As anybody who follows baseball understands, the season is long, which segues into a discussion about dividend stocks to buy. Sure, right now, risk-on sentiment appears to be returning to the market. Fundamentally, it appears that the Federal Reserve is at least open to the idea of interest rate cuts next year. Naturally, this pivot in the monetary policy framework lifted sentiment.
Here’s the thing – we just don’t know what’s going to happen tomorrow. It’s a non-zero probability event that the Fed could encounter a circumstance that it didn’t anticipate. To be sure, it’s happened before and it could happen again. Then what? Suddenly, the tailwind for risk-on assets dies out, which may presumably bolster the case for dividend stocks for passive income.
Even better, dividend stocks to buy almost always makes sense. Essentially, we’re talking about comfortable wagers on profitable, well-established enterprises. They’re not going to make you rich but they probably won’t put you on the streets.
With that, below are intriguing dividend stocks for passive income to consider.
Archer Daniels Midland (ADM)
What it is: A multinational food processing and commodities trading company, Archer Daniels Midland (NYSE:ADM) deserves consideration as one of the dividend stocks to buy for its critical business model. Per its public profile, Archer Daniels operates hundreds of plants and crop procurement facilities worldwide. While ADM is an integral component of the global food supply chain, various geopolitical and economic headwinds have pushed shares down sharply this year.
Relevance: As a food-processing firm, the relevance of ADM is obvious. Humans need to eat and bad things happen when we don’t. In terms of hard data, the global food processing market reached a valuation of $169.39 billion last year. Further, experts project that the sector could expand at a compound annual growth rate (CAGR) of 6.6% by 2031. At the forecast culmination point, the industry could clock in at slightly over $301 billion.
Pros: Right now, analysts rate shares as a consensus moderate buy with a $92.13 price target, implying over 27% upside. Also, the company provides a forward dividend yield of 2.49%, backed by 50 years of consecutive payout increases.
Cons: As stated earlier, ADM is volatile so investors should be prepared for downside risk.
Coca-Cola (KO)
What it is: A company that truly needs no introduction, Coca-Cola (NYSE:KO) is a stalwart in the soft drinks space. While the company suffered a sizable hit during the Covid-19 crisis, since 2020, Coca-Cola has steadily expanded the top line. Further, it has been consistently profitable, making KO a solid idea for dividend stocks for passive income.
Relevance: Fundamentally, Coca-Cola should benefit from the trade-down effect if economic conditions remain challenged. Rather than opt for expensive caffeinated beverages at trendy coffeeshops, more consumers will be trading down to the local grocery store for their quick pick-me-ups. That should help lift KO as Coca-Cola products compete favorably in terms of brand awareness and price point.
Pros: At the moment, Coca-Cola carries a forward yield of 3.12%, beating out the consumer staple sector’s average yield of 1.89%. Also, the company enjoys 61 years of consecutive payout increases, a status management won’t want to give up on. Thus, it’s one of the top dividend stocks to buy.
Cons: Priced at a forward earnings multiple of 21x, investors will be paying a premium for KO.
Exxon Mobil (XOM)
What it is: Another well-known enterprise, Exxon Mobil (NYSE:XOM) is one of the world’s biggest oil and gas companies. Per its public profile, Exxon Mobil is the largest direct descendent of John D. Rockefeller’s Standard Oil. Maybe you should keep that factoid in mind the next time you’re on a quiz show. Since the start of the year, XOM dipped about 5%.
Relevance: Although XOM is down below parity as we approach the end of 2023, it offers a compelling argument for top dividend stocks to buy. Yes, I understand the whole argument about society’s pivot toward clean and renewable energy sources. However, you can’t beat the science. Specifically, fossil fuels remain relevant because of their incredible energy density.
Pros: Currently, Exxon Mobil carries a forward yield of 3.74%. Admittedly, that’s a bit lower than the sector average 4.24%. However, Exxon commands 41 years of consecutive dividend increase. Also, the payout ratio is reasonable at just under 40%.
Cons: Geopolitical factors combined with reduced demand has led to volatility in recent months.
On the date of publication, Josh Enomoto 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.
