5 Dividend Stocks to Buy and Hold Forever

Record high inflation, monetary policy tightening to control it, and the consequent fears of an economic slowdown have induced pessimism among investors and led to significant price declines for several stocks from their highs. Moreover, Jerome Powell’s speech at Jackson Hole indicates the Fed's determination to keep raising rates and near-term pain for the markets.

However, falling prices also mean rising yields for stocks well-positioned to maintain and grow their dividend payouts. With an uncertain economic outlook, investors are justified to look for reliable dividend-paying stocks for an assured income stream.

To that end, high dividend yielders Merck & Co., Inc. (MRK), Abbott Laboratories (ABT), Cigna Corporation (CI), Energy Transfer LP (ET), and Kronos Worldwide, Inc. (KRO) could be wise permanent additions to one’s portfolio given their fundamental strength.

Merck & Co., Inc. (MRK)

MRK is a global healthcare company offering prescription medicines, vaccines, biological therapies, and animal health products. The company operates through Pharmaceuticals and Animal Health segments.

On August 25, 2022, MRK and AstraZeneca (AZN) announced that LYNPARZA had been approved by the Japan Pharmaceuticals and Medical Devices Agency (PMDA) for the adjuvant treatment for patients with BRCA-mutated (BRCAm), human epidermal growth factor receptor 2 (HER2)-negative high recurrent risk breast cancer.

The PDMA approval is expected to impact the company’s sales in Japan positively.

On August 23, MRK announced that the U.S. Food and Drug Administration (FDA) granted Fast Track designation for Merck’s investigational anticoagulant therapy MK-2060 to reduce the risk of major thrombotic cardiovascular events in patients with end-stage renal disease (ESRD). This makes the treatment eligible for accelerated approval and priority review, provided relevant criteria are met.

On August 16, MRK and Orna Therapeutics announced a collaboration agreement to discover, develop, and commercialize multiple programs, including vaccines and therapeutics in infectious disease and oncology. The company expects this to advance the development of the next generation of advanced vaccines and therapeutics.

In the fiscal 2022 second quarter ended June 30, 2022, MRK’s sales increased 28% year-over-year to $14.59 billion. The company’s non-GAAP net income grew 204.2% from the year-ago quarter to $4.74 billion. During the same period, its non-GAAP EPS amounted to $1.87, up 206.6% year-over-year.

On July 26, MRK declared the quarterly dividend of $0.69 per share, which would be paid out on October 7. The company pays a $2.76 per share dividend annually, which translates to a 3.18% yield on the current price. This compares to its 4-year average yield of 2.94%. The current dividend payout ratio is 35.45%.

The company’s dividend payouts have grown for 11 consecutive years.

Analysts expect MRK’s revenue for the current year to come in at $58.6 billion, indicating an increase of 20.3% year-over-year. The company’s EPS and dividend are expected to increase 22.5% and 8.4% year-over-year to $7.37 and $2.83, respectively. Furthermore, MRK has topped the consensus EPS estimates in three out of the trailing four quarters.

The stock has gained 11.9% over the past year to close the last trading session at $85.36.

MRK’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

MRK has a grade of B for Growth, Value, and Quality. It is ranked #8 among 167 stocks in the Medical – Pharmaceuticals industry.

Click here to see MRK’s POWR Ratings for Stability, Sentiment, and Momentum.

Abbott Laboratories (ABT)

ABT discovers, develops, manufactures, and sells a diversified line of health care products. The company operates through four segments: Established Pharmaceutical Products; Diagnostic Products; Nutritional Products; and Medical Devices.

On August 23, ABT announced that the FDA approved its new spinal cord stimulation device. This device provides tailored relief to multiple pain areas and adds more treatment options for evolving pain conditions.

On August 4, ABT and WW International Inc. (WW) announced a strategic partnership to support people living with diabetes to understand better and manage their condition and weight.

The two companies will work together to allow ABT’s FreeStyle Libre continuous glucose monitoring systems and the WeightWatchers mobile app to share information so that people with diabetes can see their glucose data alongside WW’s diabetes-tailored program.

