Just when investors thought that it was safe to shift towards risk-on assets, we got the latest readings on inflation. The hotter-than-expected CPI and PPI readings were like a cold splash of water that doused hopes for the Federal Reserve to cut interest rates in March.
To make matters worse, investors are now wrestling with the fact that there may not be any interest rate cuts at all. That doesn't mean you shouldn't invest in stocks, but it does mean that dividend stocks may become more attractive.
Dividend stocks can get a bad reputation as being only for investors who aren't concerned about growth. But that's not always the case. In reality, there are many stocks that pay dividends but also generate double-digit stock price gains on a regular basis.
The focus of this special presentation is dividend stocks that fit that description. Not surprisingly, these stocks are large-cap, blue-chip stocks. Those are the type of companies offering this dual benefit in 2024.
Quick Links
- Lockheed Martin
- Air Products and Chemicals
- American Tower
- Chevron
- PepsiCo
- Philip Morris
- United Parcel Service
#1 - Lockheed Martin (NYSE:LMT)
The first company to consider is Lockheed Martin Corp. (NYSE: LMT). The company is the leading defense contractor in the United States by revenue and market cap. With geopolitical tensions bubbling up around the world, defense spending is likely to be protected even as the U.S. Congress has yet to approve a budget.
The stock trades at 16x forward earnings and is expected to grow earnings by 8.82%. The Lockheed Martin analyst ratings on MarketBeat give LMT stock an upside of 15.2%. And that goes along with a dividend that has a 2.95% dividend yield, has been increasing for 21 consecutive years, and currently pays out $12.60 per share annually.
The risk is that the defense budget is under close scrutiny as part of the 2023 debt ceiling deal. One example of that may be the Lockheed Martin F-35 fighter jets. The Biden administration is considering an 18% cut that could impact Lockheed Martin by as much as $1.6 billion. However, Lockheed appears to have already factored the bad news into its earnings, and analysts still forecast double-digit gains even as they lower their price targets for LMT stock.
About Lockheed Martin
Lockheed Martin Corporation, a security and aerospace company, engages in the research, design, development, manufacture, integration, and sustainment of technology systems, products, and services worldwide. The company operates through Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space segments.
Read More - Current Price
- $605.13
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 9 Buy Ratings, 4 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $562.54 (7.0% Downside)
#2 - Air Products and Chemicals (NYSE:APD)
Air Products and Chemicals Inc. (NYSE: APD) is a key player in the Basic Materials sector and, specifically, in the area of industrial gases. The company is one of the leaders in the worldwide transition away from fossil fuels. For example, it has invested billions in scaling clean hydrogen production. Another example is the company's synthetic gas (syngas) solutions, which include its recent $1 billion acquisition of a natural gas-to-syngas processing facility in Uzbekistan.
Air Products is projecting 9.13% earnings growth, and although the consensus of the analyst ratings on MarketBeat put a Hold rating on the stock, it's projected to grow 24% in the next 12 months. To that end, the stock is trading below its 50- and 200-day moving averages and looks oversold.
Plus, APD stock trades at 18x forward earnings, which is below the sector average of 24.8x for the industrial gases sector. And Air Products is nearing Dividend King status. The company has increased its dividend for 49 consecutive years. The company's dividend currently has a 3.09% yield and pays $7 per share annually.
About Air Products and Chemicals
Air Products and Chemicals, Inc provides atmospheric gases, process and specialty gases, equipment, and related services in the Americas, Asia, Europe, the Middle East, India, and internationally. The company produces atmospheric gases, including oxygen, nitrogen, and argon; process gases, such as hydrogen, helium, carbon dioxide, carbon monoxide, and syngas; and specialty gases for customers in various industries, including refining, chemical, manufacturing, electronics, energy production, medical, food, and metals.
Read More - Current Price
- $285.50
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 9 Buy Ratings, 6 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $296.50 (3.9% Upside)
#3 - American Tower (NYSE:AMT)
The case for American Tower (NYSE: AMT) comes down to the continued buildout of high-speed internet throughout the country. The company's portfolio is narrowly focused on 225,000 communications sites, including an interconnected footprint of data center facilities.
American Tower fits into the real estate investment trusts (REITs) category. REITs operate and maintain commercial and residential properties. They are attractive to dividend investors because they must pay out a regular dividend to investors. That can come at the expense of stock price growth.
However, American Tower fits into the category of specialty REITs. Specifically, the company's focus on data centers makes it an attractive investment. The company is projected to increase earnings by 5%. However, the American Tower analyst ratings on MarketBeat give AMT stock a Moderate Buy rating and anticipate an 18.4% increase in the stock price.
Plus, as to the aforementioned dividend. American Tower has a yield of 3.62%, has increased its dividend for 12 consecutive years, and pays out $6.80 per share annually.
About American Tower
American Tower, one of the largest global REITs, is a leading independent owner, operator and developer of multitenant communications real estate with a portfolio of over 224,000 communications sites and a highly interconnected footprint of U.S. data center facilities.
- Current Price
- $223.66
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 12 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $234.00 (4.6% Upside)
#4 - Chevron (NYSE:CVX)
Oil stocks are popular among dividend investors. There are many options for investors, but right now, Chevron Corporation (NYSE: CVX) stands out as an undervalued choice.
Oil stocks tend to be highly defensive stocks because oil and gas are needed in virtually every sector of the economy. That's one reason why Warren Buffett recently rotated some of his profits from Apple Inc. (NASDAQ: AAPL) into CVX stock.
However, the stock price of these companies can fluctuate with the oil prices. That's been the case with Chevron stock, which is down 5% in the last 12 months, even though it's up 6% in the last three months.
Chevron expects to grow earnings by 14.5%. The consensus analyst ratings for Chevron on MarketBeat give CVX stock a Moderate Buy rating with a 16.5% upside.
