A variety of factors shook up financial markets in 2022: decades-high inflation, the war between Russia and Ukraine, ongoing supply chain issues, and soaring interest rates, to name a few. With the S&P 500 index down 19.7% year to date and stocks across several sectors falling as much or more, there haven't been many places for investors to hide from negative returns.
Fortunately, there were a few high-quality dividend-paying stocks that generally performed well this year. Here are three world-class dividend stocks that investors seeking growing income would be wise to consider buying during this volatile time in the market.
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1. Johnson & Johnson: 60 consecutive years of dividend growth
Johnson & Johnson's (JNJ 1.07%) $469 billion market capitalization makes it the largest drugmaker in the world by more than $100 billion. The company's product portfolio is also unrivaled: Including its COVID-19 vaccine, J&J sells more than a dozen products in its pharmaceutical segment that are on pace to surpass $1 billion in sales for 2022.
These are led by the mega-blockbusters ($5 billion or more in annual sales), including the immunology drug Stelara and the cancer therapy Darzalex.
NYSE: JNJ
Key Data Points
And with more than 100 projects currently in clinical development in promising therapeutic areas like immunology and oncology, J&J should have no problem launching more blockbusters. When paired with a dividend payout ratio that will come in around 44% in 2022, there should be plenty of room for the Dividend King to build on its six-decade payout growth streak.
Income investors will also appreciate that J&J's 2.6% dividend yield is meaningfully above the S&P 500 index's 1.8% yield. And the stock's forward price-to-earnings (P/E) ratio of 17.5 is slightly below the S&P 500 healthcare sector's forward P/E of 17.8. This makes it a buy for dividend investors.
2. PepsiCo: 49 straight years of dividend hikes
PepsiCo (PEP +0.03%) products -- iconic brands like Pepsi-Cola, Lay's potato chips, and Gatorade sports drinks -- are consumed in just about every country in the world.
NASDAQ: PEP
Key Data Points
Combining new product launches with strategic acquisitions (like the at-home carbonated drink maker SodaStream in 2018) has paid off. That is why analysts are projecting 8.2% annual earnings growth over the next five years from its consumer staples.
PepsiCo currently yields 2.6%, and the dividend payout ratio clocks in below 66% for 2022, so the dividend should be sustainable. With its next dividend hike, PepsiCo will has raised its annual dividend for 50 straight years.
The company's forward P/E of 26.4 is significantly higher than the 21.4 average in the S&P 500 consumer staples sector. But if any stock deserves such a lofty premium, it's PepsiCo.
3. NextEra Energy: 28 uninterrupted years of payout raises
With its electrical grid powering the homes of over 12 million people throughout Florida, NextEra Energy (NEE +1.39%) is one of the most dominant electric utilities in the world.
NYSE: NEE
Key Data Points
As Florida continues to attract more residents, the demand for electricity will certainly increase. This is why analysts believe that NextEra Energy will deliver 10.4% annual earnings growth through the next five years.
The stock's 2.1% payout yield should appeal to dividend investors. And with the payout ratio set to be under 60% in 2022, double-digit dividend growth can persist.
NextEra Energy's forward P/E of 28.8 is significantly above the 19.5 average in the S&P 500 utility sector. The stock is arguably the best utility out there, but this steep premium is why investors might want to wait for a bit of weakness in the share price before aggressively buying.