The economic outlook is increasingly uncertain. Between inflation, high-interest rates, and an aggressive Federal Reserve, there is plenty that could hamper the market’s returns over the next year. However, there is one area of the market with a steadier outlook: High-quality dividend stocks. In particular, the Dividend Aristocrats are a great place to go hunting for stable firms that can provide generous income through all economic climates.
That’s because these companies have raised their dividends for at least 25 consecutive years, proving their trustworthiness on a grand scale. These are the seven best dividend stocks to buy for consistent income and tantalizing share price upside.
Dividend Stocks: Exxon Mobil (XOM)
Exxon Mobil (NYSE:XOM) is one of the world’s largest oil and gas producers. It also has chemical and refining assets, which have proven invaluable in recent years. Especially as refining margins have soared and chemical prices turned higher amid the current inflationary wave.
Better, Exxon has continued to grow in its core oil production business as well. Unlike many firms that have pivoted to renewable energy, Exxon Mobil has remained focused on increasing production from traditional oil fields. That has paid off in spades recently with the price of oil skyrocketing. Exxon’s new offshore field in Guyana, in particular, has proven to be a gusher.
Exxon’s massive business produces tremendous cash flows and has delivered steadily increasing dividends for decades now. And the current macroeconomic and geopolitical instability seems likely to support higher commodity prices, and, as such, further gains for XOM stock.
Stanley Black & Decker (SWK)
Stanley Black & Decker (NYSE:SWK) is a leading power tools company that has enjoyed a tremendous run-up during the early days of the pandemic. People were stuck at home and decided to invest in tools for home maintenance and renovation projects. As a result, Stanley Black & Decker enjoyed record sales and profits. Since then, however, sales have fallen back to normal. As a result, profits fell even further as the company got stuck with excess inventory. Most people don’t need to buy new power tools every year, and as such, a lot of folks who bought new equipment in 2020 or 2021 will be set for a while.
However, the negativity is dramatically overblown. SWK stock fell from a peak of more than $200/share to just $83 today. Furthermore, shares went for about $160 prior to the onset of COVID-19. All this speaks to a company where sharp near-term negativity has caused its shares to slump beyond any reasonable valuation. With the drop, SWK stock now yields 3.9%.
Dividend Stocks: Hormel Foods (HRL)
Hormel Foods (NYSE:HRL) is a packaged foods company focused on proteins. The company was founded more than a century ago and originally focused on commodity meat goods along with its SPAM canned pork product.
However, the Hormel of today is a wholly different animal. Now Hormel has best-selling brands within varied fields including organic deli meats, bacon and pepperoni, almonds and nut butter, and ready-to-eat guacamole. Hormel has evolved with the times and now has a leading brand portfolio that is squarely focused on appealing to millennial and Gen Z consumers.
Hormel’s profitability has slipped over the past two years. That comes due to supply chain and labor issues which have driven up Hormel’s production costs. However, as livestock and grain prices have slipped and supply chains have started to catch back up, that is relieving much of the problems on the cost side.
All this sets up for Hormel to deliver sharply higher profits as its business gets back to regular operations. Meanwhile, thanks to the near-term dip in Hormel’s earnings and stock price, the company is now offering a solid 2.8% starting dividend yield.
Essex Property Trust (ESS)
Essex Property Trust (NYSE:ESS) is a leading West Coast multifamily apartment owner. Its portfolio consists of more than 62,000 apartments spread across 252 different communities. Essex believes its apartments are well-situated as they are in cities with high growth, and which are home to attractive high-paying industries such as technology.
Most real estate investment trusts (REITs), including Essex, have slumped this year. The industry is dealing with higher interest rates, which cause a firm’s debt to cost more upon refinancing. In addition, investors have demanded higher dividends from stocks to compensate for the rise in interest rates on risk-free bonds and certificates of deposit.
This selling has created a buy-the-dip opportunity in ESS stock. As high interest rates make home mortgages more expensive, we will see that serve as a structural driver that boosts demand for apartments. And, in the longer term, rents have a tendency to keep rising at a steady clip, which will grow Essex’s cash flows considerably over time.
Dividend Stocks: Realty Income (O)
Realty Income (NYSE:O) is another REIT that has sold off this year. The firm is a triple net lease REIT, which is a type of rental arrangement where the tenants — rather than the landlord — pay for key expenses such as maintenance and utilities.
O stock has slumped due to higher interest rates and economic concerns. Much of Realty Income’s business is in renting properties to industrial and retail firms, and folks are understandably cautious about the outlook given the possibility of a recession. However, these worries have pushed Realty Income shares into bargain territory. Now offering a 6% yield, Realty Income is near its lowest valuation in many years. Adding to the attraction for income investors, Realty Income pays its dividend in monthly installments.
Medtronic (MDT)
Medtronic (NYSE:MDT) is a medical device company that is known for its cardiology products. Over the years, however, it has grown and now addresses a wide range of other conditions such as diabetes and neurology.
Medtronic has been a massive winner historically. However, after decades of outperformance, MDT stock has hit a pause. Shares are at $80 today; that’s the same price they were at back in 2016. The underperformance is in large part because of the pandemic. There were many delays around elective surgeries at that time. And supply chain and clinical disruptions made it harder to research and bring new products to market. It likely won’t be until at least mid-2024 before Medtronic gets fully back on track operationally.
However, the long-term opportunity remains tremendous; analysts believe the global market will reach nearly $1 trillion in revenue by 2030. Medtronic stock is a relative bargain today at 16 times earnings and with a 3.4% dividend yield.
Brown-Forman (BF-B)
Brown-Forman (NYSE:BF-A) (NYSE:BF-B) is a leading alcoholic spirits company. It is primarily known for its Jack Daniels whiskey. That brand was so powerful that the firm survived even the U.S. prohibition without going bust. In more recent years, in addition to growing Jack Daniels into an international franchise, Brown-Forman has also made a heavy push into the booming tequila market.
Brown-Forman shares have underperformed recently. Like other consumer staples companies such as Hormel, Brown-Forman faces margin pressure. The cost of product inputs such as agave (for tequila) and bottles and packaging material soared during the pandemic. Meanwhile, the temporary closure of bars and restaurants pressured on-premise demand.
As these issues clear up and the industry returns to regular conditions, however, Brown-Forman will see its profitability pick back up. In the long run, spirits companies have tremendous brands, and wonderful profit margins, and operate in an industry with minimal risk of technological disruption. All this makes Brown-Forman a great dividend stock for the long haul that is currently undervalued due to temporary market conditions.
On the date of publication, Ian Bezek held a long position in HRL, MDT, BF.A, SWK, and XOM stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.