Chevron is also a Dividend Aristocrat with a 37-year streak of increasing its dividend. That dividend currently has an attractive 4.23% yield and pays investors $6.52 per share annually.
About Chevron
Chevron Corporation, through its subsidiaries, engages in the integrated energy and chemicals operations in the United States and internationally. The company operates in two segments, Upstream and Downstream. The Upstream segment is involved in the exploration, development, production, and transportation of crude oil and natural gas; processing, liquefaction, transportation, and regasification of liquefied natural gas; transportation of crude oil through pipelines; transportation, storage, and marketing of natural gas; and carbon capture and storage, as well as a gas-to-liquids plant.
Read More - Current Price
- $150.74
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 13 Buy Ratings, 6 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $179.00 (18.7% Upside)
#5 - PepsiCo (NASDAQ:PEP)
Consumer staples stocks are also popular among dividend investors for their defensive qualities. PepsiCo Inc. (NASDAQ: PEP) is an ideal choice for investors looking for reliable dividend income and double-digit stock price growth. That's especially true with PEP stock down approximately 5% in the last 12 months.
Pepsi is forecasting earnings growth of 7.98% in the next 12 months. The PepsiCo analyst ratings on MarketBeat project an 11.8% upside for PEP stock.
That's because, at 20.4x forward earnings, PEP stock trades right around the average valuation of other companies in the Soft Drinks and Non-Alcoholic Beverages category. This is a good buying signal for dividend investors who frequently take long positions in a stock, and analysts know it.
Plus, Pepsi is a Dividend King that has increased its dividend in each of the last 52 years. That's on top of a 3.01% dividend yield and a current payout of $5.06 per share annually.
About PepsiCo
PepsiCo, Inc engages in the manufacture, marketing, distribution, and sale of various beverages and convenient foods worldwide. The company operates through seven segments: Frito-Lay North America; Quaker Foods North America; PepsiCo Beverages North America; Latin America; Europe; Africa, Middle East and South Asia; and Asia Pacific, Australia and New Zealand and China Region.
Read More - Current Price
- $167.97
- Consensus Rating
- Hold
- Ratings Breakdown
- 6 Buy Ratings, 8 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $185.29 (10.3% Upside)
#6 - Philip Morris (NYSE:PM)
Philip Morris International Inc. (NYSE: PM) is in the category of sin stocks. The company has been undertaking a multi-year pivot towards smokeless tobacco products, including vapes. But despite revenue and earnings that have moved slightly higher in the last year, PM stock has been under pressure, down 12% in the last 12 months.
One thing that immediately stands out to investors is its dividend, which currently has a yield of 5.81%. The company has increased its dividend for 16 consecutive years and pays out $5.20 annually.
Nevertheless, Philip Morris should be on your list if you're looking for dividend stocks with a strong upside to go along with a reliable dividend. The company trades at 14x earnings. That compares favorably with the company's expectations for 11.4% earnings growth. Analysts have a Moderate Buy rating on PM stock with a potential upside of 17.6%.
About Philip Morris International
Philip Morris International Inc operates as a tobacco company working to delivers a smoke-free future and evolving portfolio for the long-term to include products outside of the tobacco and nicotine sector. The company's product portfolio primarily consists of cigarettes and smoke-free products, including heat-not-burn, vapor, and oral nicotine products primarily under the IQOS and ZYN brands; and consumer accessories, such as lighters and matches.
Read More - Current Price
- $119.10
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 7 Buy Ratings, 3 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $121.45 (2.0% Upside)
#7 - United Parcel Service (NYSE:UPS)
United Parcel Service Inc. (NYSE: UPS) is a bit of a contrarian choice to close out this list. UPS stock is down 19% in the last 12 months. The stock gapped down sharply after a disappointing earnings report in which it lowered its guidance for the next 12 months. And the stock is facing tough resistance around its February 20, 2024, price of $148.78.
But analysts are looking ahead. UPS has taken cost-cutting measures and is taking steps to modernize and make its fleet more efficient. That's why the company is projecting 17.5% earnings growth in the next 12 months. Analysts are translating that into 19.2% stock price growth in the next year.
Granted, there may be assumptions that include a stronger economy in the back of the year. However, while you're waiting on growth, you're still collecting an attractive dividend that UPS has increased for the last 15 consecutive years. That dividend has a 4.38% yield and currently pays $6.52 per share annually.
About United Parcel Service
United Parcel Service, Inc, a package delivery company, provides transportation and delivery, distribution, contract logistics, ocean freight, airfreight, customs brokerage, and insurance services. It operates through two segments, U.S. Domestic Package and International Package. The U.S. Domestic Package segment offers time-definite delivery of express letters, documents, small packages, and palletized freight through air and ground services in the United States.
Read More - Current Price
- $131.25
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 10 Buy Ratings, 10 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $149.68 (14.0% Upside)
How does MarketBeat help you find stocks like this? To put together this list, I used the MarketBeat Dividend Screener. It's a free tool available to all investors. I adjusted the filters to screen only for stocks with a minimum expected upside of 10%. Once I got that list, I sorted for the stocks that paid the highest dividend.
At that point, I had to use my intuition. But that's what every investor needs to do. The stocks you see here appear to offer investors the best possible returns in 2024. You get a cross-section of sectors from many categories, including consumer staples, energy, transportation, basic materials, and defense stocks.
What you don't see are tech stocks or even healthcare stocks. There are names in these sectors that showed up on the Dividend Screener, but those sectors may have some downside ahead of them.
We encourage you to use tools like the Dividend Screener and let us know how it helped you. And if you're not a subscriber to MarketBeat All-Access, now is an excellent time to consider that. You'll get access to several premium screening tools that can help streamline your research.
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