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12 Best Dividend Stocks To Beat Inflation


Published on April 25th, 2023 by Bob Ciura

The U.S. economy is experiencing high inflation. The Federal Reserve has hiked interest rates multiple times in response, but inflation remains elevated.

Inflation erodes investors’ purchasing power. To protect a portfolio against inflation, investors should focus on stocks that can raise their dividends above the rate of inflation.

A good place to start is blue-chip stocks, which we classify as those with at least 10 consecutive years of dividend increases.

With all this in mind, we created a list of 350+ blue-chip stocks, which you can download by clicking below:

 

In addition to the Excel spreadsheet above, this article covers our top 12 blue-chip dividend stocks to beat inflation, with the following criteria:

  1. Current dividend yield above 2%, in order to be sufficiently above the S&P average (1.7%)
  2. Dividend growth rate above U.S. inflation (6%)
  3. At least 10 consecutive years of dividend increases
  4. Dividend Risk Scores of ‘C’ or better

Dividend growth and Dividend Risk Scores were derived using data from the Sure Analysis Research Database.

The stocks are ranked by dividend growth rate, from lowest to highest. The table of contents below allows for easy navigation.

Table of Contents

Blue-Chip Stock #12: Caterpillar Inc. (CAT)

Caterpillar is the global leader in heavy machinery. It has a strong brand with a dominant industry position. Caterpillar manufactures and markets heavy machinery, mostly for the construction and mining sectors.

The company operates in three primary segments: Construction Industries, Resource Industries and Energy & Transportation, along with ancillary financing and related services through its Financial Products segment.

Source: Investor Presentation

On January 31st, 2023, Caterpillar reported its Q4 2022 and full-year results for the period ending December 31st, 2022. For the quarter, the company generated revenues of $16.6 billion, a 20% increase compared to the $13.8 billion posted in the fourth quarter of 2021. Construction Industries, Resource Industries, and Energy & Transportation posted growth of 19%, 26%, and 19%, respectively.

The increase was due to favorable price realization and higher sales volume, partially offset by unfavorable currency impacts primarily related to the euro, Japanese yen, and Australian dollar. The increase in sales volume was driven by changes in dealer inventories and higher equipment sales to end users. Dealers increased inventories by $700 million during the quarter, compared to remaining about flat during the prior-year period.

Caterpillar’s adjusted operating profit margin was 17%, compared to 11.4% last year. Margin expansion combined with revenue growth resulted in adjusted earnings-per-share landing at $3.86 against $2.69 in the comparable period last year, closing the year with great momentum in earnings-per-share growth.

Click here to download our most recent Sure Analysis report on Caterpillar (preview of page 1 of 3 shown below):

Blue-Chip Stock #11: Home Depot Inc. (HD)

Home Depot was founded in 1978, and since that time has grown into the leading home improvement retailer with almost 2,300 stores in the U.S., Canada, and Mexico. In all, Home Depot generates annual revenue of approximately $130 billion.

Home Depot reported third quarter 2022 results on November 15th. The company reported third quarter sales of $38.9 billion, a 5.6% year-over-year increase. Comparable sales in the quarter rose 4.3%, and 4.5% in the U.S. specifically. Net earnings equated to $4.3 billion, or $4.24 per share, compared to $4.1 billion, or $3.92 per share in Q3 2021.

The company spent over $5.1 billion in common stock repurchases during the first nine months of 2022, less than the $10.4 billion spent in the first nine months of 2021. Average ticket rose 8.8% compared to last year, from $82.38 to $89.67. Additionally, there was a 5.3% increase in sales per retail square foot, from $587.28 to $618.50.

Click here to download our most recent Sure Analysis report on HD (preview of page 1 of 3 shown below):

Blue-Chip Stock #10: Snap-On Inc. (SNA)

Snap-On Inc. was founded in the early 1920’s and since that time, has grown from a fledgling direct sales distributor of sockets to a full-service, global distributor of a wide array of common and specialty tools, diagnostics equipment, repair information and system solutions instruments.

Snap-On also operates a financial services business that finances its customers’ purchases in-house. The company’s market capitalization is $13.8 billion, and it should generate around $4.6 billion in revenue this year.

