You can make your money work for you by investing in the right stocks. One of them is dividend stocks but you do not want to bet your money on companies that have irregular dividend payments or are less reliable. When investing for dividend income, it is best to look for companies that have a history of rewarding shareholders over the years. These companies have steady cash flow and offer annual dividend hikes.
I’ve identified three dividend stocks with a solid history of dividend payments, income growth, and annual hikes. These companies do not pause or reduce their dividends in market uncertainties and have enough cash to keep distributing the dividends. With that in mind, let’s look at the three underrated dividend stocks to buy for steady income.
Dividend Stocks to Buy: Chevron Corporation (CVX)
With oil continually soaring higher and trading over $80 per barrel, oil and gas giant Chevron Corporation (NYSE:CVX) is set to benefit. Trading for $153, the stock has only increased 2% year-to-date. This is an opportunity for you to buy this dividend stock machine before it keeps moving higher.
When it comes to dividend reliability, the company must enjoy a steady cash flow to reward investors. This is where Chevron stands out. It is a cash-flow machine and ended the quarter with $6.1 billion in cash while the debt stood at $21.8 billion.
The company has increased dividends for 37 consecutive years and hiked it by 8% in the first quarter of 2024. It enjoys a dividend yield of 4.25% and has a payout ratio of 56%, which means there is scope for an increase here.
Chevron has a production rate of 3.35 million barrels of oil equivalent a day and its upstream and downstream business make it a highly diversified company. Its purchase of Hess (NYSE:HES) is going to boost the free cash flow over the next few years. While the deal is facing some obstacles, once it is cleared, Chevron will have an impressive cash flow growth rate.
Walmart (WMT)
Up 27% YTD and trading for $67, Walmart (NYSE:WMT) is steadily moving higher. Despite the rising competition in the e-commerce space, Walmart has maintained its ground and seen strong growth. In the first-quarter results, the company saw a 6% YOY jump in revenue. The e-commerce revenue jumped 21% YOY and Walmart ended the quarter with $5.1 billion in net income.
It continues to attract consumers for its low-priced goods and the management is investing in e-commerce business to beat competition. Walmart also offers a subscription service known as Walmart+ which offers quick checkout, free delivery, and several other benefits. It also earns significant revenue from the advertising segment which was up 24% YOY in the quarter.
Walmart has increased its cash dividends annually since declaring its first dividend of $0.05 in 1974. It currently has a yield of 1.23% and recently raised the annual dividend to 9%, making it the 51st consecutive year of dividend increase. Investors receive a quarterly dividend of $0.21 per share, making WMT one of the best dividend stocks to buy.
Yes, the stock is trading at a premium right now but the past few months show that it could keep moving higher. As the economy improves, we could see an improvement in consumer spending and this will benefit the stock.
Pfizer (PFE)
It’s time we cut Pfizer (NYSE:PFE) some slack and start to think of it as something more than the COVID-19 vaccine maker. We’ve left the pandemic behind us and it is time to let the company do the same. Pfizer is one of the largest pharmaceutical companies in the world in terms of sales and has a diverse portfolio that is not limited to vaccines.
Yes, the company has suffered due to the drop in revenue but it is also growing its pipeline and we will see it reflected in the financials in the coming quarters. It has 37 drugs in late-stage development currently.
Pfizer has been paying dividends for over eight decades and offers a dividend yield of 6.13%. Its dividend is much higher than other pharma companies. If you are in it for the passive income, you will not regret owning PFE stock. It is exchanging hands for $27 and is down 7% YTD. It is near the 52-week low and this dip is a chance to buy.
The dip is due to the quarterly results which saw a 19% YOY revenue drop due to the dip in Covid-19 vaccine demand. On the other side, it did see an improvement in the gross margin and the management is working towards reducing costs in the coming quarters.
On the date of publication, Vandita Jadeja did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.