With the stock market enduring increased turbulence in 2023, many investors are looking for ways to find stability in their portfolios. One time-tested strategy is to invest in high-quality dividend-paying stocks. Companies that consistently raise their dividends can provide much-needed income and downside protection when markets get choppy. Even better, reinvesting those dividends over the long-run can compound returns, and help investors achieve their financial goals.
With valuations looking more reasonable after the market’s recent pullback, now could be an opportune time to rotate into these dividend payers. With the market potentially bottoming, investors can lock in higher yields before these stocks bounce back. Though past performance doesn’t guarantee future results, these seven dividend stocks have been stalwarts through prior downturns, given their solid fundamentals.
Energy Transfer (ET)
With the disruption in energy markets due to Russia’s invasion of Ukraine, U.S. energy companies like Energy Transfer (NYSE:ET) stand to benefit. Natural gas prices have surged globally, with disproportionate pressure on U.S. and Middle Eastern supply. Additionally, despite economic headwinds, oil prices have proven resilient thanks to production cuts from OPEC. Even if the war ended today, sanctions would likely remain, so I believe energy prices aren’t likely to decline anytime soon.
In particular, Energy Transfer’s natural gas pipelines and export facilities connect fast-growing supply basins like the Permian and Haynesville to demand centers along the Gulf Coast. With global competition for U.S. natural gas exports heating up, Energy Transfer’s infrastructure offers reliable takeaway capacity. For example, the recently-completed Gulf Run pipeline provides Haynesville gas an outlet to LNG export terminals. Meanwhile, Energy Transfer’s NGL pipelines and fractionators allow it to handle record volumes. Notably, the company’s Nederland export terminal exported over 30 million barrels of ethane in the first half of 2023 alone.
On the crude oil front, the company’s acquisition of Lotus Midstream continues to pay dividends via commercial synergies. The partnership exported record amounts of crude in July 2023, utilizing Energy Transfer’s footprint. Looking ahead, Energy Transfer anticipates its capital run rate to average $2-3 billion annually over the long-term. Currently, the company’s cash flows support a targeted 3-5% annual distribution growth. The distribution was recently increased to $1.24 per unit annualized. ET stock now yields 9.2% annually.
After some missteps in content and media investments, telecom giant AT&T (NYSE:T) appears to be back on track with its core connectivity offerings. Following its spinoff of WarnerMedia, AT&T has refocused on its wireless and fiber broadband businesses. Impressively, the company has added 8.3 million valuable postpaid phone subscribers over the past three years, closing the gap on industry leaders. AT&T has also doubled its fiber broadband revenues since mid-2020, reflecting strong demand for its premium fiber service.
At the same time the company is reducing its debt load and cost profile, AT&T continues investing at record levels in both its 5G and fiber offerings. Its wireless network now provides 5G service to more than 290 million customers, including 175 million with speedy mid-band spectrum. These network upgrades support new services like fixed wireless internet access for rural areas. With consumers and businesses increasingly dependent on connectivity, AT&T’s investments position it for sustainable growth.
Meanwhile, T stock offers an attractive 7.7% dividend yield. With a simplified operating focus and progress on deleveraging, AT&T appears poised to maintain its dividend streak. While past investors endured missteps in content, today’s investors can buy a focused telecom leader at an opportune valuation. AT&T still has work ahead to improve its margins, but its essential communications services and renewed discipline make it a compelling turnaround story.
Enterprise Products Partners (EPD)
As a major U.S. midstream company, Enterprise Products Partners stands to benefit from tight energy supply and demand. Events like Russia’s invasion of Ukraine underscore the essential nature of North American oil and gas. Enterprise Products‘ (NYSE:EPD) diversified footprint handles over 11.9 million barrels of liquids, and processes nearly billions of cubic feet of natural gas per day. Critically, its infrastructure connects fast-growing basins like the Permian to Gulf Coast refineries, petrochemical plants, and export facilities.
With energy exports surging, Enterprise is rapidly expanding its footprint. For example, natural gas pipelines like Acadian now transport Haynesville gas to LNG terminals, while NGL exports out of Enterprise’s Marcus Hook terminal keep setting records. Meanwhile, new fractionators and pipeline capacity will support growing Permian production. These expansions utilize existing infrastructure to capture new opportunities.
Underpinned by strong volumes and stable fees, Enterprise generates steady cash flow to support its distribution. The company has now delivered 26 consecutive years of distribution growth. The latest hike takes EPD stock’s yield to 7.4%. Accordingly, with a strong balance sheet and $4 billion liquidity, Enterprise appears poised to continue growing its distribution in a volatile energy market. Its integrated infrastructure remains critical for providing the link between supply and demand across North America.
