The Dividend Dream Team: 3 Stocks Delivering Dependable Payouts

Stocks to buy

U.S. stocks have logged sizable gains in recent months, registering a 30% gain since October last year. Some analysts are starting to worry that the market may be reaching overbought levels and is due for a correction. While growth stocks have propelled the market, their rapid growth also means deeper potential declines if prices turn lower. For investors seeking a more stable option, dividend stocks can offer dependable payouts during periods of market volatility.

Dividend stocks tend to see slower growth but provide a degree of downside protection compared to their growth counterparts. Investors should look beyond just a stock’s dividend yield, as high payouts don’t always indicate a quality underlying company. Some firms may offer high yields because their share price has fallen. Yet others may borrow to fund large dividend payments to attract investors.

The most dependable dividend stocks typically have a long track record of sustaining payouts through different market cycles. Companies within consumer staples, utilities, healthcare, and government services often generate steady cash flows to support consistent dividend distributions. These dividend stocks can offer stability for investors seeking to balance their portfolios as markets reach new highs.​

Let’s examine three such stocks that have a history of delivering dependable payouts:

PepsiCo (PEP)

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Beverage and food company PepsiCo (NASDAQ:PEP) enjoys a solid reputation and track record of dividend payouts.

Not only did it manage to navigate the high inflation period of the last couple of years, but also it grew sales by 9.5% in 2023. The company pays out about three-quarters of its earnings as dividends, providing a solid financial base. This has helped it to pay 52 consecutive years of dividend growth.

With a dividend yield of 2.9%, PepsiCo offers a higher dividend than the sector average of 2.2%, suggesting it could be an undervalued dividend stock. Analysts think the company has further upside potential, with an average target price of $187.03 per share.​ They point out that shares may be undervalued today in light of the company’s progress overseas. PepsiCo’s international business is now almost $40 billion, gaining enough scale for better profit margins.

Starbucks (SBUX)

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Dividend stocks like Starbucks (NASDAQ:SBUX) provide stability amid volatility. The coffee giant has navigated fluctuating consumer demand by meeting people’s daily needs—whether a morning cup of joe or a favorite specialty drink. Even as inflation impacted many businesses last year, Starbucks still grew global comparable sales by 5% thanks to the enduring popularity of its signature brews.

The company distributed over half of its earnings to shareholders in the form of dividends. With a sizable 57% payout ratio, Starbucks ensures a wide margin of safety to maintain its dividend over time. At a yield of 2.5%, SBUX offers investors an attractive income stream above the 2.2% average found in the consumer goods sector. Analysts have an average target price of $98.56 per share for this dividend stock.​

ONEOK (OKE)

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ONEOK (NYSE:OKE) exhibits steady income stream from long-term natural gas transport contracts. The company plans to increase dividends by 3-4% yearly through acquisitions. It recently purchased Magellan Midstream Partners (NYSE:MMP) for $18.8 billion, making it a $60 billion company. And not long ago, Raymond James Financial (NYSE:RJF) increased its position in ONEOK by purchasing additional shares worth $25.8 million.

According to analysts, ONEOK is one of the highest-yielding dividend stocks, with a 5% dividend and expected share price gains to $81.38. ONEOK is well-positioned to benefit from increased natural gas exports to Europe due to the ongoing conflict in Ukraine. This could help improve earnings and make it a reliable dividend stock.​

On the date of publication, Stavros Tousios did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Stavros Tousios, MBA, is the founder and chief analyst at Markets Untold. With expertise in FX, macros, equity analysis, and investment advisory, Stavros delivers investors strategic guidance and valuable insights.

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