2 dividend stocks that had a record year and are just getting started

In times of rising inflation and slowing economic growth, investors have historically turned to dividend-paying stocks to carry them through. A company that continues to make its payments during turbulent times confirms its confidence in the strength of its business.

Hartford Funds asset managers reviewed the performance of the benchmark S&P500 dating back to 1930 and found that dividends contributed 40% of the index’s total return over that 91-year period.

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Through wars and recessions, terrorist attacks and pandemics, dividend stocks as a category have always generated positive returns, even during the so-called “lost decade” of the 2000s, when the dotcom bubble burst. , 9/11 happened and the financial markets crisis caused the housing market to plummet. Through it all, dividend stocks returned 1.8% for investors while the S&P 500 generated negative returns.

The following two income stocks had their own record year in 2022, and there could be more to come.

General Mills

Cereal General Mills (GIS -0.07%) has just published results for the fourth fiscal quarter which far exceeded Wall Street’s expectations. Earnings doubled from a year ago, leading it to increase its dividend by 6% to $0.54 per share. The payout currently earns 2.9% per annum.

While inflation and supply chain issues will likely limit performance in the coming months, the owner of Cheerios, Wheaties, Pillsbury, Betty Crocker and other brand category leaders was able to raise prices to offset the impacts while using its scale to ensure its products stayed on store shelves.

Proving that consumers will pay for the consistent quality associated with name brands, sales rose 8% to $4.9 billion, even as the company faced a headwind selling its yogurt business. As a result, adjusted earnings of $1.35 per share were up 98% from a year ago.

One of its fastest growing businesses is pet food and products, with sales jumping 35% year-over-year, reflecting the acquisition of pet treat brands from Nudges, True Chews and Top Chews last year. It was a smart move on the cereal maker’s part, as companion animals tend to be a particularly resilient segment, regardless of economic conditions.

Food stocks are generally a solid – albeit slow-growing – investment because, like pets, people still need to eat. With a portfolio of well-known brands, General Mills should be able to maintain its current trajectory for some time to come.

British American Tobacco

Pets aren’t the only businesses holding up well in a downturn. Tobacco stocks are also surviving troubled times as people continue to smoke. And while a centuries-old trend sees more people quitting smoking every year, there are still tens of millions of people who still do so around the world. British American Tobacco (RTC 0.58%) is the primary beneficiary.

Shares of the cigarette maker are up 18% in 2022 and have rebounded more than 30% above the lows they were trading at in late December. Much of it has to do with the victories it received in the US market after the US International Trade Commission accepted Philip Morris InternationalThe IQOS heated tobacco device infringed British American patents and its importation was banned.

British American’s Vuse e-cigarette had already outstripped former market leader Juul in market share. Now, with the Food and Drug Administration (FDA) denying Juul’s marketing application, which effectively bans the device from store shelves (although a court has temporarily issued an injunction over the decision), the tobacco giant could great to have almost the whole market to itself.

Yet it also faces some risks. The FDA, for example, wants to mandate that only very low nicotine cigarettes can be sold, and it is also seeking to ban menthol cigarettes. If approved, the two could cause British Americans to take a hit.

That’s probably at least years in the future, though, and plenty of court cases to come. But with a strong position in tobacco and a leading – and perhaps soon global – position in tobacco alternatives, British American should continue to grow. Its dividend currently pays 8.2% per year, which should help investors smooth out the shocks and dips it encounters along the way.

About Margaret Shaw

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