Less than 29% of the stocks in the S&P 500 have delivered positive returns so far this year. But over 80% of those winners share at least one thing in common: They pay dividends.
Some members of this elite group have done especially well for their shareholders this year. Should you buy the three best-performing S&P 500 dividend stocks of 2022?
1. Constellation Energy
Constellation Energy (CEG -0.92%) ranks as the top dividend stock in the S&P this year. In fact, it was the best-performing stock in the index bar none. So far in 2022, Constellation Energy's share price is up nearly 110%.
The company is the largest supplier of carbon-free energy in the United States. Constellation is the leader in nuclear power, and also operates hydroelectric, solar, and wind power facilities. It was spun off from Exelon earlier this year.
While Constellation pays a dividend, it's probably not one that income investors will like all that much -- at current share prices, the yield stands at only 0.63%.
However, there are definitely other things to like about the stock. Constellation's growth prospects should be solid as demand increases for clean energy. The consensus Wall Street price target for the stock reflects an upside potential of around 15%. Constellation might not be the most exciting stock to buy at this point, but it could still deliver market-beating gains.
2. Occidental Petroleum
Shares of Occidental Petroleum (OXY 0.75%) have skyrocketed by more than 70% year to date. That makes the oil and natural gas company the S&P 500's second-biggest winner of 2022.
There are two main reasons for Occidental's impressive share price surge. High oil prices this year drove most stocks in the energy sector higher. It also helped quite a bit that Warren Buffett steadily bought shares of Oxy for Berkshire Hathaway's portfolio throughout the year.
Occidental's dividend yield at the current share price is a relatively low 0.83%. The company also slashed its payout in 2020 because of the impact of the COVID-19 pandemic. As such, income investors may be leery of the stock.
However, I still think that Occidental is one of the best stocks to buy in December. Why? First, I expect oil prices will increase somewhat next year. Second, I look for Buffett to continue adding to Berkshire's position in Occidental. These two factors should enable the stock to continue its winning ways in 2023.
3. EQT
EQT (EQT 0.32%) takes third place among the S&P 500's best-performing dividend stocks in 2022. Its shares have soared by around 65% year to date. There is a catch, though: EQT didn't actually join the S&P 500 until October, when it replaced Duke Energy in the index. But it nonetheless deserves to be on our list.
Natural gas stocks as a group have performed well this year thanks to favorable industry dynamics. As the top natural gas producer in the U.S., EQT unsurprisingly led the way.
EQT's dividend yields more than 1.6%. That's not too shabby considering the stock's overall performance this year. Even better, the company has increased its dividend payout significantly.
The stock is trading at a dirt-cheap valuation of a little over 4 times expected earnings. Increasing domestic natural gas production is a position that has solid bipartisan support. The consensus Wall Street price target for EQT reflects an upside potential of close to 65% over the next 12 months. I don't know if the stock will actually move that much higher, but it appears to be a pretty good pick for investors right now.
