The market has been a real gift for many investors in 2024 S&P500 reaching new all-time highs at the end of 57 different trading days (so far). As the gift-giving holiday season approaches, it might be time to think about giving yourself a gift by investing in 2025. After all, investing in your future is one of the greatest gifts you can give. And if the gift is a reliable dividend stock, it could end up being a gift that keeps on giving.
Many people get some extra money around the holidays, whether it’s a year-end bonus, a second seasonal job, or a gift from a rich uncle to a lucky few. Other people may have bonds or CDs that mature and need to reinvest the money. So consider these two dividend stocks as long-term investments if you have $10,000 (or whatever amount) available to invest.
Major technology companies, such as Elon Musk’s xAI, Microsoft, Metaplatformsand others, are building massive data center complexes to capitalize on the exponentially rising interest in artificial intelligence (AI). These hyperscale data centers are at least 100,000 square feet in size (some are much, much larger) and are filled with computing equipment that runs in tandem. xAI’s data center in Memphis currently has 100,000 GPUs that power servers that train AI models. It plans to expand the center tenfold to meet its growing needs. Dell is a key infrastructure provider for this xAI project. Microsoft’s server center project in Wisconsin will span more than 1 square mile and will also use Dell equipment.
The growth of hyperscale data centers accelerated in 2023, as shown below, and will reach well above 1,000 by 2024. It is estimated that 120 to 130 additional hyperscale centers will come online annually in the coming years.
These centers require infrastructure such as servers, racks and cabling Dell Technologies (NYSE: DELL) is the largest supplier on the market. Last quarter, Dell’s Infrastructure Solutions Group (ISG) revenue grew 34% year over year to $11.4 billion. The main driver in this segment was servers and networking, which grew 58% to $7.4 billion – a direct result of the data center business. In total, sales amounted to $24.4 billion with a growth of 10%.
Dell’s other segment, which serves the computing needs of businesses and individuals, isn’t performing as well, with revenue down 1% year over year to $10.1 billion in the quarter. However, Dell believes an artificial intelligence (AI)-driven computer upgrade cycle is coming. Still, investors shouldn’t expect this segment to drive as much growth as ISG.
Dell plans to return 80% of its adjusted free cash flow to shareholders through share buybacks and dividends. The company plans to grow the dividend by at least 10% annually until at least fiscal year 2028. The dividend increased by 20% when it was increased in this fiscal year. The forward yield is 1.26%. This yield is roughly in line with the S&P 500 average, so it may not seem like a dividend stock worth pursuing. However, Dell is also expected to post solid share price gains. Of the 25 analysts covering the stock, 21 rate it a buy or strong buy with an average price target of $151 per share. That is 27% higher than the current price.
The enormous need for data center infrastructure ensures that Dell is in the right place at the right time. Those who buy now will benefit in the long run.
If you’re strictly looking for high-yield stocks, the Real Estate Investment Trust (REIT) is a good choice. Vici properties (NYSE:VICI) maybe more your speed. Vici owns some of the most recognizable properties in the world and leases them to these well-known experiential brand names.
These “trophy traits” are difficult to replace, making the barriers to entry for competition high. They are also occupied by large corporate tenants, such as MGM Resorts International And Caesars Entertainment; tenants with deep pockets make rent collection more consistent. Vici even collected 100% of rents during the COVID-19 pandemic, despite many casinos and entertainment venues being temporarily closed.
Vici has increased the dividend annually since its inception, and due to the growing financial resources from the activities (from which the dividend is paid) it is likely that this will continue, as shown below.
The current forward yield is 5.5%, much higher than Dell’s. However, Vici is unlikely to generate much price appreciation; it’s a stock for consistent, growing income.
Dell and Vici couldn’t be more different companies, giving investors the choice between lower returns with a potential share price increase or generating higher income. One or both may be right for you.
Have you ever felt like you missed the boat on buying the most successful stocks? Then you would like to hear this.
On rare occasions, our expert team of analysts provides a “Double Down” Stocks recommendation for companies they think are about to pop. If you’re worried that you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
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Nvidia: If you had invested $1,000 when we doubled in 2009, you would have $356,125!*
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Apple: If you had invested $1,000 when we doubled in 2008, you would have $46,959!*
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Netflix: If you had invested $1,000 when we doubled in 2004, you would have $499,141!*
We’re currently issuing ‘Double Down’ warnings for three incredible companies, and another opportunity like this may not happen anytime soon.
See 3 “Double Down” Stocks »
*Stock Advisor returns December 9, 2024
Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Bradley Guichard has positions in Dell Technologies and Vici Properties. The Motley Fool holds positions in and recommends Meta Platforms and Microsoft. The Motley Fool recommends Vici Properties and recommends the following options: long January 2026 $395 calls at Microsoft and short January 2026 $405 calls at Microsoft. The Motley Fool has a disclosure policy.
The Smartest Dividend Stocks to Buy Now with $10,000 was originally published by The Motley Fool
