These include a diverse product portfolio and customer set, low-cost manufacturing and technology, and the targeting of attractive industrial and automotive markets.

Industrial and automotive markets now make up 62% of revenue, compared with those sectors making up just 26% of the overall semiconductor market. TI has targeted the automotive and industrial sectors because cars and machines will use more and more semiconductors in each new model every year, and the design wins are typically multiyear endeavors, leading to lots of stability.

TI's chips were some of the main semiconductors in short supply over the past year, and the company is now ramping up capacity. Some may be concerned that TI is ramping up investments as end demand is softening, but management reiterated last call that, "since the last capital management call, our confidence around the long-term growth prospects in our industry, the secular trends ... that confidence has only grown, so we feel really good about that."

Moreover, Texas Instruments will also benefit from the CHIPS Act passed this past summer. In fact, management highlighted it had already earned $50 million in tax credits in the third quarter and may qualify for more subsidies next year as it continues to build U.S. capacity.

Overall, TI is poised to benefit from increasing demand for its low-cost analog and embedded chips, as well as its low-cost U.S. manufacturing capacity, which should only become more and more attractive to customers as geopolitical tensions in East Asia increase.

American Tower: rock-solid returns in a growing industry

Anders Bylund (American Tower): The best passive income stocks have some qualities in common:

  • The board of directors is committed to the dividend, doing whatever it takes to share excess cash flows with shareholders.
  • The core business is tremendously stable, with decades of near-guaranteed relevance to the company's chosen target market.
  • The ultra-stable business generates enough cash profits to finance the generous dividend policy from the first step.
  • Ideally, the whole cash machine should grow over time and so should the annual dividend payouts.

Cell tower operator American Tower delivers on all four of these qualities.

The company explicitly strives to deliver double-digit-percentage growth of its annual dividend payouts. Demand for wireless data and voice networks is likely to rise for many decades to come, and American Tower's customers generally sign multiyear service contracts. The company converted 87% of its free cash flows into dividend checks over the last four quarters -- an all-time high that still left ample room for future increases.

Finally, American Tower's cash flows are generally trending higher over time, allowing the company to boost dividend payouts year after year:

AMT Free Cash Flow Chart

AMT Free Cash Flow data by YCharts

So American Tower generates a predictable and stable stream of cash profits, based on a service that should be in demand for the foreseeable future (and then some). Then, it shares a generous and increasing portion of that cash profit directly with investors in the form of dividend payouts, as required by the company's tax-advantaged real estate investment trust (REIT) structure. The dividend yield currently stands near its all-time highs at a lofty 3%.

In short, American Tower is a tremendously reliable passive income investment stock. Adding this security to your investment portfolio will lock down a reliable income stream for the long haul.

What Visa lacks in sizzle, it makes up for in cash returns

Nicholas Rossolillo (Visa): Visa put up sizzling numbers in its recently concluded fiscal year 2022. Revenue was up 22% year over year to $29.3 billion, and net income was up 21% to $15 billion -- an incredible 51% net profit margin. Less the cost for a handful of acquisitions, free cash flow on the year was $15.9 billion.

And what did Visa do with all that cash? It returned nearly all of it to investors in the form of dividends and share repurchases. Dividends paid tallied up to $3.2 billion in 2022, and share repurchases were $11.6 billion, totaling $14.8 billion. Based on the company's current market cap of $428 billion, that works out to a 3.5% annualized yield.  

Of course, Visa says its rebound from the early pandemic is now complete, and growth is expected to slow to a high-single-digit percentage to low-teens percentage in fiscal 2023. That outlook doesn't include the effects of a possible recession. More turbulence could be in store for Visa stock. 

However, this company has a long track record of gradual growth, and boosting its dividend to follow suit. Any temporary headwinds aside, the world's gradual transition away from cash transactions is long-term bullish for Visa and its dividend. 

V Dividends Paid (TTM) Chart

Data by YCharts.

In fact, during the fiscal fourth-quarter 2022 earnings call, management said it's increasing the quarterly dividend by 20% to $0.45 a share, and authorized a new $12 billion share repurchase plan. If you're looking for a top way to build growing passive income, Visa is -- at least as part of a diversified portfolio -- "everywhere you want to be."