No Brainer Dividend Stocks for the End of 2022

The end of the year, it’s usually an excellent time to look for deals. In 2022, a bear market caused by rising interest rates in response to the highest inflation in four decades punished stock prices. A recent reversal in the downward trend has caused a slight recovery. But some stocks that were oversold during the year are still down considerably and potentially undervalued. So it’s an excellent time to review your dividend stock portfolio tracker and research potential dividend stocks for the end of 2022.

Below we discuss four quality dividend stocks with solid yields and growth with acceptable valuations. We focus on stocks with reliable safety and the potential for long-term returns.

Dividend Stocks for the End of 2022

Verizon Communications (VZ)

Verizon Communications (VZ) is a stock we have discussed before. But the combination of undervaluation and high dividend yield make it attractive. The stock price has bounced back a bit in the past few weeks but is still down ~27%. Verizon is significantly undervalued based on historical metrics.

The company provides cellular and broadband services to retail and business customers. Verizon serves roughly 120 million wireless connections, 6.7 million FiOS and other broadband connections, and approximately 25 million fixed-line telecom connections. Total revenue was $133,613 million in 2021, and the last 12 months, making the firm the second-largest telecommunication company in the United States.

Verizon is paying a ~6.8% dividend yield, just below the recent peak and nearly the highest in a decade. Verizon reliably increases the dividend by 2% annually. It has done so for 18 years, making the stock a Dividend Contender. Moreover, the dividend safety is conservative, with a payout ratio of approximately 47%, alleviating the fear of a dividend cut.

The combination of a bear market and weak retail cellular growth has pressured the stock price while simultaneously increasing the dividend yield and lowering the valuation. Verizon is trading at an earnings multiple of ~7.4X, almost the lowest in the past ten years. The stock is a good one for investors seeking dividend growth and income.

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Procter & Gamble (PG)

Procter & Gamble (PG) is one of the most famous Dividend Kings and Dividend Aristocrats. it is the second dividend stock for the end of 2022. The stock is rarely undervalued. But it is down about 13.5% in 2022, possibly making it a good time to acquire shares.

The firm sells consumer products globally, operating through five business segments. The five business segments are Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family Care. Brands include Tide, Pampers, Charmin, Oral-B, Crest, Old Spice, etc. Most brands are No. 1 or No. 2 in their market segments. Total revenue was $80,187 million in the fiscal year 2021 and $80,461 million in the past 12 months.

Procter & Gamble has one of the longest dividend streaks over 100 years. Also, it has paid a rising dividend for 66 years, one of only a few companies to achieve the 60-year mark. Additionally, the dividend growth has been slow and steady at roughly 4.9% in the past 5-years and around 5.2% in the past ten years. The forward dividend yield is about 2.6%, supported by a reasonable 60% payout ratio. This is near the higher end of our target, but consistent earnings and cash flow limit risk.

Despite the lower stock price in 2022, Procter & Gamble is trading at a price-to-earnings ratio of 24.3X. This value is not a great deal, but it is within the 5-year and 10-year ranges. The main interest, though, is low volatility combined with a growing dividend.

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Microsoft (MSFT)

Microsoft’s (MSFT) stock price was caught in the Technology sector downdraft. As a result, the stock is down approximately 28% year-to-date. But unlike some other tech stocks, Microsoft is wildly profitable and still growing revenue. Moreover, it was not bloated with too many employees, a sign of experienced and prudent management.

Microsoft is a global leader in personal and enterprise software. Also, it sells gaming hardware and tablets. Major brands are Windows, Outlook, Skype, LinkedIn, SharePoint, Surface, Bing, Xbox, etc. Total revenue was $198,270 million in the fiscal year 2021 and $203,075 million in the past 12 months.

Surprisingly, Microsoft is a dividend growth stock. The company started paying one in 2012 and has raised it each year. The growth rate has been ~13% in the past decade. The modest payout ratio of about 29% suggests many more future increases. Microsoft is not a high-yield stock. It currently yields 1.00%, below the 5-year average. However, the main interest is the rock-solid dividend safety supported by an AAA-rated balance sheet and double-digit dividend growth.

The stock is undervalued based on historical ranges. The forward P/E ratio is 25.9X, which seems high. But it is within the 5-year and 10-year ranges.

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Medtronic (MDT)

Medtronic (MDT) is less well-known than the three other stocks in this article. But the company is one of the world’s largest medical device companies. The stock price has fallen ~21% in 2022 and is nearing the lows set at the start of the coronavirus pandemic. The company is struggling with higher inflation, an FDA warning letter, and poor results from a recent medical device trial. That said, the company is high quality and the last dividend stock for the end of 2022.

The company has four business segments: Cardiac & Vascular Group (~36% of total revenue), Minimally Invasive Therapies Group (~29% of total revenue), Restorative Therapies Group (~27% of total revenue), and Diabetes Group (~8% of total revenue). Total revenue was $30,117 million in the fiscal year 2021 and $31,597 million in the LTM.

Medtronic is known for its 45-year streak of dividend increases, making the company a Dividend Aristocrat and Dividend Champion. In the trailing 5-years, the raises have averaged about 8.1%, a respectable amount. Moreover, the forward dividend yield is 3.26%, a decade high. But it is supported by a reasonable payout ratio of ~57% indicating future increases should continue.

The stock price decreases have made Medtronic a deal. It is trading at the lowest valuation in years. The forward P/E ratio is ~15.1X, below the 5-year and 10-year ranges. The market expects little from Medtronic, but the impending spinoff should streamline the company.

Disclosure: Long VZ, PG, MSFT, and MDT.

Thanks for reading No Brainer Dividend Stocks for the End of 2022!

A version of this post by Dividend Power originally appeared in Investor Place and was republished with permission.

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