Wall Street is set to close back-to-back highly successful years despite being pandemic-ridden. However, volatility has gripped the global stock markets since Black Friday. In the past month, fluctuations in U.S. stock markets have become a regular phenomenon.

The resurgence of coronavirus, the gradual termination of the pandemic-era monetary stimulus by the major central banks and the possibility of the beginning of a higher interest rate regime from next year, and the prolonged global supply-chain disruptions are the major reasons for market volatility.

At present, market participants are uncertain which direction the market will take in 2022. In order to safeguard one’s portfolio in an unpredictable market scenario, it would be fruitful to invest in stocks that will provide a steady income stream to investors. Here are five that boast a favorable Zacks Rank — Blackstone Inc. (BX Quick QuoteBX - Free Report) , Hewlett Packard Enterprise Co. (HPE Quick QuoteHPE - Free Report) , Tapestry Inc. (TPR Quick QuoteTPR - Free Report) , Broadcom Inc. (AVGO Quick QuoteAVGO - Free Report) and Atmos Energy Corp. (ATO Quick QuoteATO - Free Report) .

Near-Term Concerns

The latest Omicron variant of the coronavirus is spreading rapidly across the world including the United States. So far, more than 90 countries have witnessed the Omicron variant of coronavirus and the number of cases is doubling in 1.5 to 3 days in areas with community transmission. In the United States 43 states have already reported the presence of Omicron.

On a separate note, most economists and financial researchers have said that 2022 is likely to begin the era of a higher interest rate. The global economy has failed to restore the supply-chain system that has been devasted by the coronavirus pandemic. This is the primary reason for soaring inflation worldwide, particularly in the United States. The resurgence of the Omicron variant of coronavirus may aggravate the situation.

In the United States, on Dec 15, Fed Chairman Jerome Powell said in his post FOMC statement that the central bank will raise the tapering of the monthly bond-buy program from $15 billion per month to $30 billion per month effective January 2022. At this rate, the quantitative easing program will end in March 2022.

Although, Powell refrained from commenting anything on when the Fed will raise the benchmark lending rate and at what magnitude, Fed’s dot-plot indicated that all 18 members are expecting at least one rate hike in 2022. Out of 18 Fed members, 12 are expecting three rate hikes in 2022 followed by two more rate hikes in 2023 and 2024.

On Dec 17, the Bank of England raised the benchmark interest rate to 0.25% from 0.1%. This marked the first rate hike by the British central bank in three years. On Nov 10, the European Central Bank (ECB) Governing Council member Robert Holzmann said that the ECB could stop the bond-buying program by September 2022.

A Solid U.S. Economy: Best Positive Catalyst

Globally, the U.S. economy remained the same even during the pandemic era. Massive pent-up demand supported by unprecedented personal savings will pave the way for U.S. economic growth. Moreover, U.S. businesses are opting for higher spending despite facing chronic labor shortage.

On Dec 21, President Joe Biden said “absolutely no” to whether March 2020-style lockdowns will return to the United States as a result of the rapid spread of Omicron. His administration plans to get more booster shots, distribute 500 million free at-home COVID-19 testing kits and the immediate deployment of military doctors, nurses and other medical professionals to the six most-affected states.

The U.S. economy will get more upside from the government’s infrastructure spending. On Nov 15, President Joe Biden signed a bipartisan infrastructure bill of $550 billion in addition to the previously approved funds of $450 billion for five years. Total spending may go up to $1.2 trillion if the plan is extended to eight years.

The infrastructure development project will be a major catalyst for the U.S. stock markets in 2022. Various segments of the economy such as basic materials, industrials, utilities and telecommunications will benefit immensely with more job creation for the economy.

Moreover, the White House has put pressure on Congress to quickly pass legislation providing $52 billion to help computer chip manufacturers and ease the shortage of components vital to many industries.

Our Top Picks

At this stage, investment in large-cap (market capital > $1 billion) stocks with a high dividend yield and a favorable Zacks Rank may be the best option. If the market’s northbound journey continues, the favorable Zacks Rank of these stocks will capture the upside potential. However, if markets take a downturn, dividend payment will act as a regular income stream.

