Buying shares of a Dividend Aristocrat can be a good move whether you want some recurring dividend income or just a safe stock to buy and hold. These are businesses that have a great deal of stability and strong enough financials that they can justify making regular increases to their payouts.
Heading into next year, a couple of Aristocrats that look to be good investments are Abbott Laboratories (ABT -0.03%) and ExxonMobil (XOM 0.23%). Let's see why.
1. Abbott Laboratories
Healthcare giant Abbott Laboratories has a diverse business that generates over $1 billion in revenue every quarter from multiple segments, including medical devices, pharmaceuticals, diagnostics, and nutrition.
Through the first nine months of 2022, the company has reported positive year-over-year growth in all areas except nutrition, where manufacturing issues disrupted the production of certain baby formula products. Abbott has since restarted production and, assuming no interruptions happen again, next year should be a stronger one for that segment as well.
Overall, Abbott's year-to-date revenue of $33.6 billion is up 6.2% from the same period last year.
At 1.7%, Abbott pays a dividend that is in line with the S&P 500 average. But the company has also increased its payouts for 50 years in a row, making it not just an Aristocrat but a Dividend King. At $0.47, its current dividend is 77% higher than the $0.265 that the stock was paying five years ago. During that time, the company has increased its dividend at a compound annual rate of 12.1%.
For investors looking for a safe stock to buy and hold next year, Abbott Labs makes for an appealing buy. At 24 times earnings, it's trading only slightly higher than the average healthcare stock, which averages a multiple of 23.
2. ExxonMobil
Oil and gas producer ExxonMobil has been benefiting from high oil prices this year. West Texas Intermediate (WTI) is a key benchmark price for the industry; at around $80 per barrel, it has come down significantly from the more than $100/barrel it was at earlier this year (largely due to the Russian invasion of Ukraine). But investors shouldn't forget that oil prices are still at their highest levels since 2014.
This past Sunday, the Organization of Petroleum Exporting Countries agreed to continue cutting production by 2 million barrels/day in an effort to keep oil prices elevated and to combat slowing demand, especially in China where COVID lockdowns are weighing on the economy.
As a result, it seems probable that at the very least, oil prices could remain around their current levels in 2023. And that would be welcome news for ExxonMobil, which over the past three quarters has generated just under $43 billion in profits, three times the $14.2 billion it reported in the same period in 2021.
Exxon's 3.3% yield is higher than Abbott's and looks as safe as ever amid a high level of oil prices. Its $0.91 dividend has increased by 18% in five years, averaging a growth rate of 3.4% during that time. It's not a huge pace of growth, but if the price of oil remains stable, there could be greater increases over the next five years, especially if Exxon continues raking in some great profits.
At just nine times earnings, the stock looks like a cheap buy given the S&P 500 averages a multiple of 20. Investors are clearly discounting the stock, likely out of fear that oil prices could be volatile. But with OPEC planning for production cuts, that may not be the case, and that can make ExxonMobil one of the best oil dividend stocks to buy right now.
