Dividends provide a guaranteed return on capital and investment income to shareholders. This makes dividends an important consideration, especially for people living in retirement. However, dividends can be tricky. A lot of times, stocks that offer shareholders a high yielding dividend do so because the share price is underperforming or trailing the broader market. In the best case scenario, investors latch onto a stock whose share price is appreciating and that provides a strong quarterly payment in the form of a dividend. While not always easy to find, these exceptional stocks are out there. Here are three dividend stocks destined to move significantly higher in 2024.
AT&T (T)
U.S. telecommunications firm AT&T (NYSE:T) offers investors one of the highest yielding dividends around. The company currently pays its shareholders 28 cents a share each quarter for a yield of 6.99%. That’s a return most investors will gladly take. However, there are other reasons to like T stock beyond the dividend. The company has been reporting improving earnings and there is reason to believe that the company’s share price could also recover in 2024.
For this year’s third quarter, AT&T announced EPS of 64 cents, which was better than the 62 cents forecast among analysts. Revenue rose1% from a year earlier to $30.40 billion. Analysts had penciled in $30.20 billion of sales for the summer quarter. Looking forward, AT&T raised its guidance for free cash flow for the rest of this year, saying it now anticipates free cash of $16.50 billion, up from a previous estimate of $16 billion. That free cash flow can help support the dividend.
T stock is down 15% this year, presenting a buy-the-dip opportunity.
PepsiCo (PEP)
PepsiCo (NASDAQ:PEP) provides a dividend that is better-than-average. Shareholders of the food and beverage giant receive a quarterly payment of $1.27 per share, giving it a yield of 3%. The maker of Pepsi and Mountain Dew soft drinks is also a “Dividend Aristocrat,” meaning it has increased its dividend payment for more than 25 consecutive years. Owed partly to the attraction of its dividend, PepsiCo is on track to become the biggest U.S. beverage company by market value, surpassing rival Coca-Cola (NYSE:KO), which has held the top spot for nearly 20 years.
PepsiCo is also a consistent performer when it comes to its finances and growth. Most recently, the company announced Q3 EPS of $2.24 and revenue of $23.45 billion. That beat analyst forecasts of $2.15 a share of profit on $23.41 billion in sales. PepsiCo, which also makes Lay’s potato chips and Gatorade sports drink, said that it now expects its annual earnings to grow by 13% in 2023. PEP stock has pulled back recently and is down 6% on the year, offering a nice entry point to investors.
Dick’s Sporting Goods (DKS)
Earlier this year, retailer Dick’s Sporting Goods (NYSE:DKS) more than doubled its quarterly dividend payment, increasing it 105% to $1 per share. DKS stock now has a dividend yield of 3.47% based on the current share price. In addition to the dividend, Dick’s stock looks undervalued right now trading at just 10 times future earnings estimates, in addition to the share price being down 4% on the year after the company posted a rare earnings miss in late August.
DKS stock declined more than 20% on news of a 23% drop in profits and lowered earnings guidance for the remainder of this year. The company blamed the poor showing on consumer theft and a slowdown of sales in its outdoor category that includes camping gear. Dick’s also lowered its profit outlook for the remainder of this year, saying it is grappling with “shrink,” a term that refers to inventory lost due to theft. Analysts and investors are hoping for a stronger print from Dick’s when it next reports results on Nov. 21.
On the date of publication, Joel Baglole did not have (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.
