If there is one thing I am clear about when considering investing in 2022, it is this: the year will be an uncertain one. Here’s why. The recovery is happening, but is still slow. It may even go into the reverse if we go into another lockdown. Inflation is creating a lot of discomfort too. And supportive policies are being rolled back. On the other hand, we have the wherewithal to deal with the latest health challenge and even the price rises. I think this combination of negative and positive forces will create fluctuations.
The point is, a clear direction is not visible to me right now. So, how should I aim to earn solid returns on my stock market investments in 2022? I think the way to do this is by targeting stocks that are most likely to rake in returns for me. Note that all such investments are subject to risks. And we can never really know how things will turn out. But I can take calculated risks, and potentially come out ahead. In fact, in my experience, more often than not, that is exactly what happens.
How to invest for dividends
To earn a strong passive income, I am targeting two kinds of FTSE 100 stocks now. The first is oil biggies like BP and Royal Dutch Shell. If the recovery continues, oil prices will continue to be on a tear. They do not have the biggest dividend yields yet, but I think they could increase their dividend amounts next year. Even if the recovery is small and oil prices tank, I could hold these stocks for the next few years and still earn reasonable returns. So I am not too worried about the downside.
I am also looking at FTSE 100 utilities like SSE and National Grid. These might not have the best yields either, but they are sustainable. In the past year, utilities have mostly been steady in paying dividends. And besides that, all of them have dividend yields higher than the index average at 3.5%.
Stock market investments for capital gains
For capital gains, I am focused on stocks that have a long history of steady share price increases. There are plenty of such examples in the FTSE 100 index itself. These include the likes of the high performing pharmaceuticals giant AstraZeneca, speciality chemicals producer Croda International, and warehousing and real estate investment trust Segro. They could have a slow next year if recovery picks up speed and beaten down stocks look more attractive. But going by both their share price histories and their expected performances, I reckon they could continue to do quite well even next year.
In summary
Whether they are dividend or growth stocks, to aim towards solid returns, I am most likely to buy stocks that have a long history of paying good dividends and returning good capital gains to investors.
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Manika Premsingh owns AstraZeneca, BP, Royal Dutch Shell B, and SSE. The Motley Fool UK has recommended Croda International. 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.
