Good dividend stocks provide their owners with reliable income. What’s more, even if these equities drop, investors are “paid to wait” for them to rebound down the road. Consequently, if a stock combines dividends and growth, its owners can profit from both higher stock prices and dividend payments. As a result, equities that pay dividends and have “a growth kicker” can wind up being very lucrative over the longer term.
Also importantly, as interest rates decline later this year following the Federal Reserve’s rate cuts, stocks with significant, reliable dividends will become much more coveted by investors. That’s because their dividend yields will no longer be significantly lower than the rates that the government pays on the funds that it borrows.
What’s more, over the longer term, these stocks’ dividend yields are likely to overtake the rates paid on Treasuries. Long-term income investors are likely to see the “writing on the wall” when it comes to this situation and start snapping up top dividend names in the second half of the year.
NextEra Energy (NEE)
NextEra (NYSE:NEE), which owns a huge amount of renewable energy projects and electric utilities in Florida, recently reported strong fourth-quarter results last month, indicating that this battered stock is poised to mount a huge comeback.
Specifically, its top line jumped 11.5% versus the same period a year earlier while its operating income came in at $1.7 billion, way up from the $1.05 billion of OI that it generated during Q4 of 2022.
As “the largest producer of solar and wind power in the world,” NEE is very well-positioned to benefit from the increased demand for electricity being triggered by the electrification of transportation. It’s also getting a lift from the high number of consumers and businesses moving into Florida.
Also noteworthy is that the company’s renewables unit has a huge 20-gigawatt backlog, while it expects its earnings per share to increase 6% to 8% annually over the next three years.
NEE stock has a low forward price-to-earnings ratio of 16.8 times and a significant dividend yield of 3.6%.
GSK (GSK)
On Feb. 13, Citi (NYSE:C) upgraded the large UK-based drug maker GSK (NYSE:GSK) to “buy.” The bank raised its rating on the shares after a Phase 3 clinical trial of the firm’s blood cancer treatment, Blenrep, produced spectacular results. Specifically, the percentage of patients taking Blenrep whose blood cancer did not progress was nearly triple the proportion of those whose cancer did not progress while receiving the current standard treatment made by Johnson & Johnson (NYSE:JNJ) Citi expects Blenrep to become a standard treatment for some blood cancer treatments.
Also noteworthy is that Citi increased its estimate of the uptake of GSK’s RSV vaccine due to subpar Phase 3 results of a competing shot made by Moderna (NASDAQ:MRNA). Finally, Citi increased its earnings per share estimate for GSK by a huge 50%.
The shares have a low forward price-to-earnings ratio of 10.9 times and a significant dividend yield of 3.5%.
Target (TGT)
Goldman Sachs (NYSE:GS) recently added Target (NYSE:TGT) stock to its Conviction List, citing the retailer’s ability to benefit from America’s strong consumers. Indeed, after U.S. retail sales advanced a strong 0.6% in December versus November, I agree that TGT is well-positioned to thrive going forward.
Also noteworthy is that Goldman believes that Target will benefit from easy comparisons this year, enabling its to climb roughly 6% year-over-year and boosting its margins.
Meanwhile, the retailer is considering a paid membership program similar to those of Amazon and Walmart. Such a move, I believe, could significantly boost Target’s revenue and profits from e-commerce and move the needle of its overall results in the longer term.
TGT stock has an attractive forward price-to-earnings ratio of 16.4 times and a meaningful dividend yield of 3%.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