Snap-On reported fourth quarter and full-year earnings on February 2nd, 2023, and results were better than expected on both the top and bottom lines. Earnings-per-share for the fourth quarter was $4.42, 18 cents better than expected. Revenue was $1.16 billion, up 4.5% year-over-year, and fractionally better than estimates. Organic sales were 8% higher year-over-year, partially offset by unfavorable forex translation.

Operating earnings before financial services were $248 million, up from $232 million a year ago. As a percentage of sales, operating earnings were 21.5%, up 50bps year-over-year. Financial services revenue was $88 million, up fractionally year-over-year. Consolidated operating earnings were $312 million, up from just $87 million a year-ago.

Click here to download our most recent Sure Analysis report on Snap-On (preview of page 1 of 3 shown below):

Blue-Chip Stock #9: American Financial Group (AFG)

American Financial Group is an insurance holding company that is engaged in property and casualty insurance, focusing on specialized commercial products for businesses. In 2021, the company completed the sale of its Annuity business for $3.57 billion in cash.

Source: Investor Presentation

AFG reported Q4 2022 and full year earnings on February 1st, 2023. For the quarter, earnings-per-share equalled $3.24, below the $4.18 per share that the company reported for the same period in 2021. For the full year, earnings were $10.53 per share, versus the $23.30 per share for 2021.

The company declared a regular quarterly dividend of $0.63 per share, as well as a $4 special dividend with an ex dividend date of the 14th of February. The management team has outlined a 2023 full year core operating earnings guidance in a range between $11.00-$12.00 per share.

Click here to download our most recent Sure Analysis report on AFG (preview of page 1 of 3 shown below):


Blue-Chip Stock #8: Atmos Energy (ATO)

Atmos Energy distributes and stores natural gas in eight states, serves over 3 million customers, and should generate about $4.3 billion in revenue this year.

The company reported first quarter earnings on February 7th, 2023, and results were somewhat mixed. Earnings-per-share came to $1.91, which was four cents less than expected. However, revenue was up 47% to $1.48 billion, beating
estimates by $340 million.

Consolidated operating income was up $45 million to $321 million for the quarter. This was primarily due to rate outcomes in both of the company’s segments, as well as customer growth in the distribution segment.

Source: Investor Presentation

This was partially offset by increased operation and maintenance costs, as well as higher depreciation and property tax expenses, due to higher capital investments.

Distribution operating income was up $41 million to $232 million, which was due to a $58 million gain from rates, a $6 million decline from refunds of excess deferred taxes, and customer growth of $2 million. This was partially offset by higher operating and maintenance expense.

Pipeline and storage operating income rose $4 million to $89 million. This was due to higher rates, which were somewhat offset by higher operating and maintenance costs.

Click here to download our most recent Sure Analysis report on Atmos (preview of page 1 of 3 shown below):

Blue-Chip Stock #7: Automatic Data Processing (ADP)

ADP is a business outsourcing services company. It was founded in 1949 and began with a single client. In the 74 years since ADP has grown into the leading payroll and human resource outsourcing company. It has over 1 million clients in more than 140 countries worldwide.

ADP provides services to companies of all sizes, including payroll, benefits administration, and human resources management. ADP enjoys high demand for these services, as companies would prefer to outsource these functions in order to better focus on their core business activities.

Source: Investor Presentation

ADP reported fiscal second-quarter results on January 25th, 2023. Revenue rose just over 9% year-over-year to $4.39 billion, which met expectations. Adjusted earnings-per-share came to $1.96, which was two cents ahead of estimates.

Employer Services revenue increased 10% on an organic constant currency basis, while PEO Services revenue rose 11%. Along with quarterly results, ADP maintained its guidance of 8% to 9% revenue growth and ~16% adjusted diluted earnings-per-share growth for the full year.

It also expects adjusted EBIT margin expansion of 125 to 150 basis points, leading to expected adjusted EPS growth of 15% to 17% for fiscal 2023.

Click here to download our most recent Sure Analysis report on ADP (preview of page 1 of 3 shown below):

Blue-Chip Stock #6: Texas Instruments (TXN)

Texas Instruments is a semiconductor company that operates two business units: Analog and Embedded Processing. Its products include semiconductors that measure sound, temperature and other physical data and convert them to digital signals, as well as semiconductors that are designed to handle specific tasks and applications.

The company generates strong free cash flow, which it uses to return cash to shareholders.

