7 Dividend Stocks to Buy for a Stable Income Stream

A key to successful retirement planning or wealth building is to start early. One critical component of investing is to secure stable cash flows. This is likely through fixed income, rental income, or investment in dividend stocks. With the markets continuing to face macroeconomic headwinds, it’s a good time to look at some dividend stocks to buy for the coming years.

I would allocate 50% of my funds toward dividend stocks, though your allocation may vary based on your individual risk profile. I must also mention that dividend stocks do not only imply dividend gains. Based on certain growth catalysts, dividend stocks also offer meaningful capital gains.

I believe that these stocks are attractively valued. In the next five years, total returns (dividend and capital gains) from these stocks will exceed index returns.

Let’s discuss the reasons to be bullish on these dividend stocks to buy.

Newmont Corporation (NEM)

Sentiments have turned bullish for gold with inflation easing and with the possibility of a recession in 2023. Newmont Mining (NYSE:NEM) is among the top dividend stocks to buy as the company stands to benefit from higher realized gold prices.

Newmont has an investment-grade balance sheet and that’s a key reason to like the blue-chip stock. The company is positioned to deliver robust cash flows and I expect dividend growth. Currently, NEM stock offers a yield of 4.1%.

Newmont reported an operating cash flow of $2.2 billion for the first nine months of 2022. This was on the lower realized gold price. For the current year, OCF is likely to be in excess of $4 billion.

Newmont, with 96 million ounces of proved reserves, is also attractive from a long-term perspective. The asset base provides clear free cash flow visibility even if gold remains sideways.

AstraZeneca (AZN)

AstraZeneca (NASDAQ:AZN) is another attractive dividend stock to buy and hold. AZN stock offers a dividend yield of 1.4% and there is clear visibility for dividend growth in the coming years. In the last 12 months, AZN stock has also trended higher by 14.5%.

For the first nine months of 2022, AstraZeneca reported revenue growth of 37%. With a strong pipeline of drug candidates, the company expects to sustain low double-digit revenue growth. Currently, AstraZeneca has 179 projects in pipeline.

Another point to note is that the company has a diverse therapy area focus. This includes oncology, bio-pharmaceutical and rare diseases. With a wide addressable market and global presence, the growth outlook is positive.

In the last 12 months, AstraZeneca has reported operating cash flow of $7.4 billion. OCF is likely to accelerate with revenue growth. This positions the company for aggressive investment in research and development. Additionally, there is ample headroom for dividend growth.

Lockheed Martin (LMT)

At a forward price-earnings ratio of 16.4, Lockheed Martin (NYSE:LMT) is an attractive dividend stock to buy. LMT stock offers a current dividend yield of 2.67% and I see visibility for dividend growth.

Global defense spending is likely to remain high and Lockheed is positioned to benefit. The company has already been witnessing robust order intake. As of Q4 2022, Lockheed reported an order backlog of $150 billion. On a year-on-year basis, the backlog increased by 11%.

There are two important reasons to believe that the order backlog will continue to remain robust. First and foremost, Lockheed has been winning orders from outside the United States. As Europe increases defense spending to meet the NATO target, Lockheed will benefit.

Furthermore, Lockheed has been investing in innovation. This includes investment in hypersonics, directed energy, and autonomy. With these initiatives, the company expects to resume revenue growth in 2024. The dividend growth outlook is therefore bright.

Chevron Corporation (CVX)

Chevron Corporation (NYSE:CVX) is possibly the best pick. The 3.14% dividend yield stock trades at an attractive forward price-earnings ratio of 9.4.

Even with recession concerns, oil has remained firm around $80 per barrel. This will ensure robust cash flows for Chevron, which has attractive break-even assets. Just to put things into perspective, Chevron reported operating cash flow of $13.7 billion for Q3 2022. The annualized OCF potential is $40 billion.

Chevron plans to invest $15 to $17 billion annually in the next few years. Even with aggressive investments, there will be ample funds for dividends and buybacks. It’s worth mentioning that Chevron has an investment-grade balance sheet.

With high financial flexibility, reserve replacement is likely to remain robust. This will ensure steady long-term cash flow visibility.

Vale (VALE)

Vale (NYSE:VALE) stock has been surging higher with returns of 40% in the last six months.

The stock remains attractive at a forward price-earnings ratio of 5.4. Additionally, the dividend yield is attractive at 7.9% and I expect dividends to sustain.

With fears of recession, there is a high possibility of stimulus measures in the coming quarters. This will be positive for commodity prices. Iron ore has already been trending higher and this explains the rally in VALE stock.

For Q3 2022, Vale reported an adjusted EBITDA of $4 billion. Therefore, even with relatively soft commodity prices, the EBITDA outlook is robust. For the current year, I expect an annualized EBITDA in excess of $20 billion. Cash flows are therefore likely to remain healthy.

The iron ore segment remains the cash cow for Vale. However, the company has also been investing in copper and nickel projects. The objective is to benefit from the impending demand for these metals in a low carbon economy.

AT&T (T)

Considering the valuations, AT&T (NYSE:T) is another name among dividend stocks to buy and hold. At a forward price-earnings ratio of 7.4, T stock looks poised for a meaningful rally. The stock also offers a dividend yield of 5.79%.

Recently, AT&T reported strong quarterly numbers and there are several positives. First, the company reduced net debt by $24 billion last year. Deleveraging is likely to continue and as credit metrics improve, the stock will trend higher.

Further, for 2022, AT&T reported $14.1 billion in free cash flow. For the same period, the company paid $8 billion in dividend. Financial flexibility is therefore high for investments to sustain growth.

For five consecutive quarters, AT&T has reported growth in phone and fiber subscribers. This is an encouraging metric and as 5G penetration increases, I expect subscriber growth to remain healthy. The company’s mid-band 5G spectrum already covers more than 150 million people.

AT&T is a focused organization after the spin-off of the media division. Key metrics point to positive business development, which will translate into shareholder value creation.

Walmart (WMT)

Walmart (NYSE:WMT) is among the dividend stocks to buy and hold for the long term. The stock currently offers a dividend yield of 1.57%.

Even with the challenges related to inflation, Walmart has reported good numbers. The company returned $13.3 billion to shareholders in the first nine months of 2022.

I expect comparable store sales growth to be better in 2023 as compared to last year. Any recession would be good news for Walmart as it would imply immediate action from policymakers to spur spending.

In the international markets, Walmart reported revenue growth of 7.1% for Q3 2023. In the coming years, international market growth is likely to remain robust. The reason is Walmart’s growing presence in China and India.

On the date of publication, Faisal Humayun did not hold (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.