3 Dividend Stocks With Growth Potential You Can’t Miss

Key Points

• There are a few opportunities today that offer both dividend income and potential double-digit upside in the market, and investors can take advantage of both.
• Three dividend stocks have fallen to favorable valuations, giving investors a chance to start 2025 on a strong note.
• Wall Street analysts and institutional buyers agree on upside potential and a good value deal.

Going into the new year, investors are probably looking at their 2024 performance and trying to find a way to either replicate it or top it, and today’s market offers a few opportunities to do so with a few added benefits. When dividend stocks are considered, they aren’t typically known for having the sort of volatility and upside potential that brings about portfolio growth, but today’s list is different.

Today’s list will get investors lined up with enough fundamental trends and expose their capital to attractive upside potential as well as steady and growing dividend payments. As the prices of these stocks today have severely contracted below their 52-week highs, the percentage yield offered by their dividends has only become more attractive, creating the perfect storm for portfolios to start 2025 on a strong note.

To start off, the consumer staples sector is giving investors an incredible opportunity to consider shares of Cal-Maine Foods Inc. NASDAQ: CALM, a recent discount from its highs, and enough of a dividend yield to attract new buyers. There is the transportation sector’s opportunity in shares of United Parcel Service Inc. NYSE: UPS, and finally, the technology stock that once caught Warren Buffett’s attention; HP Inc. NYSE: HPQ.

Cal-Maine Stock’s Discount Attracted New Buyers

After reaching a 52-week high of $114.06 a share, Cal-Maine stock declined by over 10% in a matter of days, presenting investors with a potential buying opportunity. Before reaching a significant support level at $100 a share, some institutional investors were already lining up to grab this stock and its dividend before it was too late.

Those from State Street decided to boost their holdings in Cal-Maine stock by 3.0% as of November 2024, bringing their net position to a high of $120.5 million today, or 3.2% ownership in the company. After the recent double-digit selloff in the stock, there will be further additions to institutional buying activity.

But that’s not what investors are banking on right now; rather, they are offering shareholders up to $5.95 share payouts in dividends. At today’s stock price, these payments would translate in a dividend yield of up to 5.84% today, beating any United States inflation left and also outpacing most other dividend stock offerings.

More than that, the stock trades at a discount to the rest of the materials sector, as its price-to-book (P/B) ratio of only 2.8x would show against the sector’s average of 3.6x, giving investors ample room to run the price higher on a potential catch up.

Business Activity Will Boost UPS Stock Higher

At least that’s what some Wall Street analysts are saying today, particularly those from Citigroup, through their reiteration of a buy rating on UPS stock; this time, though, they decided to keep a $158 price target on the stock as of November 2024. UPS stock would have to stage off a rally of up to 28% from today’s price to prove this new view right.

That's why picking up the stock at only 76% of its 52-week high level becomes such an attractive proposition. But, more than the price discount, investors can also take advantage of the company’s dividend payout per share of up to $6.52, translating into an annualized yield of as much as 5.3%.

Even the UPS stock bears have decided to ditch some of their short positions, knowing that favorable interest rate cuts and a boost in business activity recently will have a direct impact on transportation and packaging services. Investors can see this bearish capitulation through the 4.8% decline in UPS stock’s short interest over the past month.

HP Stock’s Collapsing Short Interest, a Potential Turnaround

Over the past month, HP stock’s short interest collapsed by up to 14.9%, showing that the market’s preference for discounted dividend stocks might be gaining traction now. At today’s price, 83% of its 52-week high, HP stock offers shareholders a 3.46% dividend yield to cushion inflation and still offer more upside potential.

This is a factor that can be checked through the $41 a share valuation placed by analysts at J.P. Morgan Chase as of November 2024, implying a net upside of up to 23.1% from where the stock trades today. The current setup in the stock did drive a lot more interest from the institutional realm as well, as seen in recent buying activity.

As of November 2024, those from State Street decided to boost their HP stock holdings by as much as 8.2%, bringing their net position to a high of $1.9 billion today, or 5.4% ownership in the company. Speaking of discounted dividends as well, HP stock trades at a mere 11.8x price-to-earnings (P/E) ratio, a steep discount next to the computer sector’s average 233.9x multiple today.