Dividend-yield stocks way to invest in bear market

Atime-honored investing method is to buy stocks that have rising dividends. In my opinion, it’s a sensible method. A dividend increase acts as a sincerity barometer, showing that management believes earnings progress is sustainable. Right now, with a bear market raging, I think it is especially sensible because dividend-paying stocks usually hold up better than most when the bear roars. Here are five stocks that have increased their dividend at a 10 percent annual clip or better the past five years. In each case, the dividend yield, the annual dividend as a percentage of the stock price, is at least 2.5 percent.

Pioneer Natural

Pioneer Natural Resources Inc. (PXD), which explores for and produces oil and natural gas, leads the pack with a dividend growth rate of 123 percent. It also boasts one of the highest dividend yields, 7.9 percent.

The oil-and-gas industry tends to have boom and bust cycles, which is probably why the stock is reasonably priced at 11 times recent earnings.

Alico

Fort Myers, Florida, was one of the towns most devastated by Hurricane Ian. That’s the headquarters of Alico Inc., a company that owns citrus groves and leases land to others in Florida. Given the intensity of the hurricane, it will take time for the company to return to normal. And “normal” doesn’t necessarily mean prosperity, as the company’s earnings have been spotty. The stock was down 17 percent in the week that ended Oct. 10. It sells for only six times the past four quarters’ earnings and less than book value.

The dividend might have to be cut, but for now, the yield is 7.2 percent. The five-year dividend growth rate is 32 percent.

Compx International

Compx International Inc. (CIX) offers a 5.4 percent dividend yield and has grown its dividend at a 30 percent clip the past five years.

Over the past decade, Compx has grown its sales at close to 5 percent a year and earnings more rapidly. In the past four quarters, earnings jumped 38 percent, and the company hiked its dividend 50 percent.

Tyson Foods

For the third year in a row, I recommend Tyson Foods Inc. (TSN), the largest U.S. producer of chicken and beef. It jumped 36 percent from October 2020 to October 2021, then fell 17 percent from October 2021 to October 2022. Dividends have grown at a 24 percent annual pace the past five years. The yield is 2.9 percent.

Packaging Corp.

Packaging Corp. of America (PKG) has grown its revenue by 11 percent per year the past 10 years.

The company has responded by raising its dividend by an average of 10.7 percent the past five years. The yield is just under 4 percent.

Past record

In an effort to improve performance, I have tightened up the selection criteria this year.

To be considered, a stock must now have a dividend yield of at least 2.5 percent, up from 2.1 percent, and a dividend growth rate of 10 percent or better, increased from 7 percent.

My dividend-appeal picks from a year ago declined 18.5 percent while the S&P 500 dropped 15.3 percent. A big loss in Paramount Global (PARA) was primarily to blame.