There’s really no such thing as a “no brainer” stock pick. I’d say that some opportunities are more compelling than others. But when valuations are as high as they are (such as right now), it can certainly be difficult for investors to wrap their heads around opportunities they think they’d kick themselves for not owning five or 10 years from now.
The thing is, even with where valuations are right now, I do think there are some top-tier opportunities for investors to explore.
In this piece, I’m going to highlight three companies I think are among the best large-cap companies with durable moats in mature industries that are worth considering from a dividend perspective. These are companies that have all proven their ability to continue to grow earnings each year, and pass on a greater percentage of their overall cash flow to investors over time.
Thus, for those seeking meaningful and reliable dividend income in retirement (that will increase at the same rate, or faster, than inflation), these are companies that are worth a look.
Let’s dive in!
AbbVie
One large-cap pharmaceutical stock I don’t talk about enough, but probably should at least from a dividend perspective, is AbbVie (NYSE:ABBV | ABBV Price Prediction).
Shares of the drug maker have done well over most time frames, with ABBV stock up 7% since the start of this year, 14% over the past year, and nearly doubled over the past five years. That’s the kind of consistent capital appreciation most investors are after, and that’s not even touching the stock’s very meaningful 3.5% dividend yield.
On top of this, AbbVie’s incredible dividend growth run (now spanning 53 years of consecutive dividend hikes) adds more credence to the idea that this is a company that should want to continue this streak over time.
And with AbbVie producing solid 8.4% year-over-year revenue growth and diluted EPS growth of 6.5%, I think these dividend hikes will continue for the foreseeable future. With a robust pharmaceutical portfolio, one of the best immunology and oncology drug profiles of the competition, and plenty of spending increases expected in this sector, this is one of the more defensive dividend stock picks I think is worth considering here.
Caterpillar
Caterpillar (NYSE:CAT) is an intriguing stock to look at, for a number of reasons.
First on the list of reasons I’d think about owning Caterpillar over the long-haul is trying to express the belief that U.S. manufacturing and industry will continue to grow over time. It’s true that many of the bridges, roads, and buildings around the country need to be upgraded or rebuilt. And with Biden’s Inflation Reduction Act, and Republican promises that infrastructure spending in key areas will continue (and more jobs should come back with a manufacturing boom), CAT stock has been a favorite option for investors looking to trade such a theme.
Fundamentally,
But from a dividend perspective, Caterpillar is also an interesting stock to look at. The company’s 31 consecutive years of dividend increases positions the company as a dividend growth champion worth considering. Now, the company’s 1.3% dividend yield isn’t necessarily something many investors will write home about. But with solid earnings growth this past quarter and strong cost discipline and pricing power leading to margin expansion, I think this is a stable and steady cyclical investment worth making, particularly on market downturns.
Chevron
Moving onto the oil and gas sector, energy giant Chevron (NYSE:CVX) has been one of my top picks for a long time. The company has worked similar magic as the aforementioned two picks, having raised its dividend distribution for decades. And with a current dividend yield of 4.8%, I’d say this company is among the most attractive and popular dividend stocks for a reason.
Now, the fossil fuel industry is one that many investors may steer clear of for personal reasons. But I do think that a relatively limited investor base provides the rest of us with opportunities to potentially pick up shares of a profit-generating giant like Chevron on the cheap.
Trading at just 16-times forward earnings, Chevron’s underlying profit growth in this higher-for-longer energy price environment is encouraging. For those who think that demand will continue to outpace supply in the energy sector for the foreseeable future, this is a company with among the most robust underlying fundamentals I think is worth considering right now.
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