Dividend stocks have historically been fantastic long-term investments. The best ones offer an attractive and growing income stream together with steady increase in share price. This can amount to a strong overall yield.
Chevron (NYSE:CVX), Real estate income (NYSE:O)And Verizon (NYSE: VZ) have a great track record of paying dividends. In fact, they are currently trading at lower valuations. that she has offer high dividend yields. With upside catalysts on the horizon, these look like screaming buys at the moment.
A high-octane dividend share
Shares of Chevron have fallen by more than 10% in the past year. The decrease is due to delays in completing the acquisition of Hes and lower oil prices. That’s why Chevron currently offers a dividend yield of approximately 4.4%. That is much higher than that of its main rival ExxonMobil (3.2% dividend yield). While Exxon the top dog in the oil fieldChevron does a very strong one No. 2.
Chevron can thrive on lower oil prices. The company has stress-tested its business for a downside scenario in which Brent crude oil (the global benchmark price) averages $50 between 2025 and 2027. The oil giant can produce enough cash to fund its high-yield capital program with a growing dividend (something it has been doing for more than three decades) while still having room to spare. That surplus and its elite balance sheet will give him the capacity to buy back shares at the lower end of the annual range of $10 billion to $20 billion.
Crude oil prices are currently well above that level (in the low $70s). That is the upward scenario for the coming years. In that price environment, Chevron could produce enough cash to buy back shares at the high end of its annual target without using its balance sheet flexibility. Meanwhile, the Hess acquisition, which Exxon is trying to hold back, will significantly improve and extend free cash flow growth prospects. It could double the company’s cash flow to $70 per barrel by 2027 strong downside protection and ample upside potential, Chevron looks very attractive these days.
As consistent as can be
Realty Income’s stock price is currently nearly 20% below its peak a few years ago, mainly due to the impact of higher interest rates on the commercial real estate market. That is why this real estate investment trust (REIT) offers a very attractive dividend yield of almost 5%.
The REIT has done a great job of growing its dividend over the years. Since going public in 1994, it has increased its payout 127 times, including over the last 108 quarters in a row. Over the past thirty years, the payout has increased at a compound annual rate of 4.3%.
Realty Income is in an excellent position to continue increasing its dividend in the future. The REIT expects growth money from operations at an annual rate of 4% to 5%, driven by rental growth and positive acquisitions. It has huge investment opportunities ($5.4 trillion addressable market in the US and $8.5 trillion in Europe). With interest rates finally starting to fall, the REIT could ramp up its acquisition volume in the future.
A ridiculously cheap dividend stock
Verizon currently offers a dividend yield of 6.2%, that is one of the highest in the S&P500. This high return is due to the company’s dirt-cheap valuation. Verizon is trading on one future price-earnings ratio (PE). of less than 10 time. That’s a discount of more than 50% on the S&P500s 23.8 times the multiple of future earnings.
The telecom giant has been an excellent dividend growth stock over the years. It achieved its 18th straight annual dividend increase last month. That’s the longest current streak of dividend growth in the US telecom sector.
Verizon is taking a notable step to accelerate its growth through acquisitions Border communication. The $20 billion deal will deliver at least $500 million in annual cost savings. Meanwhile, it will increase the scale of its fiber network and extend its reach. In addition, the company has invested heavily in expanding its activities 5G network to increase growth. These investments will grow cash flow, giving the country the money to continue raising its dividend and strengthening its balance sheet, and ultimately start buy back his dirt-cheap shares.
Premium income shares
Chevron, Realty Income and Verizon have consistently increased their dividends over the years. That should continue going forward, especially given the upside catalysts they have ahead. Add in their high yields and lower valuations, and this trio looks like screaming buys for those looking for investments strong overallreturn potential.
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*Stock Advisor returns October 14, 2024
Matt DiLallo has positions at Chevron, Realty Income and Verizon Communications. The Motley Fool holds positions in and recommends Chevron and Realty Income. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.
3 High-Yield Dividend Stocks That Are Screaming Buys Right Now, originally published by The Motley Fool