Source: Investor Presentation

Texas Instruments reported its fourth quarter earnings results on January 24. During the quarter Texas Instruments generated revenues of $4.7 billion, which represents a decline of 3% versus the previous year’s quarter. This beat analyst estimates by $40 million, as the analyst community had forecast a weaker sales performance. Texas Instruments managed to keep its gross profit margin at an attractive level of 66%, while the company’s operating profit margin of 47% remained strong as well.

Texas Instruments generated earnings-per-share of $2.13 during the fourth quarter, which was better than the consensus estimate, coming in $0.15 ahead of the analyst community’s forecast. Texas Instruments continued to generate strong cash flows over the last year. Thanks to its strong cash generation, Texas Instruments was able to finance shareholder returns of $2.0 billion during the last quarter.

Spending on buybacks came in at $850 million in the quarter, which was in line with the average spending over the previous three quarters. Texas Instruments guides for revenues of $4.4 billion and for earnings-per-share of around $1.77 for the first quarter of 2023.

Click here to download our most recent Sure Analysis report on Texas Instruments (preview of page 1 of 3 shown below):

Blue-Chip Stock #5: Amgen Inc. (AMGN)

Amgen is the largest independent biotech company in the world. Amgen discovers, develops, manufactures and sells medicines that treat serious illnesses. The company focuses on six therapeutic areas: cardiovascular disease, oncology, bone health, neuroscience, nephrology, and inflammation. Amgen generates about $26 billion in annual revenues.

On January 31st, 2023, Amgen announced fourth quarter and full year results for the period ending December 31st, 2023. Revenue declined 0.6% to $6.8 billion, though this was $30 million above estimates. Adjusted earnings-per-share of $4.09 compared unfavorably to $4.40 in the prior year, but was in-line with estimates.

Source: Investor Presentation

For the year, revenue grew 1% to $26.3 billion while adjusted earnings-per-share of $17.69 was up significantly from $13.92 in 2021. Product revenue increased 4% while volumes were higher by 10%. Currency exchange reduced results. Sales for Enbrel, which treats rheumatoid arthritis and remains Amgen’s top grossing product, declined 1% during the quarter, extending the year-over-year declines to eleven consecutive quarters. This was down from a 14% decline in the preceding quarter.

Neulasta dropped 37% due to weakness in both pricing and volumes. Amgen expects this pressure to remain in the coming quarters due to biosimilar competition. Prolia, which treats osteoporosis and could become the top grossing product within the next year or so, grew 14%, driven by an 11% increase in volume. Repatha, which is used to control cholesterol, increased 22%. Volumes were higher by 31% during the quarter, helping to offset lower selling prices.

Amgen provided guidance for 2023 as well. The company expects adjusted earnings-per-share in a range of $17.40 to $18.60. At the midpoint, this would be a 1.8% improvement from the prior year.

Click here to download our most recent Sure Analysis report on Amgen (preview of page 1 of 3 shown below):

Blue-Chip Stock #4: Honeywell International (HON)

Honeywell International is a diversified industrial company. The company has four divisions: Aerospace, Honeywell Building Technologies, Performance Materials & Technologies and Safety & Productivity Solutions. Honeywell International has more than 99,000 employees around the world and more than 40% of sales come from international
markets. The company generates about $36 billion in annual revenues.

Source: Investor Presentation

On February 2nd, 2023, Honeywell International announced fourth quarter and full year results for the period ending December 31st, 2022. For the quarter, revenue grew 6.1% to $9.19 billion, which was $70 million less than expected. Adjusted earnings-per-share of $2.52 compared favorably to $2.09 in the prior year and was $0.01 above estimates.

For the year, revenue grew 3% to $35.5 billion while adjusted earnings-per-share of $8.76 compared to $8.06 in 2021. For the quarter, organic sales grew 10% when excluding lost Russian sales. Segment margin expanded 70 basis points to 21.7% as pricing offset inflation. The backlog improved 7% to a record $29.6 billion. Aerospace grew 11% organically due to 23% growth in commercial aftermarket that was offset by lower defense volumes.

Honeywell International provided an outlook for 2023 as well. The company expects revenue in a range of $36 billion to $37 billion and adjusted earnings-per-share in a range of $8.80 to $9.20. At the midpoint, this would represent growth of 2.8% and 2.7%, respectively, from 2022. Organic growth is projected to be 2% to 5% for the year.

