More than 6,000 stocks trade on U.S. exchanges, and the sheer number of choices can feel overwhelming. For new investors, the challenge is figuring out which companies have the staying power to deliver reliable long-term gains. One way to narrow the field is by focusing on proven strategies.
In the last decade, historically low interest rates and a powerful bull market drove growth stocks to record highs. These companies, known for expanding revenue and profits faster than the broader market, often come with higher volatility. Growth stocks typically outperform in rising markets, but when conditions shift—as they did in 2022 with inflation, supply chain pressures, and tighter monetary policy—they can fall hard.
That is why many investors turn to value investing, a strategy that looks for fundamentally strong companies trading below intrinsic worth. Others prefer dividend investing, a time-tested approach that not only builds wealth but also generates steady income.
Dividend investing is particularly attractive in a market environment like 2022, where uncertainty is high and investors crave stability. Companies that return cash to shareholders through dividends are often established players with consistent earnings and resilient business models. For retirees or anyone seeking passive income, dividends can be a dependable way to balance risk and reward.
This article explores the fundamentals of dividend investing, the key metrics every investor should know, and 20 of the best dividend-paying stocks to consider in 2022.
What Are Dividend Stocks?
Dividend stocks are shares of companies that distribute a portion of their profits directly to investors. Instead of reinvesting all earnings into growth projects, these companies return capital in the form of cash or stock. Over time, dividends can create a second stream of income alongside capital appreciation.
For example, Coca-Cola (NYSE: KO) has long been a dividend stalwart. Over the last 20 years, its stock price has climbed 146%. When reinvested dividends are included, total returns jump to nearly 340%. This demonstrates the compounding power of dividends over decades.
Most dividend-paying companies operate in mature industries with reliable cash flows. These businesses are better positioned to weather economic ups and downs, making them less volatile than high-flying growth stocks.
However, not every dividend stock is a sound investment. Investors must look beyond the headline yield to understand sustainability and long-term potential.
Cash vs. Stock Dividends
Dividends usually come in one of two forms: cash or stock.
- Cash dividends are the most common. Apple (NASDAQ: AAPL), for example, pays $0.92 per share annually. If you own 100 Apple shares, you collect $92 each year, which you can either withdraw or reinvest in additional stock.
- Stock dividends are less common. Instead of cash, the company issues new shares to investors. Smaller or mid-sized firms often use this method to conserve cash while rewarding shareholders. These shares can later be sold or held for future growth.
Cash dividends provide direct income, while stock dividends increase ownership stakes. Both can be useful, depending on investor goals.
Key Metrics for Identifying Dividend Stocks
Dividend investing is not about chasing the highest yield. Instead, it requires analyzing a combination of factors that determine both the attractiveness and sustainability of payouts.
Dividend Yield
Dividend yield is the ratio of annual dividend payments to a stock’s price. For instance, Chevron (NYSE: CVX) trades around $148 per share and pays $5.68 annually in dividends. That results in a yield of about 3.8%. If the stock price falls, yield rises, and vice versa.
Yields above 3% are generally considered attractive, especially in comparison with historically low bond rates of recent years. However, yield alone can be misleading, as extremely high yields often signal financial trouble.
Payout Ratio
The payout ratio shows what percentage of earnings go toward dividends. PepsiCo (NASDAQ: PEP), for example, pays $4.60 per share annually with adjusted earnings of $6.26 per share, resulting in a 73% payout ratio. That is high but sustainable given Pepsi’s 50-year streak of dividend growth.
A lower payout ratio gives a company more room to reinvest, pay down debt, or boost future dividends. Ratios above 80% can be red flags, suggesting the dividend might not be sustainable in tough times.
Capital Gains Plus Yield
Strong dividend stocks should deliver both income and growth. If a company’s shares rise 10% in a year and its dividend yield is 2.5%, total returns are 12.5%. The best investments deliver market-beating returns by combining steady payouts with rising share prices.
Earnings Per Share (EPS)
EPS measures profitability per share and should ideally grow over time. Rising EPS supports consistent dividend increases. For example, analysts project Pepsi’s EPS growth at 7.5% annually over the next five years, reinforcing confidence in future payouts.
Balance Sheet Strength
Dividends are not guaranteed. Companies with excessive debt or weak cash flows may be forced to cut or suspend dividends during downturns. Strong balance sheets provide a cushion against economic cycles and help sustain payouts even in challenging years.
