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Dividend Stocks to Buy Now as the S&P 500 Dodges a Bear Market

Mohit Oberoi, CFA - Author

May 20 2022, Published 9:58 a.m. ET

The S&P 500 has been dodging a bear market even as the tech-heavy Nasdaq is in the bear market territory after falling more than 20 percent from its peaks. Recession fears have also been piling up and several economists now see a recession in 2022. Dividend stocks can provide some cushion in turbulent stock markets.

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While dividends are variable, quality companies tend to maintain steady dividends and increase them progressively every year. In bear markets where stocks tumble, investors can at least expect some dividends from companies that have high dividend yields. Here are the best dividend stocks you can consider in 2022 as U.S. stock markets take a breather after three years of double-digit returns.

Dividend stocks can be a good investment.

Dividend stocks can be a good investment, especially if you're looking at regular income from your investments. Also, a lot of companies that pay healthy dividends are value plays. Value stocks can outperform in the current macro environment. Incidentally, Berkshire Hathaway, which is led by the legendary value investor Warren Buffett, hit a record high in 2022 even as U.S. stocks crashed.

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There are high dividend stocks in the tech industry.

Large Silicon Valley companies are known to be frugal with dividends and instead spend generously on stock buybacks. As for the growth tech companies, they're either loss-making or the business needs a continuous flow of money to grow the business. Growth tech stocks also don’t pay dividends. However, there are some stocks in the space that have a good dividend yield.

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Cisco, which recently had its worst fall in over a decade, has a dividend yield of 3.64 percent, which looks attractive. IBM is another high dividend stock worth considering with a yield above 5 percent. Chipmaker Broadcom also has a yield of 3 percent while Intel’s yield is nearly 3.5 percent.

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Consider these high dividend-paying energy stocks.

Thanks to the steep rise in crude oil prices, energy stocks are outperforming in 2022. Even Buffett has scaled up the purchases of oil and gas companies. Chevron and Occidental Petroleum are now among the top 10 holdings for Berkshire Hathaway.

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Higher energy prices look here to stay and investors can expect good dividends from oil and gas companies in 2022. In the energy space, BP has a dividend yield of 4.2 percent, while ExxonMobil currently has a yield of nearly 3.9 percent.

Midstream companies can be good buys for dividend investors.

Midstream energy companies usually have a high dividend yield. In the midstream space, ONEOK, Inc. has a dividend yield of 5.9 percent. USD Partners looks like another good bet and has a yield of 8.1 percent.

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If you're comfortable investing in tobacco, Altria Group offers a good dividend yield of 7.1 percent. While the stock is down over the last five years and is underperforming the markets, it's in the green in 2022 as investors have poured money into value stocks.

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Also, in the metals and mining space, Brazilian steelmaker Gerdau is offering a dividend yield of 12.7 percent. The stock, like Altria, is in the green this year. If you're comfortable with the volatility in metal and mining stocks, you can consider Gerdau stock.

Investors should avoid these dividend stocks.

Some of the REITs are paying high dividends. For example, the mortgage REIT is offering a 14 percent dividend yield. However, given the current markets, REITs don’t look like good investments.

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ETFs are another way to invest in dividend stocks.

Another way to invest in dividend stocks would be to look at ETFs that invest in high dividend companies. Dividend ETFs can help you gain access to a portfolio of high dividend stocks. The Vanguard High Dividend Yield ETF is a good option if you're looking for a dividend ETF.


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