Click here to download our most recent Sure Analysis report on Honeywell (preview of page 1 of 3 shown below):

Blue-Chip Stock #3: Target Corporation (TGT)

Target is a giant retailer consisting of about 2,000 big box stores offering general merchandise and food and serving as distribution points for its burgeoning e-commerce business. Target’s market capitalization of $74.7 billion should produce about $110 billion in total revenue this year.

Target reported fourth-quarter and full-year earnings on February 28th, 2023, and results were better than expected on both the top and bottom lines and by wide margins.

Source: Investor Infographic

Adjusted earnings-per-share reached $1.89 in Q4, which was 49 cents better than expected. Revenue was up 1.3% year over-year to $31.4 billion, which was nearly $700 million ahead of estimates.

Comparable sales were up 0.7%, and the company noted this was on top of a gain of 8.9% in the year-ago period. Management noted guest traffic in the stores remains strong. Comparable sales were 2.4% better than estimated.

Click here to download our most recent Sure Analysis report on Target Corporation (preview of page 1 of 3 shown below):

Blue-Chip Stock #2: L3Harris Technologies (LHX)

L3Harris Technologies is the result of a merger between L3 Technologies and Harris Corporation completed on June 29, 2019, forming the sixth largest defense contractor. Shareholders of L3 Technologies received 1.30 shares of Harris Corporation for each of their own shares outstanding.

The company now reports three business segments: Integrated Mission Systems (~42% of revenue), Communication Systems (~23% of revenue), and Space and Airborne Systems (~35% of revenue). The majority of L3Harris’ sales are to the US Government or to other defense contractors. The company had revenue of about $17.1B in 2022.

L3Harris reported Q4 2022 results and full year on January 26th, 2023. For the quarter, companywide revenue rose 5% to $4,578M from $4,350M and diluted non-GAAP EPS decreased (-12%) to $2.17 from $2.46 on year-over-year basis on lower margins and supply chain disruptions. Diluted GAAP earnings fell (-1%) to $3.27 from $3.20 in comparable periods.

Growth came from Space, Intel & Cyber, and F-35 but offset by declines in legacy programs. Communications systems revenue increased 17% to $1,193M from $1,018M due to higher volumes in Tactical Communications, Public Safety, offset by a decrease in Integrated Vision Solutions.

For the year, revenue fell (-4%) to $17,062M from $17,814M and adjusted EPS declined to $12.90 from $12.95. The funded book-to-bill ratio was 1.08X.

The firm closed on the $2B acquisition Viasat’s TDL product line, Link 16. L3Harris is acquiring Aerojet Rocketdyne for $4.7 billion, subject to regulatory and shareholder approvals. The company guided for ~$17.4B – $17.8B in revenue and $12.00 – $12.50 for EPS in 2023.

Click here to download our most recent Sure Analysis report on L3Harris (preview of page 1 of 3 shown below):

Blue-Chip Stock #1: Broadridge Financial (BR)

Broadridge Financial Solutions, Inc. provides investor communications services and technology-related solutions to the financial services industry. Broadridge was spun off from Automatic Data Processingin 2007, where it had been the brokerage service division of ADP since 1962.

Broadridge processes millions of trades a day involving trillions of dollars, provides investor communications which reach 75% of North American households, and also manage shareholder voting in ~120 countries.

Broadridge has also expanded into blockchain solutions and has secured a blockchain patent for proxy processing and repurchase agreements. The company serves clients across the globe, but the majority of customers are in the U.S., Canada, and the U.K.

Source: Investor Presentation

On August 12th, 2022, Broadridge increased the dividend by 13% to $2.90 per share annually, marking 16 years of consecutive increases.

Broadridge Financial Solutions reported second quarter 2023 results on February 2nd, 2023. Total revenues for the quarter grew 38% to $1.29 billion. Recurring revenue grew 6% year-over-year to $840 million from $793 million. Recurring revenue made up 65% of total revenues in the second quarter. Adjusted EPS increased by 11% YoY to $0.91 per share.

Leadership reiterated FY 2023 guidance and estimates roughly 7.5% in recurring revenue growth, a 50 bps increase to adjusted operating income margin, and for adjusted EPS growth of between 7% to 11%.

Click here to download our most recent Sure Analysis report on Broadridge (preview of page 1 of 3 shown below):

Additional Resources

If you are interested in finding more high-quality dividend growth stocks suitable for long-term investment, the following Sure Dividend databases will be useful:

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