Investors seeking a stable and potentially growing income stream frequently turn to dividend stocks, which represent ownership in companies that distribute regular profit shares, often quarterly [1]. Selecting the best dividend stocks 2024 requires focusing on companies with a history of profitability and the potential to sustain and grow their dividends over time [1].
As the investment community eyes stocks with the best dividends, considering factors like the dividend yield, payout, and coverage ratios becomes paramount [1]. Furthermore, understanding the performance of indices such as the Morningstar Dividend Leaders Index can offer valuable insights into the market leaders in dividend returns [2]. This article serves as a guide to navigate through the leading dividend stocks for investors seeking the highest dividend stocks with a robust financial foundation [1] [2].
Key Factors to Consider When Choosing Dividend Stocks
When selecting the best dividend stocks for 2024, investors should consider several key factors to ensure they are making informed decisions that align with their financial goals. Here are the important criteria to keep in mind:
- Dividend Yield and Growth Rate:
- Look for stocks with a healthy dividend yield, which is a company’s annual dividend payments divided by its stock price. For example, Duke Energy (DUK) offers a current dividend yield of 4.30% (12-month trailing) and 4.32% (12-month forward).
- Consider the historical annual dividend growth rate, as a consistent increase can indicate a company’s commitment to returning value to shareholders. DUK’s annual dividend growth rate over the past 3, 5, and 10 years is 2.10%, 2.20%, and 2.90%, respectively [3].
- Dividend Payout Ratio:
- The dividend payout ratio is the percentage of earnings paid to shareholders in dividends. It’s crucial to find a balance; a high ratio may signal a company is over-distributing, while a low ratio may indicate room for dividend growth. DUK’s dividend payout ratio is 73.4% based on earnings [4].
- Avoid companies with payout ratios that are too high, such as those with a dividend payout ratio for DUK at 115.49% based on the trailing year of earnings [5]. A ratio over 100% may not be sustainable in the long term.
- Company’s Financial Health:
- A company’s consistent profitability is a strong indicator of its ability to maintain and grow dividends. DUK has reported positive net income for each year over the past decade [3].
- Revenue growth is also a factor; DUK’s revenue has increased by approximately 6.00% per year on average [3]. However, it’s important to consider this in the context of industry performance.
- Industry Trends:
- Following broader sector trends can help investors choose companies that are likely to thrive in the future. The utility sector’s average yield is 3.75%, and DUK is one of the 7 best utility dividend stocks, which suggests it’s a strong performer in its industry [7].
- Financial Ratios and Sector-Specific Trends:
- Examine the debt-to-equity ratio to assess financial stability. A ratio higher than 2.00 could be a red flag [8][9].
- Check sector-specific trends for a more holistic view of potential performance. This can help investors avoid sectors that may be facing long-term challenges [9].
- Diversification and Investment Strategies:
- Diversification is key to managing risk. Consider building a portfolio that includes various sectors and dividend reinvestment plans (DRIPs) [10].
- Dividend-focused ETFs can also offer diversified income streams and are worth considering for those looking to spread out their risk [10].
By carefully evaluating these factors, investors can identify stocks with the best dividends and position themselves for both income and growth. It’s important to align these criteria with one’s financial goals and risk tolerance to create a robust dividend investment strategy.
Exxon Mobil (XOM)
Exxon Mobil Corp (XOM) stands out as a dividend aristocrat, showcasing its commitment to shareholders through a consistent dividend payment record since 1983. This legacy of financial returns is marked by at least 41 years of annual dividend increases [18].
- Dividend Yield and Growth:
- Current 12-month trailing dividend yield: 3.62%
- 12-month forward dividend yield: 3.73%
- Annual dividend growth rate over the past decade: 3.80% per year [18]
- Financial Health Indicators:
- Dividend payout ratio: 0.39, suggesting a prudent balance between paying dividends and retaining earnings for future growth [18]
- Revenue performance: Increased by an average of 25.50% per year, outpacing 76.32% of global competitors [18]
- Profitability rank: 7 out of 10, with net profit reported in 9 out of the past 10 years [18]
Exxon Mobil’s financial achievements in 2024 further solidify its status as a reliable dividend stock:
- 2024 Financial Highlights:
- Total dividend payout: $14.7 billion, up 4% from the previous year
- Dividend payout ratio: 57%, demonstrating a substantial return of earnings to shareholders
- Revenue for 2024: $275 billion, a 5% increase year-over-year
- Net income for 2024: $35 billion, marking a 10% increase from the previous year
- Total debt reduction: 5% decrease from the previous year, totaling $55 billion
- Debt-to-equity ratio: A low 0.2, indicating a strong balance sheet
- Return on equity (ROE): An impressive 15%, reflecting robust profitability
- Free cash flow: $20 billion, underscoring a solid financial position [20]
The company’s ability to generate strong free cash flow, which has recently surpassed its reported net income, suggests that Exxon Mobil’s price-to-earnings (P/E) ratio may now more accurately reflect its true cash-generating potential [21]. This, combined with its dividend yield of 3.51% and an annual dividend of $3.80 per share, positions Exxon Mobil as a compelling choice for investors seeking stocks with high dividend yields in 2024 [19].