For the second quarter that ended June 30, 2022, ABT’s net sales increased 10.1% year-over-year to $11.25 billion. The company’s operating earnings grew 70.6% from the prior-year period to $2.38 billion. Also, its net earnings increased 69.7% year-over-year to $2.02 billion, while its adjusted EPS rose 22.2% from the prior-year period to $1.43.

On June 10, ABT declared the quarterly dividend of $0.47 per share, which was paid out on August 15. The company pays a $1.88 per share dividend annually. This translates to a 1.84% yield on the current price versus the 4-year average yield of 1.48%. The current dividend payout ratio is 31.63%.

ABT has increased its dividend payout for 50 consecutive years. The company’s dividend payouts have grown phenomenally at 14.5% CAGR over the last three years.

ABT surpassed Street EPS estimates in each of the trailing four quarters. Over the past month, the stock has dipped 5.5% to close the last trading session at $102.65.

ABT’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It has a B grade for Value, Stability, Sentiment, and Quality.

It is ranked #3 of 145 stocks in the Medical – Devices & Equipment industry. Click here to see ABT’s ratings for Growth and Momentum.

Cigna Corporation (CI)

CI is involved with providing medical and dental insurance and related products and services. The company operates through Evernorth and Cigna Healthcare segments.

On August 29, CI announced that it would be expanding the reach of its ACA Marketplace exchange plans to provide more customers and communities access to affordable, predictable, and simple health care coverage in 2023. This is expected to impact the company’s market share positively.

On August 15, CI and Oscar Health Inc (OSCR) announced an expansion of their footprint to provide small businesses in Philadelphia access to cost-effective health plans. The offering includes low-cost prescription coverage, behavioral health support, and Cigna’s networks of quality physicians, specialists, and hospitals.

In July, CI announced that it had completed the divestiture of its life, accident, and supplemental benefits businesses in six markets across the Asia Pacific to Chubb Ltd. (CB) in an approximately $5.40 billion transaction. “The completion of this transaction allows us to focus further our efforts to grow our global health portfolio,” said David M. Cordani, chairman and CEO of CI.

In the second quarter ended June 30, 2022, CI’s total revenues increased 5.4% year-over-year to $45.48 billion. Its adjusted income from operations increased 9.6% from the year-ago value to $1.98 billion, leading to an adjusted income from operations per share of $6.22, up 18.7% year-over-year.

On July 27, CI declared a quarterly dividend of $1.12 per share which would be paid out on September 22. The company pays a dividend of $4.48 per share annually. This translates to a 1.58% yield on the current price, which is above the 4-year average yield of 0.49%. The current dividend payout ratio is 18.65%. The company’s dividend payouts have grown phenomenally at 373.3% CAGR over the last three years.

Analysts expect CI’s revenue for the current year to come in at $179.9 billion, indicating an increase of 3.4%% year-over-year. EPS and dividend for the year are also expected to increase 12.3% and 8% to $22.99 and $4.32 year-over-year, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters.

The stock has gained 33.9% over the past year to close the last trading session at $283.45.

CI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. It has a B grade for Growth, Value, Sentiment, and Quality. CI is ranked #5 among 11 stocks in the A-rated Medical – Health Insurance industry. 

Click here to see CI’s ratings for Momentum and Stability.

Energy Transfer LP (ET)

ET owns and operates a portfolio of energy assets in the United States. The company sells natural gas to electric utilities, independent power plants, local distribution, and industrial end-users.

The company’s segments include Intrastate Transportation and Storage Segment; Interstate Transportation and Storage Segment; Midstream Segment NGL and Refined Products Transportation and Services Segment; Crude Oil Transportation and Services Segment; Investment in Sunoco LP; Investment in USA Compression Partners; LP (USAC); and All Other Segment.

