The Nasdaq Composite has been off to a strong start this year. Powered by the Magnificent Seven stocks, the index is up by 24% year-to-date (YTD). Investors would love to have that type of a return every year, as compounded growth can make long-term financial goals more attainable.
While a 24% YTD return is quite impressive, a few stocks that have actually outperformed it. Some of those same stocks also offer dividends, which means you’ll receive solid capital gains and cash flow. Another good perk about dividend stocks is that they tend to be less speculative. Corporations can only give out dividends if they report profits. Furthermore, companies can only maintain double-digit dividend growth each year if they have low dividend payout ratios and rising net income.
So, are you wondering which dividend stocks are beating the Nasdaq Composite while delivering quarterly distributions to their investors? Let’s delve into these three dividend stocks that have outperformed the Nasdaq in 2024.
Alphabet (GOOG, GOOGL)
You can always look within the Magnificent Seven to find stocks that have regularly outperformed the stock market. Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) is one of the dividend-paying stocks that has outperformed the Nasdaq Composite. Google’s parent company has logged a 34% YTD gain and has more than tripled over the past five years. The Nasdaq Composite has ‘only’ gained 122% over the same span.
Moreover, Wall Street analysts believe that the stock has more room to run. It is rated as a strong buy with a projected 8% upside from current levels. The highest price target of $225 per share implies that Alphabet can gain 21%.
Also, Alphabet continues to deliver growth and attract plenty of attention with its search engines. Billions of people use Alphabet’s websites each month, and advertisers continue to compete for ad placements. This dynamic translated into 15% year-over-year (YOY) revenue growth in the first quarter. Profits increased by 57% YOY amid Alphabet’s cost cutting efforts, providing plenty of room for future dividend hikes.
Broadcom (AVGO)
Broadcom (NASDAQ:AVGO) is a primer chipmaker that has been benefitting nicely from artificial intelligence (AI). The company recently released Q2 of fiscal year 2024 earnings which revealed the company’s 43% YOY revenue growth. Additionally, Broadcom generated $3.1 billion from AI products, which is a record for the company.
Notably, investors are excited about the stock’s upcoming 10-for-1 split. While stock splits do not increase intrinsic value, they make it easier for options traders to buy calls and puts, which increases volatility. The heightened volatility can lead to more gains when things go Broadcom’s way. So far, it’s been a pleasant ride for investors. Shares are up by 57% YTD and have gained roughly 500% over the past five years.
Even with those gains, Broadcom still offers a 1.23% yield. The tech conglomerate has also maintained a double-digit dividend growth rate for several years. Wall Street analysts are bullish about the stock’s long-term prospects. It’s currently rated as a strong buy with a projected 14% upside.
American Express (AXP)
It’s not every day that a credit and debit card issuer outperforms the Nasdaq Composite.
American Express’ (NYSE:AXP) 5-year gain of 87% demonstrates that this doesn’t always happen. However, the stock is up by 27% YTD which puts it ahead of the Nasdaq Composite. It remains to be seen if American Express holds onto its lead, but the stock does offer a 1.17% yield to sweeten the deal. Furthermore, shares trade at a 20 P/E ratio, which is more reasonable than most stocks with the company’s financial growth.
American Express reported 11% YOY revenue growth and 34% YOY net income growth in the first quarter of 2024. Most of the growth came from Millennials and Gen Z consumers who made up more than 60% of the firm’s new account openings in the first quarter. American Express acts as a good hedge against inflation since it receives a percentage of every transaction. If prices go up, American Express’ average transaction fee also goes up.
Unsurprisingly, Wall Street is behind this stock. Shares have received a moderate buy rating from 19 analysts. The highest price target of $285 per share suggests that the stock can rally by an additional 19% upside.
On this date of publication, Marc Guberti held long positions in GOOG and AVGO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
