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Motley Fool Issues Rare “All In” Buy Alert

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Buying shares of quality dividend stocks can add tangible returns to your portfolio every year. In fact, 84% of the S&P 500's total return since 1960 came from reinvesting dividends and compound interest, according to a study by Hartford Funds. 

To help you boost your average dividend yield on your investment portfolio, three Motley Fool contributors recently selected Kraft Heinz (KHC 1.31% ) , Kimberly-Clark (KMB 1.19% ) , and McDonald's (MCD 2.46% ) . Splitting $100,000 across these stocks would yield annual income of $3,323. 

These stocks pay above-average yields ranging from 2.2% to 4.2% and are relatively safe choices for the bearish environment.

John Ballard (Kraft Heinz): Shares of Kraft Heinz have underperformed the market over the last five years. It made the mistake of cutting costs at the expense of investing to grow the top line. That resulted in disappointing revenue growth and returns to shareholders. But the company is in the process of addressing those issues, which makes now a great time to consider buying the stock.

The company is removing complexity in the workforce to make the business more agile. It is also investing more in digital capabilities, including machine learning and data science, to better understand customer demand. 

Kraft is a very profitable business, and it's now unleashing its resources to create better returns for investors. It owns valuable brands, such as Philadelphia, Velveeta, Jell-O, Kool-Aid, Maxwell House, and of course, the classic Heinz ketchup brand. Sales of these brands translated to free cash flow of $4.1 billion on $25 billion in revenue over the last four quarters. 

The recurring sales volume of selling everyday grocery store brands means the company can steadily pay out plenty of income to shareholders. Over the last year, Kraft Heinz distributed nearly half of its free cash flow in dividend payments, bringing the dividend yield to a tasty 4.2%. That yield would generate extra income of $1,260 per year on a $30,000 investment.

Jennifer Saibil (Kimberly-Clark): An important element of a great dividend stock is reliability. Whether you're retired or you need passive income for other reasons, knowing the check is in the mail is part and parcel of the appeal. That's why Kimberly-Clark, with its 3.5% yield, is such an attractive dividend stock.

Kimberly-Clark makes many of the brands you can't live without, like Huggies diapers, Kleenex tissues, and Cottonelle toilet paper. In fact, it created five of the eight categories in which it operates, and has the No. 1 or No. 2 position in 80 of the 175 countries where its products are sold. This company, which has been in operation since 1872, is rock solid, and so is its dividend.

The company raised its dividend in April, marking the 50th consecutive year of dividend raises, and elevating its status to an exclusive Dividend King. It has been paying a dividend for 88 years.

As a mature, established company, Kimberly-Clark doesn't usually post high sales increases. The reason to buy the stock is for the amazing dividend. But it does typically post sales increases, and it has a huge cash reserve that it uses to enhance its value for investors as well as power product development and new ventures. It's also rigorously focused on cost management to be highly efficient in its vast operations.

2020 was a strong year for the company, when global shoppers were stocking up on essentials. Consequently, 2021 was a softer year, with a 2% year-over-year revenue increase to $19.4 billion. Management raised its 2022 outlook after a strong first quarter. Sales increased 7% over last year, including 10% organic growth, or growth from existing products. North America was even stronger, with 13% organic sales growth in the personal care segment. Management attributed the robust performance to higher volume and strategic pricing, considering the inflationary environment. It's cautiously optimistic, and it raised its 2022 outlook from between 3% and 4% year-over-year revenue growth to between 4% and 6%. It needs to balance pricing with consumer demand in a volatile environment, but it's been here before, and it knows how to operate in tricky market conditions.

If you're looking for a healthy, stable, and growing passive income stream, Kimberly-Clark is an excellent choice.

Parkev Tatevosian (McDonald's): McDonald's is one of my top dividend stocks to buy right now for passive income. The iconic fast-food chain has come through the pandemic stronger than ever. Government-mandated closures of dining inside restaurants forced the company to make adjustments. McDonald's moved quickly and implemented a robust digital ordering system that included meals for delivery. 

The change has worked tremendously. Revenue increased by 21% for McDonald's in 2021. Moreover, the company reported earnings per share of $10.04, a record and a 59% increase from the previous year. That's critical because dividends are paid out of earnings. Income investors looking to generate passive income can feel secure about McDonald's ability to make those payments due to its rising profitability.

McDonald's paid a dividend per share of $5.25 in 2021. That was meaningfully higher than the $2.87 dividend per share it paid in 2012. Given that McDonald's earnings are growing as robustly as they are, income investors can reasonably expect McDonald's to continue increasing its dividend payment over the next several years.

Moreover, the current economic backdrop is poised to benefit McDonald's. The company is well known for providing affordable meals, a feature that may prove vital as inflation pinches consumer purchasing power. With less money to spend on discretionary items, folks may substitute more expensive restaurant meals for a trip to McDonald's. Indeed, there is scarcely any other away-from-home option that is more affordable than McDonald's. For those reasons, McDonald's is one of my top dividend stocks to buy right now. 

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