On August 24, ET announced that its subsidiary, Energy Transfer LNG Export, LLC, has entered into a 20-year LNG Sale and Purchase Agreement (SPA) with Shell NA LNG LLC related to its Lake Charles LNG project. Under the agreement, Energy Transfer LNG will supply Shell with 2.1 million tonnes of LNG per annum (mtpa). This SPA is expected to boost the company’s revenue streams.

On August 16, ET announced the completion of the sale of its 51 percent interest in Energy Transfer Canada ULC (Energy Transfer Canada). The company expects the sale of these assets would allow it to deleverage its balance sheet further and redeploy capital within its U.S. footprint, which consists of a portfolio of energy assets with exceptional geographic and product diversity.

During the fiscal 2022 second quarter, which ended June 30, ET’s revenue increased 71.8% year-over-year to $25.95 billion. During the same period, its operating income grew 32.3% year-over-year to $2.11 billion. The company’s adjusted EBITDA amounted to $3.23 billion, up 23.4% year-over-year.

Furthermore, the company’s net income attributable to partners and net income per unit came in at $1.33 billion and $0.39, registering increases of 111.8% and 95% from the prior-year period, respectively.

On July 26, ET declared a quarterly dividend of $0.23 per share, which was paid out on August 19. The company pays a $0.92 per share dividend annually. This translates to a yield of 7.86% on the current price.

The 4-year average yield stands at an impressive 10.45%. The current dividend payout ratio is 60.6%. The company’s dividend payouts have grown at 1.9% CAGR over the last ten years.

Analysts expect ET’s revenue for the fiscal 2022 third quarter (ending September 2022) to come in at $23.96 billion, representing an increase of 43.8% from the previous-year quarter. The consensus EPS estimate of $0.39 for the ongoing quarter indicates a 95% year-over-year increase. The company has surpassed the consensus revenue estimates in three of the trailing four quarters.

ET has gained 25.9% over the past year to close the last trading session at $11.71.

ET has an overall rating of B, equating to a Buy in our POWR Ratings system. ET has an A grade for Momentum and a B grade for Value. ET is ranked #29 out of 98 stocks in the B-rated Energy-Oil & Gas industry.

Beyond what has been discussed above, we have also given ET grades for Sentiment, Growth, Quality, and Stability. Get access to all ET ratings here.

Kronos Worldwide, Inc. (KRO)

KRO is a global producer and seller of titanium dioxide pigments (TiO2), a base industrial product used for diverse applications. The company sells and provides technical expertise for its products in Europe, North America, and the Asia Pacific region.

KRO’s net sales increased 18.1% year-over-year to $565.30 million during the second quarter of 2022 ended June 30. The company’s income from operations increased 48.9% from the year-ago value to $65.20 million. Net income came in at $45.90 million, up 78.6% year-over-year. This translated to a net income per share of $0.40, an increase of 81.8% from the previous-year quarter.

On August 3, KRO declared a quarterly dividend of $0.19 per share which would be paid out on September 15. The company pays $0.76 as a dividend annually. This translates to a yield of 5.9% on the current price, above the 4-year average yield of 5.38%.

The current dividend payout ratio is 49.66%. The company’s dividend payouts have grown at 4.6% CAGR over the last five years.

Analysts expect KRO’s revenue for 2022 to be $2.18 billion, indicating a 12.6% year-over-year growth. The company’s EPS for the same period is expected to increase 58% year-over-year to $1.55. Its dividend is also expected to increase 5.6% over the previous year to $0.76.

KRO has dipped 2.7% over the past year to close its last trading session at $12.88.

It is no surprise that KRO has an overall A rating, which translates to Strong Buy in our POWR Ratings system. KRO also has an A grade for Value and a B for Stability and Quality. It is ranked #9 out of 89 stocks in the A-rated Chemicals industry.

Beyond what we’ve stated above, we have also given KRO grades for Growth, Momentum, and Sentiment. Get all KRO ratings here.

MRK shares were unchanged in after-hours trading Thursday. Year-to-date, MRK has gained 15.66%, versus a -15.92% rise in the benchmark S&P 500 index during the same period.

Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.

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