We have narrowed our search to five such stocks whose dividend yield is higher than the current yield on the benchmark 10-Year U.S. Treasury Note. These companies have strong growth potential for 2022 and have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows the price performance of our five picks year to date.

Image Source: Zacks Investment Research

The Blackstone Group remains well-poised to benefit from its fund-raising ability, revenue mix and inorganic expansion strategies. To provide ESG-focused investment opportunities, BX inked a deal to acquire Sphera, while the buyout of DCI will further enhance its digital capabilities.

The Blackstone Group’s fee-earning AUM and total AUM consistently demonstrate strong growth, aided by increasing net inflows. Over the last four years (2017-2020), fee-earning AUM witnessed a CAGR of 11.9% and total AUM saw a CAGR of 12.5%. Both metrics witnessed an uptrend in the first nine months of 2021. BX’s diversified products, revenue mix and superior position in the alternative investments space will likely continue to support AUM growth.

Zacks Rank #1 The Blackstone Group has an expected earnings growth rate of 18.2% for next year. The Zacks Consensus Estimate for next-year earnings improved 15.4 % over the last 60 days. BX has a current dividend yield of 3.64%.

Tapestry provides luxury accessories and branded lifestyle products in the United States, Japan, China, Hong Kong, Macau, Taiwan, Europe, Canada, South Korea, Malaysia, Singapore, Australia, and New Zealand. TPR operates through three segments: Coach, Kate Spade, and Stuart Weitzman.

Tapestry highlighted that strength in North America as well as sustained growth in Digital and China contributed to its recent performance. Markedly, management raised revenues and earnings per share view for the fiscal year. TPR’s focus on improving SKU productivity, maintain price discipline and effective marketing have been contributing.

Zacks Rank#1 Tapestry has an expected earnings growth rate of 17.9% for the current year (ending June 2022). The Zacks Consensus Estimate for current-year earnings improved 4.8% over the last 60 days. TPR has a current dividend yield of 2.54%.

Hewlett Packard Enterprise has benefitted from strong executions in clearing backlogs, improved supply-chain and increased customer acceptance. HPE’s efforts to shift focus to higher-margin products like Intelligent Edge and Aruba Central Hyperconverged Infrastructure are aiding its bottom- ine.

Additionally, Hewlett Packard Enterprise’s  target of saving at least $800 million annually by fiscal 2022-end through its cost optimization plan is a positive. Moreover, HPE’s multi-billion-dollar investment plan for expanding networking capabilities will help it to diversify business from server and hardware storage markets, and boost margins over the long run.

Zacks Rank #1 Hewlett Packard Enterprise has an expected earnings growth rate of 3.6% for the current year (ending October 2022). The Zacks Consensus Estimate for current-year earnings improved 1.5% over the last 60 days. HPE has a current dividend yield of 3.23%.

Broadcom is riding on continued strength across both Semiconductor solutions and Infrastructure software verticals. In fourth-quarter fiscal 2021, Semiconductor revenues benefited from higher demand for wireless solutions and continued momentum in networking and broadband solutions.

Networking revenues of AVGO were driven by routing from service providers in the expansion of 5G networks for backhaul, metro, and call, as well as major share gains in ethernet network interface controllers within data centers. Synergies from the acquisitions of CA and Symantec’s enterprise security business aided the results of Broadcom. Further, upbeat first-quarter guidance on a strong uptick in broadband, networking and wireless revenues is encouraging for AVGO.

Zacks Rank #2 Broadcom has an expected earnings growth rate of 17.9% for the current year (ending October 2022). The Zacks Consensus Estimate for current-year earnings has improved 6.2% over the last 30 days. AVGO has a current dividend yield of 2.23%.

Atmos Energy continues to benefit from the rising demand from its expanding customer base.  The company is planning to invest in the range of $13-$16 billion in fiscal 2022-2026, which will help Atmos to increase the reliability of pipelines and serve customers efficiently.

Returns within a year of capital investment continue to boost ATO’s performance and allow it to pay regular dividends. Atmos Energy has enough liquidity to meet near-term debt obligations.

Zacks Rank #2 ATO has an expected earnings growth rate of 6.8% for the current year (ending September 2022). The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 7 days. Atmos Energy has a current dividend yield of 2.74%.