Got $3,000 to invest? Here are the 3 best dividend stocks to buy right now
JThe stock market decline in 2022 hasn’t been a walk in the park for investors, but the good news is that there are plenty of dividend-paying stocks on sale that you can now add to your portfolio at a discount to generate income and wealth. the long term.
Dividend investing is a proven strategy that has proven to be one of the best ways to build long-term wealth. Since returns are generated through both dividend payouts and stock price appreciation, dividend investing offers you multiple ways to earn, and this strategy has outperformed the S&P500 overtime. By reinvesting the dividends you receive, you can generate even better returns.
Here are three dividend-paying stocks investors can buy now and “set and forget” to create a steady stream of dividend payouts for years to come.
1.Philip Morris International
Global tobacco giant Philip Morris International (NYSE:PM) has been paying a steadily growing dividend since 2008. While this may not give it the same long track record as the Dividend Kings, note that Philip Morris has been spun off from Altria in 2008, it therefore paid a dividend throughout its existence as a stand-alone company.
Philip Morris has increased the dividend at an annualized rate of 8% since then, and paying dividends of $1.25 per quarter now yields an impressive 5%. The company is reasonably valued at 17 times its earnings and has potentially attractive growth engines.
For example, Philip Morris’ IQOS heated tobacco and e-cigarette products have been an international hit with 18 million users worldwide. Philip Morris is also in the process of acquiring Swedish gamewhose ZYN Smokeless Nicotine Pouch quickly gained traction in the United States and abroad.
Completing the merger would help take Philip Morris to the next level as a global powerhouse in traditional and smokeless tobacco products that also pays a 5.1% dividend yield for its ownership. Investing $1,000 in Philip Morris (compared to the $3,000 we started with) would net you about $51 over the year in dividends.
2. Franchisee group
It’s an old investing adage that the safest dividend is the one that’s just been increased, and franchise group (NASDAQ: FRG) has significantly increased its payouts over the past three years. The Ohio-based owner of brands like Vitamin Shoppe and American Freight has increased its dividend from $1.00 in 2020 to $1.50 in 2021, and from $1.50 to $2.50 this year.
The company entered the public market by taking over Liberty Tax in 2019 and merging it with its Buddy’s Home Furnishings business. It therefore does not have a long history of dividends, but so far the first results are very promising. Even better, at its current share price, Franchise Group is returning around 6.5%, which is a substantial gain.
This dividend payout should prove resilient over time, as Franchise Group’s business portfolio is relatively resilient to the recession. People will continue to buy vitamins during a recession, and so will its Pet Supplies Plus business. His various furniture companies tend to be at the more affordable end of the market, so they should also be relatively resilient.
In addition to the generous dividend, Franchise Group is also returning capital to shareholders with a share buyback authorization of $500 million, which is equivalent to almost a third of the market capitalization. These buybacks will reduce the number of shares outstanding, which will increase earnings per share and reduce the number of shares among which future dividend payments will be allocated.
Investing the next $1,000 in Franchise Group would yield around $65 per year. Add that to our Philip Morris earnings, and we’ve added about $116 in annual income to our portfolio.
3. Domains of the camping world
Philip Morris and Franchise Group pay dividend yields well above those of the broader market, but for our final pick, let’s grow our earnings even further with an even higher yield. Camping World Holdings (NYSE: CWH)the recreational vehicle (RV) retailer led by Marcus Lemonis, is currently reporting a whopping 9.8% payout.
Like Franchise Group, the company has been aggressive in increasing its dividend in recent quarters. The company recently increased its quarterly dividend from $0.25 to $0.50 in the second half of 2021. In March, Camping World increased the payout further, to $0.625, representing an annual payout of $2.50. Like Franchise Group, Camping World also buys back shares.
Investing our last $1,000 in Camping World would yield $98 per year. Add that to our previous picks paying $116, and we’ve now built a total annual payment of $214.
Rinse and repeat
This $214 represents a return of about 7% on our hypothetical portfolio of $3,000. These are all high-quality companies that have increased their dividends and should have the ability to continue paying them over time. Taking that $214 and reinvesting it in more of those stocks will also strengthen our positions and lead to more dividend payouts.
This strategy will slowly but surely increase our portfolio as dividends increase and the number of stocks in it increases. Investors can also periodically invest more money in the portfolio and add to each position gradually. Rinse and repeat every few months, and before you know it, you’ll have a resilient portfolio of top-notch businesses generating a substantial amount of revenue.
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Michael Byrne holds positions at Franchise Group, Inc. The Motley Fool recommends Camping World Holdings and Philip Morris International and recommends the following options: June 2022 $29 short put options on Camping World Holdings. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.