Dividend stocks can be great ways for investors to earn stable, consistent returns over time. Indeed, dividends provide both income as well as a valuation floor under many stocks. In times of uncertainty, many investors choose dividend-paying stocks for this reason.
That said, not all dividend stocks are created equal. In this market, rising interest rates are likely to diminish the value of the yield such stocks provide. Accordingly, this rising-rate environment could be detrimental to investors of all stripes.
That said, there are few dividend stocks I think can outperform in this environment. Here are two of my top picks right now.
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Top dividend stocks: Manulife
Without a doubt, Manulife (TSX: MFC)(NYSE: MFC) is a top-notch, high-yield blue chip that investors may want to look to right now. This company’s rather impressive dividend yield of 5% is a testament to this stock’s cash flow prowess.
As a major insurance player, higher interest rates may actually be a net positive for Manulife. That’s because the company’s investment income is reliant on fixed-income yields, particularly when tied to long-term liabilities.
Manulife’s international exposure is also something I think is noteworthy. In Q4 2021, Manulife signed a 16-year exclusive bancassurance partnership with VietinBank. This partnership seeks to enhance the distribution capability of this insurer in Vietnam with its broad array of solution offerings for retirement, insurance, and wealth. Further, this organization also acquired Aviva Vietnam to improve its scale in the rapidly growing market of Vietnam.
Besides a strong growth outlook, mainly out of Asia, Manulife boasts a strong balance sheet and robust organic growth in its core North American markets. Analysts expect Manulife could deliver 32% total returns through 2023 and be a potential triple over the coming five years. Thus, for those looking for more than just dividend income, Manulife is a great choice.
Canadian Imperial Bank of Commerce
Like Manulife, Canadian Imperial Bank of Commerce (TSX: CM)(NYSE: CM) is a company that should see net benefits from higher rates. One of Canada’s largest banks, CIBC remains a top choice for long-term dividend investors. And for good reason.
CIBC’s consistent earnings growth has allowed the bank to return capital to shareholders in an outstanding fashion over decades. Right now, CIBC has among the highest yields of its peers, at 4.4%. For those who believe in the strength of the Canadian and U.S. economy, this is a good thing.
In a higher interest rate environment, CIBC stands to benefit from improved net interest margins. While some of these gains may be offset by slower economic growth, CIBC’s ability to earn higher margins is something many investors look to. Accordingly, this dividend stock is on my radar right now for this key reason.
