After the uncertainty and hardship facing investors in 2022, they are looking for stocks with bright prospects and high potential going into 2023. Unfortunately, the market is sending some warning signs to investors, especially high-risk, high-reward stocks. The financial sector took its toll on stocks as inflation rose, interest rates soared and the banking sector crumbled. Investors need to be more careful when buying stocks.
Dividend stocks perform best in volatile markets. These stocks are in huge demand during recessions and when the economy is stable. After all, who doesn't want a steady stream of income? If you're not sure which dividend-paying stocks will outperform the experts' estimates this year, then this article is for you. Check out the ten best-performing dividend stocks that can generate passive income in a volatile market.
1. Home Depot
Home Depot, the largest home improvement retailer in the U.S. with 2,300 stores, is a popular choice for low-risk investors. The company's five-year dividend yield has been excellent, while reporting substantial growth in its annual earnings. Home Depot stock also plummeted as home accessories soared in 2022 and the retail market slowed. However, the company is recovering and presents an excellent opportunity for income investors.
2. Lockheed Martin Corp
The U.S. arms, defense, communications and technology company makes helicopters, missiles and defense equipment. The company has grown its dividend steadily over the past few years. Although its growth rate is slower than other stocks on this list, its stability has attracted investors' interest. With a compound annual dividend growth rate of 8.4%, Lockheed Martin presents a good investment opportunity for dividend investors.
3. Extra Space Storage
Utah-based real estate investment firm Extra Space Storage is best known for its 2,200 storage facilities across the United States. With a dividend yield of 4.3% and earnings per share (EPS) growth rate of 13%, Extra Space Storage appears to be an ideal investment choice for investors looking for stable and consistent returns in the stock market.
Experts expect the company to generate 6% earnings per share over the next five years, implying sustainable gains for its investors. The company is the strongest performer on the list of dividend stocks despite a 28% drop in shares since its 2021 peak.
4. Automatic Data Processing
Automatic data processing was one of the first adopters of cloud computing. The company provides payroll, human resource management, retirement planning and other business services.
The company reports annual earnings per share growth of 13.3%, and experts estimate annual growth of 13.4% over the next five years. ADP is a lucrative business for dividend investors, with a 2.3% dividend yield that has remained steady over the years.
5. International Business Machines
International Business Machines, also known as Big Blue, is an IT company offering its products and services in more than 170 countries. It is primarily known for providing computers, servers, networking solutions, and other software and hardware equipment. With cloud computing becoming the new normal, there is a sense that IBM may lose popularity in the technology market.
But the company has made several changes to keep it as relevant as ever in today's competitive market. After a sharp drop in sales, the company is gaining momentum and has recovered from its 2020 lows. The company's current dividend yield is 5.22%.
6. Digital Realty Trust
Another real estate mutual fund on this list is a U.S. blue-chip stock best known for data centers and communications technology. They have seen tremendous growth over the past few years as the demand for data has increased dramatically.
However, since the tech company started building data centers instead of getting IT support from Digital Realty Trust, the company has faced many challenges. Still, it hasn't stopped the company from growing. The company's stock recently lost a third of its stock value due to rising inflation and rising interest rates, but it has upside. Digital Realty Trust has increased its dividend yield to 5.20%.
7. Air Products and Chemicals
The most respected and largest producer of helium and hydrogen, Air Products and Chemicals is known for its solid dividend yield and impressive annual profit growth. With earnings per share projected to grow 10% over the next five years, this dividend-paying stock could make a big addition to your portfolio, especially for investors looking to balance risk by adding low-risk, steady-yielding stocks.
8. Honeywell International
Honeywell International is a technology and engineering company with products in renewable energy, utilities, security and more. This is an excellent dividend stock, offering a 2% yield and a 6.7% CAGR. While that's pretty low for dividend investors, the company's EPS growth rate of 31.3% is attractive. Honeywell has recovered from a severe downturn in 2022.
9. Amgen Inc.
The California-based biotech offers excellent EPS growth and a solid dividend increase. The company is a major supplier of drugs for the treatment of chronic diseases. It currently offers a 3.6% dividend yield and 35.9% EPS growth.
10. AvalonBay Communities
AvalonBay Communities is a United States-based apartment construction, remodeling, acquisition and management company. The company has established services in Washington and New York, where demand is steady and rents are high. As inflation rose, rents soared and the company experienced massive growth. However, as the economy stabilizes, investors are concerned that stock prices will fall. However, for dividend investors, the 3.72% dividend yield looks attractive.
Of course, tough times with unpredictable price swings shouldn't stop you from investing in high-yielding stocks, but adding investments that promise steady returns may be right for your portfolio. These are the top 10 dividend stocks with solid dividend growth rates and incredible EPS growth. You might consider using these companies to diversify your portfolio or add stability to your investments.