Verizon Communications (VZ)
Verizon Communications (VZ) presents an attractive profile for dividend-seeking investors, with several key financial indicators worth noting:
- Stock and Dividend Performance:
- The stock closed at $39.51 USD with a slight pre-market increase to $39.54 USD [22].
- It boasts a substantial dividend yield of 6.67%, with an annual dividend of $2.66 per share [22].
- Despite a high payout ratio of 94.93%, Verizon has a history of dividend reliability, having increased its payout for over 20 consecutive years [22].
- Financial Health and Dividend Safety:
- Verizon’s dividend safety is underscored by a long-standing tradition of dividend payments and consistent increases, indicative of its shareholder commitment [22].
- The company’s dividend cover stands at approximately 2.0, and it has a track record of consecutive annual dividend increases for more than 10 years [22].
- However, the high payout ratio may raise concerns about the sustainability of future dividends, necessitating close monitoring by investors [22].
- Comparative and Strategic Insights:
- In terms of dividend yield percentile ranks, Verizon scores high relative to its sector (0.76), country (0.86), and globally (0.89), suggesting its dividend yield is competitive [22].
- For those considering a dividend capture strategy, the key dates to note are the buy date of April 08, 2024, the upcoming ex-dividend date of April 09, 2024, and the estimated sell date of April 23, 2024 [22].
- The average yield on cost for this strategy is calculated at 1.14%, which can be an appealing figure for short-term dividend investors [22].
Verizon, rated as a 4-star stock, is currently trading at a 10% discount to fair value, which could be an opportune entry point for investors looking for a combination of value and income [22].
PepsiCo (PEP)
PepsiCo (PEP) is a prominent player in the dividend stock arena, with a reputation for delivering consistent shareholder value. Here’s a closer look at its performance and financial health:
- Dividend Consistency and Growth:
- PepsiCo has a long-standing history of dividend payments, with an impressive track record of increasing its dividends for the past 49 years, making it a distinguished member of the S&P 500 Dividend Aristocrats [12].
- The company’s dividend yield stands at a competitive 2.90%, with a five-year average dividend growth rate of 7.90%, showcasing its commitment to growing shareholder returns [12].
- Financial Health Indicators:
- The dividend payout ratio for PepsiCo is currently at a sustainable 68.77%, indicating a balanced approach to rewarding shareholders while retaining enough earnings for future investments [13].
- PepsiCo’s revenue has seen a steady increase, with a 5-year compound annual growth rate (CAGR) of 4.3%, reflecting its strong market position and effective business strategies [13].
- Strategic Business Moves:
- In 2024, PepsiCo continued to innovate within its product lines and expand its global footprint, contributing to a robust performance despite the challenging economic environment [14].
- The company’s focus on healthier products and adaptability to consumer trends has allowed it to maintain a strong competitive edge and drive revenue growth [14].
Investors considering PepsiCo (PEP) for their portfolio should note the company’s resilience, proven by its ability to sustain and grow dividends over nearly half a century. With a solid financial foundation and strategic market positioning, PepsiCo represents a potentially lucrative option for those seeking reliable dividend-paying stocks.
Duke Energy (DUK)
Duke Energy Corp. (DUK), recognized as one of the 15 best dividend stocks to buy for 2024, stands out for its stability and dividend yield within the utility sector. Here are some key points to consider for investors interested in Duke Energy:
- Market Position and Dividend Reputation:
- Duke Energy is part of a select group of stocks known for their strong dividend offerings, which is crucial for investors seeking steady income streams [23].
- The company’s inclusion in this list highlights its reputation as a reliable payer of dividends, which is a testament to its financial health and strategic planning [23].
- Comparison with Peers:
- When compared to other companies on the list, such as Southern Co. (SO) and National Storage Affiliates Trust (NSA), Duke Energy’s performance and dividend prospects are competitive, making it an appealing choice for dividend-focused portfolios [23].
- The utility sector is generally known for its stable dividends, and Duke Energy’s presence among the top picks suggests it is one of the stronger performers in this category [23].
- Investment Consideration:
- Investors looking for a diversified dividend portfolio would do well to consider Duke Energy, given its standing among other high-performing dividend stocks like Verizon Communications Inc. (VZ) and Realty Income Corp. (O) [23].