Hess Midstream (HESM)
Many energy stocks sport eye-popping dividends, but midstream operator Hess Midstream (NYSE:HESM) pursues a unique strategy – aggressive share buybacks. Since 2021, Hess Midstream has repurchased 18% of its stock, reducing its unit count and increasing its dividend per share by 33%. This combination of buybacks and growing payouts has delivered a standout total return. Hess Midstream’s leverage of 3.1-times the company’s EBITDA also remains comfortably below peers, enabling ongoing buybacks.
Hess believes another 10-15% of shares can be repurchased through 2025, financed through forecasted cash flow growth. The company anticipates 10%+ annual EBITDA and cash flow growth based on accelerating Bakken shale output. Hess Midstream provides essential gathering, processing, terminal, and water services across the Bakken, underpinning its projected growth.
With its parent expanding Bakken drilling, Hess Midstream’s gas processing volumes already rose 6% year-over-year in Q2 2023. Looking ahead, Hess forecasts its Bakken output will grow 10% annually through 2025. This outlook provides clear visibility into Hess Midstream’s projected double-digit cash flow growth. While Hess Midstream lacks a jaw-dropping dividend, its balanced approach of buybacks and payout hikes continues generating outsized total returns. The company’s dividend currently yields 8.45%.
United Parcel Service (UPS)
During the pandemic, United Parcel Service (NYSE:UPS) saw its top- and bottom-lines surge as e-commerce and logistics demand exploded. And in my opinion, while the pandemic boom has faded, this global logistics leader still has plenty of runway for growth. The company put up solid Q2 results despite economic turbulence. Revenue declined 11% year-over-year, but 5.5% top-line growth and double-digit EPS growth is expected next year.
Meanwhile, the company’s operating profit edged down too, but I expect it to recover as UPS adjusts its cost profile. Agility is key in uncertain times. Personally, I believe UPS boasts an unmatched integrated network, spanning domestic small packages, freight, logistics, and international. Who doesn’t love UPS?
Though near-term consumer spending may fluctuate, UPS targets growing areas like healthcare logistics. The company is on track to generate $10 billion in healthcare revenue this year. UPS ia also expanding its Digital Access Program, which simplifies shipping for e-commerce platforms. In my view, UPS has the scale, infrastructure, and innovation to deliver growth for years to come.
Additionally, UPS continues directing lots of cash to shareholders. The company returned $4 billion to shareholders in the first half of 2023 through dividends and buybacks. The company now targets revenue at about $14 billion in 2023, supported by robust cash generation. The stock also pays a well-covered 4.2% dividend yield.
Union Pacific (UNP)
Union Pacific (NYSE:UNP) is the largest public North American railroad pure-play, providing integral infrastructure connecting farms, factories, ports, and more. I believe railroads like UNP receive too little fanfare, despite their indispensable role in our economy.
In Q2, Union Pacific’s volumes fell 2% year-over-year amidst consumer spending shifts. Ongoing service improvements allowed Union Pacific to meet available demand, though margins faced pressure. Still, Union Pacific has returned more than $2.3 billion of capital to shareholders in the first half of 2023. Notably, this cash cow has also hiked its dividend annually for 16 straight years, with UNP stock currently yielding 2.5%. While pandemic-era margins may moderate, I have high hopes for the stock over the long-run.
In my view, Union Pacific offers investors a premier rail pure-play backed by strong dividend growth. Infrastructure investments and service improvements aim to drive efficiency, fluidity, and volume growth over time. Union Pacific’s wide moat business model should continue rewarding shareholders for decades to come.
Tyson Foods (TSN)
Tyson Foods (NYSE:TSN) has faced turbulence recently, with profits squeezed by inflation, higher costs, and moderating demand. The stock now trades more than 45% below its 2021 highs. However, I believe much of the macro negativity is priced in at current levels. Plus, TSN stock still offers income investors an impressive 4% dividend yield.
In Q3, Tyson’s chicken segment remained pressured by low commodity pricing and higher feed costs. However, Tyson is optimizing its footprint by closing six chicken plants this year, plus transitioning its antibiotic-free chicken brand to “no antibiotics ever.” In beef and pork, tight cattle and hog supply have weighed on spreads. However, Tyson’s prepared foods segment continues gaining shelf space and market share through beloved brands like Jimmy Dean, Hillshire Farm, and Ball Park.
I’m putting this stock at the bottom of this list due to mixed feelings displayed by Wall Street analysts. However, I am very bullish on TSN stock over the long-run. Gurufocus’ model tags the stock’s fair value at nearly $90 per share.
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