I’ve started to look for dividend stocks to add to my portfolio for 2022. Dividends are a great way to increase passive income, and using a Stocks and Shares ISA means they will be tax-free too.
But with the prospect of rising inflation next year, I want to make sure the dividend yield is high. So, here are three dividend stocks I’m considering buying for my portfolio.
A sky-high dividend stock
The first is Persimmon (LSE: PSN), which is a great way to take advantage of the booming housing sector. I do have to be cautious about the Bank of England raising the base rate next year. This might lower demand for mortgages, and home buying activity. Rising inflation may also increase raw materials costs for Persimmon, which could lower profits.
However, according to Halifax, the average house price is now over £270,000 for the first time. The house price index rose 8.1% in October year-on-year, which I think shows how strong the housing market is. Persimmon also said in its recent November trading statement that forward sales beyond 2021 remain healthy.
The best part is the dividend yield is a huge 8.4% for next year. I’m strongly considering the shares for my portfolio.
Another impressive dividend stock
I’m also considering Vodafone (LSE: VOD). The company is involved in the expansion of our broadband infrastructure, and also 5G connectivity. Digitalisation is an accelerating trend due to the pandemic, and Vodafone is in the right place to service this demand.
I do have a concern over the net debt the company has. This was €44.3bn in the half-year report released in November. However, operating cash flow was a huge €6.5bn so it shouldn’t be a problem if the company remains cash generative.
The dividend yield is impressive, at 6.7% for next year. The company just upgraded its guidance for the full year, including its free cash flow generation. I think this makes the dividend yield safer at this high level. For me, this is a great dividend stock to buy.
A health care stock
The final stock I’m looking at is GlaxoSmithKline (LSE: GSK), a healthcare stock in a defensive sector. The company develops a range of medical treatments and consumer health care products.
There’s always a risk with healthcare stocks that new medicines fail to get regulatory approval, which ultimately damages profits and the potential for dividends. In fact, the GSK share price has underperformed during the pandemic as it lagged behind Covid vaccine developers.
But the company has just guided for meaningful improvement in revenue and margins for 2022. I think this makes the dividend more dependable for next year.
The current dividend yield forecast is a punchy 5.3%, which to me mean it’s still a good dividend stock to own. I’ll be looking to add to my position.
These could also be worth a look…
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Dan Appleby owns shares of GlaxoSmithKline. The Motley Fool UK has recommended GlaxoSmithKline. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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