Dividend Traps and Risks
New investors often make the mistake of chasing the highest yields. But a high yield can signal declining share prices driven by weak fundamentals. AT&T (NYSE: T) illustrates this risk. Despite a forward yield above 5%, the stock has lost 23% over the last decade. Including dividends, total returns reached only 61%, far behind the S&P 500.
Dividends can also be reduced or suspended at any time. In 2020, during the pandemic-driven downturn, companies like Schlumberger slashed payouts by 75%, while General Motors suspended dividends altogether. Unlike interest payments on bonds, dividends are discretionary.
The safest strategy is to favor companies with moderate yields, consistent growth, and strong financials rather than chasing risky high payers.
The Best Dividend Stocks to Watch in 2022
With the fundamentals of dividend investing established, let’s take a closer look at 20 companies that stand out for their consistency, resilience, and income potential. These stocks are spread across consumer staples, energy, technology, utilities, and finance, offering both diversification and stability for dividend-focused investors.
Consumer staples companies dominate the Dividend Aristocrats list because their products are non-discretionary. Households buy toothpaste, soap, and soda regardless of economic conditions, which makes revenue streams remarkably stable. These companies also enjoy strong brands and global distribution, giving them pricing power when inflation strikes.
Energy companies have long been favorites for income investors because they return massive amounts of cash when oil prices rise. In 2022, with oil surging, integrated majors and midstream operators are some of the best dividend opportunities.
Technology is not traditionally known for dividends, but several mature tech companies have embraced shareholder returns. With strong balance sheets, growing cash flows, and secular growth trends, these companies represent the next generation of dividend leaders.
Utilities and renewable energy companies provide essential services, making them among the most recession-resistant dividend payers. At the same time, the shift to clean energy creates growth opportunities for select players.
Coca-Cola (KO)
Coca-Cola is more than a beverage company; it is one of the most recognized brands in the world. With operations in over 200 countries, Coca-Cola enjoys pricing power and distribution strength that few competitors can match. Its product portfolio stretches well beyond soda into bottled water, teas, sports drinks, and juices, giving it a broad consumer base.
The company has raised its dividend for 60 consecutive years, making it a classic Dividend Aristocrat. At a forward yield of roughly 2.9% in 2022, Coca-Cola’s payout looks modest compared to some higher-yielding peers, but its consistency and resilience are what matter most. Its free cash flow margins hover around 30%, leaving plenty of room for both reinvestment and dividend payments. Coca-Cola has also proven it can withstand inflationary pressures, passing along costs without losing customers thanks to its brand loyalty.
Colgate-Palmolive (CL)
Colgate-Palmolive is another global brand powerhouse with a portfolio that spans oral care, personal care, and pet nutrition. The company generates about 70% of its sales internationally, which helps balance regional economic cycles. In 2021, revenue grew 4.5% year over year, reflecting the steady demand for everyday consumer staples.
Colgate has been rewarding shareholders since the 19th century, with uninterrupted dividend payments dating back to 1895 and consistent annual increases since 1963. Its current yield of about 2.4% might not look eye-popping, but its reliability is unmatched. Importantly, Colgate’s payout ratio sits below 60%, suggesting ample room for future increases. While the stock trades at a relatively rich multiple of 23 times forward earnings, investors are paying for stability, predictability, and global reach.
Procter & Gamble (PG)
As the company behind household names like Tide, Pampers, Gillette, and Crest, Procter & Gamble is one of the world’s largest consumer goods giants. Its scale gives it an edge in advertising, supply chains, and shelf space, which translates into strong pricing power.
The company reported $76 billion in sales in fiscal 2021, with an operating margin of 23.6% that underscores its efficiency. Rising commodity costs are a headwind, but Procter & Gamble’s wide moat allows it to absorb pressure better than most competitors. With annual dividends of $3.65 per share, the stock yields 2.6%. The company has steadily increased dividends for decades, reflecting both financial strength and shareholder-friendly policies.
3M (MMM)
3M is a diversified industrial giant with products ranging from medical equipment to adhesives, automotive components, and consumer goods like Post-it Notes. Its diversity is a strength, allowing it to generate revenue across multiple industries and regions.
