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My 3 favorite dividend stocks to buy in 2022

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The US stock market has had an incredible run since the financial crisis. So good, in fact, that if you had invested at the worst time in October 2007, just before the big crash, you would still have more than tripled your money today.

What’s more, the S&P500 doubled between January 1, 2019 and December 31, 2021. It is now more difficult to find low-cost companies, especially well-known and industry-leading companies. One solution is to move away from capital gains and instead focus on generating passive income. here’s why Procter & Gamble (NYSE:PG), Kinder Morgan (NYSE: KMI), and Starbucks (NASDAQ:SBUX) are three completely different but equally promising dividend stocks to buy in 2022.

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A rock-solid mainstay that pays dividends

Few companies embody stability better than good old Procter & Gamble. In October, P&G will celebrate its 185th anniversary. For the past 65 years, P&G has increased its dividend every year, a feat that earns it a spot on the Dividend Kings list.

What makes P&G unique is not just its dividend, but how it generates cash to support that dividend. P&G’s business is about as recession-proof as it gets. Demand for DayQuil, Crest toothpaste, Tide laundry detergent, Dawn dish soap, Olay lotion, Pantene shampoo, Gillette razors, Pampers diapers and Charmin toilet paper is not keeping up with the ebb and flow of the economy at large as in other industries. During an economic downturn, consumers tend to cut back on discretionary spending on things they don’t need. P&G makes products that people need and as a result consistently grows organically.

For investors who value a dividend they can trust above a higher, riskier return, P&G is as good as it gets in the US stock market.

A Stable, High-Performance Natural Gas Company

Kinder Morgan may not have P&G’s track record of dividend increases. But it generates highly predictable free cash flow (FCF) to support its dividend.

Given the relevance of P&G’s products, it’s easy to see why its business would thrive during a recession. Kinder Morgan is one of the largest pipeline and energy storage companies in the United States, something few of us can relate to. But unlike the volatile nature of oil and gas, more than 90% of Kinder Morgan’s business is tied to long-term fixed fees and take-or-pay contracts. Kinder Morgan does not make money by drilling for oil, selling it, or turning oil into useful products. On the contrary, it makes money on the transport of natural gas, oil and carbon dioxide.

Thanks to its contract model, Kinder Morgan is able to forecast its revenues and profits in advance. It hasn’t even released its results for the full year 2021, but has already released guidance for the full year 2022. It plans to increase its annualized dividend from $1.08 per share to $1.11 per share and to generate $1.09 per share in net earnings and $2.07 per share. in distributable cash flow. Since the oil and gas crash of 2014 and 2015, Kinder Morgan has significantly reduced its expenses and now uses a low-growth business model focused on high cash generation to support its dividends, acquisitions and share buybacks – exactly the type of strategy that income investors love.

With the dividend increase, Kinder Morgan stock will have a dividend yield of 6.4%, giving it one of the 10 highest dividend yields among S&P 500 constituents.

From a growth stock to a basic holding for any portfolio

Not so long ago, Starbucks was commonly referred to as a growth stock that was disrupting the global retail coffee industry, especially in the United States and China. Still, calling Starbucks a growth stock today is a bit of a stretch. Granted, Starbucks reported record revenue of $29.1 billion for its fiscal year 2021. But that’s only 30% more than five years ago.

Today’s Starbucks is a mature and stable company that is known for its strong brand, international exposure and consistency. It is also very profitable and generates a lot of FCF which is used to support its growing dividend.

In early 2010, Starbucks paid a quarterly cash dividend of $0.05 per share. Since then, it has increased its dividend every year and now pays a quarterly dividend of $0.49 per share, giving Starbucks an annual dividend yield of 1.9%. That’s almost as much as P&G. While you could argue that P&G’s dividend is safer than Starbucks’ given P&G’s longer track record and recession resistance, Starbucks is growing faster than P&G and therefore could potentially have more upside through performance of his actions.

A diversified basket of income

P&G, Kinder Morgan and Starbucks have almost nothing in common. Yet that’s exactly what a dividend investor is looking for when choosing names to add to a diversified income basket. Equal parts of each stock expose a portfolio to a variety of industries and global markets while producing a 3.5% dividend yield.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.