- The company’s inclusion on this list indicates a positive outlook for its dividend performance in 2024, which is an essential factor for long-term investment planning [23].
Duke Energy’s recognition as one of the best dividend stocks to buy for 2024 should encourage investors to delve deeper into the company’s financials and consider how it fits within their investment strategy, especially when building a portfolio that seeks to balance growth with income [23].
Pioneer Natural Resources (PXD)
Investors interested in Pioneer Natural Resources (PXD) should be aware of the following critical date:
- Ex-Dividend Date:
- The ex-dividend date for Pioneer Natural Resources is set for March 1, 2024. This date is essential for shareholders as it determines the eligibility to receive the company’s next dividend payment [14].
- Investors who purchase shares on or before February 28, 2024, will be entitled to the dividend. Those buying on March 1, 2024, or later will not receive the upcoming dividend [14].
- Understanding the significance of the ex-dividend date is crucial for dividend investors, particularly those who follow a dividend capture strategy [14].
It’s important for shareholders and potential investors to mark their calendars accordingly and plan their trades if they aim to benefit from the company’s dividend distribution.
Conclusion
Through meticulous analysis of dividend yield, payout ratios, and company financial health, this article has furnished investors with a comprehensive overview of standout dividend stocks for 2024, such as Exxon Mobil, Verizon, PepsiCo, Duke Energy, and Pioneer Natural Resources. Each of these market leaders offers a blend of stability and potential growth, essential for building a dividend-rewarding portfolio. Notably, Duke Energy and Verizon emerge as strong contenders for those prioritizing consistent income, while Exxon Mobil and Pioneer Natural Resources continue to showcase robust financial positions, key in navigating turbulent markets.
As we look ahead, investors are encouraged to align these insights with their individual investment goals and the ever-evolving market dynamics. For those eager to start or enhance their investment journey with a focus on dividends, taking the next step is just a click away. Explore the wealth of dividend opportunities and make informed decisions to reinforce your financial future here. Remember, the road to building a resilient portfolio is paved with informed choices and strategic diversification.
References
[1] – https://www.investopedia.com/best-dividend-stocks-8406437[2] – https://www.morningstar.com/stocks/top-performing-us-dividend-stocks-january-2024
[3] – https://finance.yahoo.com/news/duke-energy-corps-dividend-analysis-111302160.html
[4] – https://dividendstocks.cash/dividend-profile/Duke%20Energy%20Corporation-Dividend
[5] – https://www.marketbeat.com/stocks/NYSE/DUK/dividend/
[6] – https://www.fool.com/investing/2023/11/17/the-good-news-in-duke-energys-bad-news-is-it-a-buy/ [7] – https://www.dividend.com/stocks/utilities/integrated-utilities/other/duk-duke-energy/
[8] – https://www.investopedia.com/articles/active-trading/042315/top-dividend-stocks-how-pick-them.asp
[9] – https://www.nerdwallet.com/article/investing/how-to-invest-dividend-stocks
[10] – https://www.fool.com/investing/stock-market/types-of-stocks/dividend-stocks/how-to-invest-in-dividend-stocks/
[11] – https://rates.fm/invest/5-high-dividend-stocks-what-they-are-and-how-to-invest-in-2024/
[12] – https://www.dividendmax.com/united-states/nasdaq/beverages/pepsico-inc/dividends
[13] – https://finance.yahoo.com/news/pepsico-incs-dividend-analysis-140522372.html
[14] – https://www.koyfin.com/company/pxd/dividends/
[15] – https://www.gurufocus.com/term/dividend_growth_5y/PXD/5-Year-Dividend-Growth-Rate/Pioneer%20Natural%20Resources%20Co
[16] – https://www.usatoday.com/money/blueprint/investing/best-dividend-stocks/
[17] – https://www.cnn.com/2024/01/12/investing/premarket-stocks-trading-dividend-rates/index.html [18] – https://finance.yahoo.com/news/exxon-mobil-corps-dividend-analysis-100409452.html
[19] – https://stockanalysis.com/stocks/xom/dividend/
[20] – https://www.barrons.com/articles/exxon-mobil-earnings-stock-price-47f59720
[21] – https://www.fool.com/investing/2024/01/02/giant-oil-stock-is-my-top-dividend-pick-for-2024/
[22] – https://www.morningstar.com/stocks/10-undervalued-dividend-stocks-2024-2
[23] – https://money.usnews.com/investing/articles/best-dividend-stocks-to-buy-this-year
[24] – https://www.cnbc.com/2024/03/10/top-wall-street-analysts-recommend-these-3-dividend-stocks.html
[25] – https://www.fool.com/investing/2024/03/06/here-are-my-top-10-ultra-high-yield-dividend-stock/