The company has raised dividends for 64 straight years, one of the longest streaks on record. In 2021, sales grew 10% to $35.3 billion, boosted by strong demand in healthcare and safety products. However, 3M has also faced inflationary pressures and supply chain disruptions, which pulled its stock down more than 30% in the past year. That decline has lifted its yield to an attractive 4.4%. Trading at just 11 times forward earnings, 3M offers investors both value and income, though its near-term challenges should not be overlooked.
Walmart (WMT)
Walmart is the world’s largest retailer, with a market cap around $335 billion in 2022 and nearly $600 billion in expected annual sales. The company thrives on scale, allowing it to keep prices low for consumers while still generating strong cash flows. Its massive logistics network and online expansion have made it one of the few traditional retailers able to compete effectively with Amazon.
Walmart’s dividends may look modest at a 1.9% yield, but the company has increased payouts annually since 1974, a track record that speaks to its durability. In fiscal 2021, Walmart generated $11.1 billion in free cash flow, more than enough to cover its $6 billion in dividend payments. For investors looking for stability in uncertain times, Walmart provides consistency and resilience.
Chevron (CVX)
Chevron is one of the largest integrated oil companies in the world, operating across exploration, refining, and petrochemicals. In 2022, Warren Buffett’s Berkshire Hathaway made headlines by building a massive stake in Chevron, highlighting the company’s strong fundamentals.
Chevron generated $21 billion in free cash flow in 2021 and trades at just 8.5 times operating cash flow, making it attractive on valuation grounds. With a dividend yield near 4%, Chevron offers a solid combination of income and value. Its integrated model and disciplined capital spending also give it flexibility in navigating oil price volatility.
Exxon Mobil (XOM)
Exxon Mobil is another energy heavyweight with decades of dividend reliability. It has increased its dividend for 39 consecutive years, offering investors a current yield around 4%. Despite a challenging decade for the oil industry, Exxon has emerged from the pandemic stronger, reducing debt and initiating a $30 billion share buyback program that will further support earnings per share.
Shares rose 40% in the past year, yet the stock still trades at only 8 times forward earnings. Analysts expect further upside as oil demand remains steady. For investors seeking a high yield backed by one of the strongest balance sheets in the sector, Exxon Mobil remains a top choice.
Enbridge (ENB)
Based in Canada, Enbridge is one of North America’s largest midstream energy companies. Unlike oil producers, Enbridge makes money transporting and storing energy, which means its revenue is largely insulated from commodity price swings. About 84% of its EBITDA is backed by long-term contracts, ensuring stable cash flows.
Enbridge yields more than 6% in 2022 and has increased its dividend for 27 consecutive years. With a payout ratio of around 65% and $2 billion in excess cash flow after dividends and capital investments, the company has plenty of room to grow. It is also building out renewable energy assets, which account for 4% of EBITDA, offering a long-term growth angle.
Broadcom (AVGO)
Broadcom is a semiconductor giant that has evolved into a major player in infrastructure software. Known for aggressive acquisitions, it recently announced a $61 billion deal to acquire VMware, which would make software about half of total sales.
Broadcom has rewarded shareholders with rapid dividend growth. Its quarterly payout has risen from just $0.15 per share in 2012 to $4.10 in 2022, a staggering compound growth rate. With a forward yield of 3.2% and a payout ratio below 50%, dividends look sustainable. Over the last decade, Broadcom has delivered a remarkable 1,830% in dividend-adjusted returns, making it one of the best-performing dividend stocks in technology.
American Tower (AMT)
American Tower is a real estate investment trust that owns and operates thousands of cell towers and data centers. It leases these assets to wireless carriers and cloud providers, locking in long-term contracts that generate reliable cash flows. The expansion of 5G networks provides a structural tailwind for the company.
AMT offers a dividend yield of about 2.2% and has raised its payout steadily over time. With a payout ratio slightly above 50%, it retains enough cash flow to reinvest in new towers and data centers. Since 2012, American Tower shares have gained 347% after dividends, easily outpacing the broader market.
Verizon (VZ)
Verizon is one of the largest U.S. telecom providers, with a strong focus on 5G deployment. The company has spent over $45 billion securing spectrum licenses that will power next-generation wireless services.
Its stock yields a hefty 5.8%, making it one of the most attractive dividend plays in technology and telecom. Verizon has raised its dividend for 18 consecutive years and maintains a manageable payout ratio of 49%. Analysts expect shares to rebound nearly 40% in the next year, making the combination of income and growth appealing in 2022.
