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3 Top Dividend Stocks That Can Beat the S&P 500 In 2022

Sophie Richmal
3 Top Dividend Stocks That Can Beat the S&P 500 In 2022

As the markets are expected to remain volatile in 2022 due to a wide variety of reasons, there are a few stocks that are well poised to beat the broader indices such as the S&P 500 this year. These companies have survived multiple economic recessions in the past and derive stable cash flows across business cycles, allowing them to pay investors a dividend in good times and bad.

Let’s take a look at three blue-chip dividend stocks that should be part of your portfolio today.

JP Morgan

JP Morgan Chase (NYSE: JPM) is the largest bank in the U.S. in terms of assets. JPM stock is down 10% year-to-date and trading almost 18% below record highs, valuing the company at a market cap of $419 billion. However, it possesses a robust balance sheet and derived $125 billion of sales on a managed basis last year.

One way to analyze the performance of banking companies on a quarterly basis is to consider the ROTCE (return on tangible common equity) ratio which is the return on shareholder capital after accounting for intangible assets as well as preferred stock. The ROTCE for JP Morgan has consistently surpassed its 17% target in recent years despite several macro-economic headwinds that include the ongoing pandemic.

As the Federal Reserve is likely to increase interest rates multiple times in 2022, JP Morgan should experience an expansion in its NII or net interest income. The net interest income is the money banks generate on loans and securities after covering the cost of funding these assets.

In 2021, its NII stood at $44.5 billion and this number might rise to $50 billion in 2022. The banking giant also pays investors a tasty dividend yield of 2.7% and the JPM stock is valued at a forward price to earnings multiple of 12.6x which is reasonable given its forecast to increase earnings at an annual rate of 11.3% in the next five years.

Analysts tracking JPM stock have a 12-month average price target of $173 which is almost 30% above its current trading price.


Kinder Morgan

The energy sector has crushed broader market returns this year due to a surge in oil prices. A midstream company, Kinder Morgan (NYSE: KMI) has returned 26% to investors after accounting for its dividend yield. In 2021, its adjusted EBITDA soared by 14% to $8 billion and distributable cash flow grew by 19% to $5.5 billion.

Kinder Morgan has forecast adjusted EBITDA of $7.2 billion and DCF of $4.7 billion in 2022. 

It's on track to generate cash flows that will cover its tasty dividend yield of 6.4%. The company aims to increase dividends by 3% in 2022 and will still have enough cash to invest in capital expenditures going forward.

A majority of Kinder Morgan’s cash flows are tied to long-term contracts making it almost immune to fluctuations in oil and gas prices.



NextEra Energy

One of the top-performing stocks in the last decade, shares of NextEra Energy (NYSE: NEE) have returned close to 600% in dividend-adjusted gains since March 2012. The company increased its dividends in 2021 allowing it to enter the coveted list of Dividend Aristocrats. Basically, a Dividend Aristocrat is a company that has increased dividends for 25 consecutive years.

The largest U.S. utility entity by market cap, NextEra has aggressively invested to increase its base of cash-generating renewable energy assets allowing it to offer investors a yield of 2%. 

With a market cap of $153 billion, it generated $17.1 billion in revenue last year, making it among the most expensive stocks on the S&P 500. However, analysts expect NEE stock to increase by 15% in the next 12-months.

Sophie Richmal
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