The Schwab US Divided Equity ETF (NYSEARCA:SCHD) offers a basket of the best dividend stocks for investors. It’s also a standout among top ETFs, having run from $25.50 in 2011 to a peak of $80 last year. All thanks to the quality of its holdings, which have high dividend yields, strong value, growth, and quality stock grades. Some of those top holdings include:
| AAP | Advance Auto Parts | $121.34 |
| MO | Altria | $44.83 |
| F | Ford Motor | $12.67 |
| K | Kellogg | $68.37 |
| MRK | Merck | $113.75 |
| OKE | ONEOK | $66.25 |
| PEP | PepsiCo | $182.56 |
Advance Auto Parts (AAP)
Even with strong revenue and guidance, Advance Auto Parts (NYSE:AAP) stock is lagging. For one, AAP announced on Feb. 28 that its CEO would retire. However, shareholders need not worry since the company has a succession plan and is searching for a replacement.
In addition, just last year the company invested in inventory to meet its customer needs. This will expand profitability as demand from the professional installer and do-it-yourself customer markets improve. Also, CEO Greco said that AAP is working through its strategic plan from 2024 through 2026. Before that, it will have the integration work completed, benefiting from the realized transformation cost reduction.
At the moment, AAP carries a dividend yield of 4.84%.
Altria Group (MO)
With a yield of 7.96%, Altria Group (NYSE:MO) is pivoting from smoking and tobacco to non-nicotine products. After all, profitability and revenue from the former are on the decline. So, it’s now betting on non-nicotine products to lift its bottom line. For example, at its Investor Day on March 24, it introduced Swic, a heated tobacco product, where consumers may inhale a cigarette-like capsule. It also introduced On Plus, Altria’s newest oral tobacco innovation.
Altria’s purchase of NJOY expands the product pipeline considerably. NJOY is a pod-based e-vapor product sold at around 33,000 U.S. retail stores. It has strong growth potential ahead once Altria expands its currently small sales force. By increasing the limited distribution and visibility of NJOY’s Ace product line, investors will recognize the newfound growth in the company. NJOY’s products include the e-vapor device and five various pods with unique tobacco flavors.
Ford Motor (F)
With a dividend yield of 5.14%, Ford Motor (NYSE:F) is in transition as it migrates out of the gas-powered sedan market. In fact, the Vice President of Product Development, Jim Baumbick, said the company can manage its core business while transforming into the electric vehicle market. In the electric vehicle space, Ford has the Mustang Mach-E, F-150 Lightning, and E-Transit. The latter two products will increase its market share in the commercial space.
Kellogg (K)
With a yield of 3.45%, Kellogg (NYSE:K) is a food manufacturing company. For 2023, the company expects to grow net sales by 5% to 7%. Demand for snacks will continue. In addition, Kellogg will benefit from strong performance in emerging markets.
CEO Steven Cahillane said that noodle sales thrived in Africa. Snack and cereal sales grew across the EMEA and Latin American geographies. The company offset the negative impact of high input costs by achieving productivity. It also managed through the supply bottleneck and shortages.
Kellogg may continue to face profit margin pressure from inflation. However, it has strong pricing power. While it negotiates with customers on price, the company may offer consumer promotions to sustain its sales momentum.
Merck (MRK)
With a yield of 2.57%, Merck(NYSE:MRK) announced a significant improvement in eight of nine measures for Sotatercept. This is a biologic that treats adult patients with pulmonary arterial hypertension. Side effects of the drug are not a concern. The President of Merck Human Health U.S., Carter Gould, said that subjects did not have side effects that resulted in discontinuation during the trial.
The strong efficacy of Sotatercept is a welcome development for MRK stock. Although shares trade near all-time highs, Merck has a rich pipeline. For example, in cardiovascular, the pipeline has a $10 billion commercial revenue potential by the mid-2030s.
Keytruda is another revenue growth generator. Between now and 2025, Jannie Oosthuizen said that drugs treating breast and melanoma will become 25% of Keytruda’s revenue. This drug treats triple-negative breast cancer.
ONEOK (OKE)
With an impressive yield of 5.81%, ONEOK (NYSE:OKE) is focused primarily on the natural gas industry. The company not only posted strong growth in the fourth quarter but expects higher 2023 results.
In the last quarter, ONEOK posted adjusted EBITDA growing by 14% Y/Y. For 2023, it expects adjusted EBITDA of $4.575 billion at the midpoint. This year, it will support its growth by allocating its capital to high-return organic projects. CEO Pierce Norton said that those projects will lead to higher earnings as the company realizes high returns. This enables ONEOK to increase its dividend.
The company faced weak prices for gas like ethane in the last quarter. However, it already contracted prices and the price spread. This allows ONEOK to find opportunities as gas prices fall. When demand strengthens locally and internationally, the firm’s profit margins will rise. The company may apply stronger cash flow to pay down its debt.
PepsiCo (PEP)
Finally, with a dividend yield of 2.44%, PepsiCo (NASDAQ:PEP) has strong branding power that investors may sleep well at night holding shares. In the last quarter, the company earned $1.67 a share. Its revenue grew by 10.9% Y/Y to $28 billion. For 2023, Pepsi expects to grow organic revenue by 6%.
As one of the largest food and beverage companies, Pepsi thrives from its healthy portfolio of brands that consumers recognize. 68% of its business is from convenience foods while the rest is in beverages. Pepsi has a competitive advantage through its agriculture ingredient sourcing. Customers who buy Pepsi are getting ingredients from over 60 countries that create over 100,000 agricultural jobs.
Consumers may cut back on spending, as their disposable income falls. However, it’s a good bet they won’t stop buying junk foods like Doritos, Cheetos, and Lays for comfort.
On the date of publication, Chris Lau 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.