Qualcomm (QCOM)
Qualcomm is best known for its smartphone chips, but it is expanding into high-growth areas such as automotive technology and the Internet of Things (IoT). In its most recent quarter, IoT sales jumped 61% year over year, highlighting the company’s ability to diversify beyond its core mobile segment.
The stock, down 18% from all-time highs, trades at a discount of about 30% to analyst price targets. Qualcomm yields 2% and has a solid balance sheet, making it an attractive mix of value, growth, and income.
Texas Instruments (TXN)
Texas Instruments is a semiconductor company with a reputation for steady performance. Since 2004, it has increased dividends annually by an average of 25%. The stock yields 2.8% in 2022 and trades at 16 times operating cash flow, a fair valuation for a company with such consistency.
Over the last decade, shares are up nearly 700%, proving that dividend stocks can also be growth stocks. With a payout ratio averaging 53%, Texas Instruments strikes a balance between rewarding shareholders and reinvesting in its business.
NextEra Energy (NEE)
NextEra is the world’s largest renewable energy company, with a portfolio of wind, solar, and storage projects. It also owns Florida Power & Light, one of the largest utilities in the United States. This combination gives it both stability and growth potential.
NextEra expects to grow earnings by about 12% in 2022 and has committed to increasing dividends by 10% annually through 2024. Its 2% yield may not be the highest, but the growth trajectory is compelling. For investors who want exposure to clean energy without sacrificing reliability, NextEra is a top choice.
Brookfield Renewable Partners (BEP)
Brookfield Renewable operates hydro, wind, solar, and storage facilities across multiple continents. With 21 gigawatts of installed capacity and a pipeline to expand to 69 gigawatts, Brookfield has enormous growth potential.
The stock yields 3.5% and dividends have grown 6% annually for nearly a decade. Brookfield targets long-term annual returns of 15%, driven by expansion and a disciplined capital strategy.
Clearway Energy (CWEN)
Clearway Energy focuses on wind and solar generation in the U.S. The stock yields over 4% and management has guided for 7% annual dividend growth through 2026.
To support this growth, Clearway recently announced a $415 million deal to acquire five utility-scale wind farms across three states, adding 413 megawatts of capacity. These acquisitions help lock in long-term cash flows and sustain rising payouts.
Brookfield Infrastructure Partners (BIP)
Brookfield Infrastructure owns and operates assets in utilities, transportation, midstream energy, and data infrastructure. Its globally diversified portfolio provides resilience across economic cycles.
The company has grown its dividend at an annual rate of 10% since 2009 and now yields 3.7%. Management expects future dividend growth between 5% and 9% annually. With 382% total returns in the past decade, BIP is proof that infrastructure can be both defensive and profitable.
American Water Works (AWK)
As the largest publicly traded water and wastewater utility in the U.S., American Water Works provides one of the most essential services in any economy. Its regulated business model creates predictable earnings and cash flows.
The stock yields 1.8%, and while the valuation is steep at over 30 times earnings, American Water Works has consistently grown earnings at 7% to 9% annually. That supports a similar pace of dividend growth, making it an appealing option for long-term income investors.
JPMorgan Chase (JPM)
JPMorgan is the largest bank in the United States and one of the most influential financial institutions worldwide. While investment banking revenue slowed sharply in 2022, net interest income rose thanks to higher interest rates, a trend expected to continue.
JPMorgan currently yields 3.5% and has a strong capital position to support dividend growth even in volatile markets. With net interest income projected at $58 billion in 2022, up from earlier estimates, JPMorgan’s fundamentals remain sound despite short-term headwinds.
Goldman Sachs (GS)
Goldman Sachs is best known for its investment banking and trading operations, but it has also expanded into consumer finance through partnerships with Apple and General Motors. In 2022, trading revenue surged 32% year over year, offsetting weakness in deal-making.
The stock yields 2.5%, and while down 22% from all-time highs, it has delivered nearly 300% total returns since 2012. Goldman’s combination of strong trading revenue, growing consumer banking, and a shareholder-friendly dividend policy makes it a solid addition to a dividend watchlist.
The key is balance. Diversify across sectors, avoid chasing unsustainable yields, and remember that total return combines both capital appreciation and dividends. For 2022, the 20 stocks highlighted above provide a solid starting point for investors looking to strengthen their watchlist with income-generating opportunities.
