As interest rates rise, dividend stocks will be one area in the stock market that can retain value. This especially applies to companies that can afford to pay their dividends with cash flow.

I wanted to find seven dividend stocks that seem poised to do well this year. There are several reasons a company might have a good outlook. It might have strong earnings and/or cash flow, a potential dividend hike, some sort of upside catalyst or undervalued valuation metrics.

Here are the featured dividend stocks:

• Exxon Mobil (NYSE:XOM)
• AT&T (NYSE:T)
• Intel Corp (NASDAQ:INTC)
• Microsoft (NASDAQ:MSFT)
• Domino’s Pizza (NYSE:DPZ)
• Walmart (NYSE:WMT)
• Apple Inc (NASDAQ:AAPL)

Dividend Stocks: Exxon Mobil (XOM)

Exxon Mobil has a very attractive dividend yield. Its $3.52 dividend per share (DPS) represents 4.2% of its price of $77.81 as of March 16.

This is easily affordable by the oil giant since in 2021 it made $5.39 per share, well over the dividend payment.

In addition, analysts estimate that in 2022, EPS could rise to $8.05. That puts XOM stock on a cheap forward P/E of just 9.7 times earnings. That allows Exxon to keep on paying its huge dividend.

On top of this, as I recently wrote about, Exxon recently started a new $10 billion share buyback program. All three of these factors — the high yield, low P/E, and share buyback program — make XOM one of the best dividend stocks.

AT&T (T)

I have written several articles recently showing how AT&T will actually have a decently high yield. This is after the company spins off its Warner Media division into a new public company called Warner Bros Discovery (WBD).

I explained in this article how the new dividend yield can be estimated. At the time, the stock was at $23.19. T stock opened at $23.15 on March 16 and has mostly hovered around $23 recently.

Let’s use $23 as an example price. First, we deduct approximately $5.85 as AT&T will no longer own Warner Media assets. That lowers the post-spinoff price to $17.15. Next, we can determine that the new DPS payment will be $1.11 annually. That brings the new dividend yield to 6.5%.

This makes AT&T still an attractive dividend-paying company, especially since management says this will be no more than about 40% of its post-spinoff cash flow. That implies that they can keep on paying the dividend, even though it’s lower than the $2.08 DPS payment annually before then.

Look for AT&T stock to do well once it spins off the WBD assets, sometime in early Q2.

Dividend Stocks: Intel Corp (INTC)

Intel recently raised its DPS by 5% to $1.46 when it announced fourth-quarter (Q4) and 2021 earnings. Therefore, at today’s price of $45.30, the new dividend yield is 3.2%. This makes it very attractive, as it has not been at this yield for a while.

The average yield over the past 5 years has been 2.48%. That is much lower than today and implies that INTC stock could be worth much more.

One way to figure this is to divide the present dividend of $1.46 by the 2.48% average yield over the last 5 years. That produces a price of $58.87, which is 30% higher than today’s price.

Moreover, Intel is also cheap on a forward P/E basis, as it trades for just 13.9 times forward earnings.

So given its valuation, it looks like INTC stock could be a good investment for the long term.

Microsoft (MSFT)

Microsoft reported a stellar Q4-quarter earnings report on Jan. 25. It shows that the software developer and cloud infrastructure company can produce large amounts of free cash flow (FCF).

Moreover, Microsoft pays a $2.48 per share annual dividend. At today’s price of $276.44, this gives it a dividend yield of 0.9%. That may not seem like much, but remember that the company is also growing earnings quickly, which helps push the stock up.

In addition, it also buys back its own stock, which lowers its dividend costs over time. In turn, that leaves room for Microsoft to keep raising the dividend, especially as its FCF keeps growing.

For example, its free cash flow — which is operating cash flow minus capital expenditure — was $8.6 billion. That represents a very high percentage of its revenue. With $51.7 billion in sales produced during the quarter, Microsoft generated 17% of that in FCF.

This implies Microsoft could make $34 billion in FCF based on 17% of a $200 billion revenue forecast for the year to June 2022. Using a 1% FCF yield, that brings its target value $3.4 trillion, or 55% over today’s market value. In other words, MSFT stock potentially has a 55% upside from here.

Dividend Stocks: Domino’s Pizza (DPZ)

Domino’s Pizza recently announced raised its quarterly dividend by 17% to $1.10, or $4.40 annually. So, at today’s price of $386.18, the new yield is 1.14%. Moreover, this is more than affordable by the company as it made a diluted EPS of $13.60 in 2021.

Domino’s has 36.67 million diluted shares outstanding, so its dividend payments will cost $161.3 million. Its free cash flow was higher than this dividend cost at $560 million. In other words, free cash flow covers the dividend by more than 3 times.

Moreover, Domino’s also has a strong share repurchase program. In 2021 alone it bought back $1.32 billion of shares, and it has $704.1 million left in its share buyback program. That will help raise the company’s earnings per share and also lower the ongoing dividend costs. Both of these things will help push DPZ stock higher over the coming year.

Walmart (WMT)

Walmart recently raised its dividend to $2.24 on an annual basis. This gives the stock an annualized dividend yield of 1.6%.

Moreover, this is the 49th year in a row that the company has raised the annual dividend, which is paid out on a quarterly basis. Interestingly, Walmart is one of the few companies that makes its quarterly dividend declarations ahead of time for the next year.

Investors expect Walmart to make at least $6.73 per share on average for the year ending Jan. 2023, according to Seeking Alpha. That more than covers the $2.24 dividend (the payout ratio is just 33%). The company produced $11 billion in FCF last year, but its dividend cost was just $6.15 billion in 2021. So its FCF more than covers the dividend at Walmart, even though they declared it in advance for one year.

Walmart has also been buying back its shares — almost $10 billion worth in the last year. Based on this analysts have higher price targets for WMT stock for the next year. The average price target of 27 analysts in the Refinitiv survey on Yahoo! Finance is $165.29. That represents an upside of almost 15% for the stock.

Dividend Stocks: Apple Inc (AAPL)

Apple’s stellar earnings for the first quarter, released on Jan. 27, will likely lead to a higher dividend per share declaration after March. It posted an all-time revenue record of $123.9 billion, up 11% year over year, and quarterly earnings per diluted share of $2.10.

Apple also posted a huge gain in its quarterly free cash flow of $44.16 billion as seen on page 3 of its report. This more than covered the $3.73 billion in dividend payments as well as $20.49 billion in share repurchases during the quarter. That is slightly less than 55% of its total $44.163 billion in FCF. So, clearly, Apple could easily increase its dividend and share buyback activity.

In the last four quarters, Apple paid out 22 cents each quarter. Apple usually increases its quarterly dividend payment after 4 payments at the same level.

Therefore, investors can expect, in April, an announcement that the quarterly dividend will rise at least 10%. I estimate Apple will raise it to 24 cents per quarter or so. That will raise it to 96 cents per year. At today’s price of $157.05, that raises the yield to 0.61%.

Moreover, it could also increase its share buyback program. On page 11 of its 10-Q filing, Apple has now spent almost all of its $315 billion in authorized share repurchases. As of Dec. 25, it had spent $274.5 billion of this total. That leaves just $40.5 billion. If it has already spent over $20 billion as it did in Q4 during Q1, this leaves less than one quarter in share buyback authorization.

That is why I think Apple will soon declare both a dividend increase and a new share buyback program.

On the date of publication, Mark Hake did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.