This has been another wild year, with the S&P 500 currently up over 20% after a 16% gain last year. Looking ahead to 2022, many investors are probably setting financial goals that undoubtedly include not losing money.
One way to protect yourself against volatility is by investing in dividend-paying stocks that generate income no matter what the market is doing. Dividing a $50,000 investment into roughly equal parts among defense contractor Lockheed Martin (NYSE:LMT), renewable energy asset manager Brookfield Renewable (NYSE:BEPC)(NYSE:BEP), and diversified industrial company Caterpillar (NYSE:CAT) is likely to yield $1,500 in low-tax dividend income in 2022. Here’s what makes each dividend stock a great buy now.
1. Lockheed Martin
Lockheed Martin stock is trading right around where it started the year. As one of the largest defense contractors, the company operates under long-term sales cycles based on contracts with the U.S. government and its allies. The bad news is that Lockheed’s sales growth has been flatlining for years now. And its recent guidance points to a multiyear period of stagnant or even negative growth. This news set off a move to the exits among many investors who want no part of a low-growth business. Unsurprisingly, Lockheed stock has taken a hit. It is down for the year after being down last year, and is trading within striking distance of its 52-week low.
It’s not a great situation, but it’s certainly better for investors that Lockheed has told them a lot of the bad news ahead of time. Its declining stock price and rising dividend payout have the dual effect of increasing its dividend yield, which is now at the high end of its historical range. For investors looking for an industry-leading company with predictable cash flows and a growing dividend, Lockheed Martin could very well be one of the best options.
2. Brookfield Renewable
Share prices of Brookfield Renewable are hovering around a 52-week low as the renewable energy sector cools off from a red-hot 2020. Brookfield has a portfolio of wind, solar, hydroelectric, and energy-storage assets tied to power purchase agreements. These contracts generate stable long-term cash flows, but the company also has a lot of debt and is spending a lot of money to develop its 36-gigawatt pipeline of projects.
Brookfield’s infrastructure developments will take time to play out. In the meantime, a lot of its dry powder is being used to support its dividend. It’s a short-term problem, and the Brookfield family of companies has a reputation for outlasting short-term issues.
Brookfield plans to steadily increase its earnings and dividend as its projects come onstream. Few companies have the capacity or project pipeline that Brookfield has, not to mention the stock’s 3.4% dividend yield. For investors confident in the energy transition from fossil fuels to renewables, Brookfield is an easy choice.
Caterpillar stock is up for the year after outperforming the S&P 500 in 2020. This may come as a surprise …….