Dividend stocks can offer long-term investors steady income – but only if they're reliable.
The world and the economy are constantly changing, creating risks for long-term investors.
Identifying stocks to buy and hold for decades rather than months or years can be difficult. The world and the economy are constantly changing, creating risks for long-term investors. A dividend payment from a large, profitable company with a leading market share in a stable or growing industry is about the closest thing to a guarantee a long-term investor can find in the market. In fact, dividends alone have accounted for about 40% of total stock market returns since 1930.
Here are seven attractively valued dividend stocks investors can bet on for the long term, according to Bank of America analysts:
JPMorgan Chase & Co. (JPM)
JPMorgan Chase is one of the world's largest banks and financial services companies with roughly $3.9 trillion in assets. A string of bank failures in early 2023 has weighed on the financial sector. In early May, JPMorgan stepped in to acquire First Republic Bank after it failed and was seized by the Federal Deposit Insurance Corp. Analyst Ebrahim Poonawala says JPMorgan is one of the best-positioned U.S. banks to navigate elevated interest rates. Bank of America has a "buy" rating and $175 price target for JPM stock, which closed at $141.17 on Oct. 24.
Sector: Financials
Yield: 2.9%
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Procter & Gamble Co. (PG)
Procter & Gamble produces household consumer products and owns several popular brands, including Pampers, Tide and Gillette. Analyst Bryan Spillane says Procter has significant earnings leverage potential as its costs stabilize and its sales volumes remain resilient. Spillane says Procter's diversified product portfolio of several multibillion-dollar brands and its leading global market share warrant a premium valuation relative to home and personal care product peers. He projects 5% organic sales growth in the fiscal second quarter and in the full fiscal 2024 year. Bank of America has a "buy" rating and $175 price target for PG stock, which closed at $149.90 on Oct. 24.
Sector: Consumer staples
Yield: 2.5%
Home Depot Inc. (HD)
Home Depot is one of the largest North American home improvement retailers. Analyst Elizabeth Suzuki says Home Depot is well positioned to capitalize on continuing demand for housing and home improvement. A recent survey by Bank of America found two-thirds of American millennials who are not currently homeowners plan to buy a home within the next two years, many of which prefer an existing home or fixer-upper. Suzuki says a ramp up in millennial home buying should be a tailwind for Home Depot and other home improvement retailers. Bank of America has a "buy" rating and $340 price target for HD stock, which closed at $283.31 on Oct. 24.
Sector: Consumer discretionary
Yield: 2.9%
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Merck & Co. Inc. (MRK)
Merck is one of the world's largest pharmaceutical companies. Merck reported 3% year-over-year revenue growth in the second quarter, including 19% sales growth from leading cancer drug Keytruda. Sales for Merck's HPV vaccine Gardasil were also up 47%. Analyst Geoff Meacham says Merck has a strong core business, a disciplined business development strategy and five years to diversify its business away from Keytruda before its exclusivity expires. Meacham says the latest data on pulmonary arterial hypertension drug sotatercept and hypercholesterolemia drug MK-0616 is encouraging. Bank of America has a "buy" rating and $130 price target for MRK stock, which closed at $103.03 on Oct. 24.
Sector: Health care
Yield: 2.8%
Coca-Cola Co. (KO)
Coca-Cola is a leading non-alcoholic beverage company. Spillane says the company has impressive underlying business momentum and an attractive valuation. He says the stock is trading at a discount to its five-year average earnings multiple relative to the S&P 500, and its premium relative to non-alcoholic beverage peers is down about 50%. Spillane says Coca-Cola is a best-in-class business with a strong balance of stable profit-growth markets and strategic investment markets. He projects full-year fiscal 2023 organic sales growth of 9.5%. Bank of America has a "buy" rating and $74 price target for KO stock, which closed at $55.64 on Oct. 24.
Sector: Consumer staples
Yield: 3.3%
International Business Machines Corp. (IBM)
IBM is a global technology company that provides enterprise software, infrastructure and services. Analyst Wamsi Mohan says IBM is an excellent defensive investment given its strong balance sheet, high exposure to recurring sales, opportunity for market share gains, stable margins, cost-cutting levers and exposure to growth opportunities in artificial intelligence technology. Mohan is particularly bullish on IBM's potential to increase its share of information technology spending via its cloud computing and AI initiatives. He says IBM's revenue growth and free cash flow rebound will continue. Bank of America has a "buy" rating and $160 price target for IBM stock, which closed at $137.79 on Oct. 24.
Sector: Technology
Yield: 4.8%
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Honeywell International Inc. (HON)
Honeywell is an industrial conglomerate that specializes in aviation, industrial process automation, building automation, industrial materials and safety equipment. Analyst Andrew Obin says Honeywell management has executed well in a difficult environment in recent quarters, and he is optimistic about the company's current initiatives to increase research and development spending and investment in internal automation. Obin says Honeywell inexplicably trades at a valuation discount to high-quality peers, and the company's plan to divest about 10% of its business to streamline operations should be a positive catalyst. Bank of America has a "buy" rating and $265 price target for HON stock, which closed at $181.46 on Oct. 24.
Sector: Industrials
Yield: 2.4%
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