IMPORTANT POINTS:
- Enterprise Products Partners (EPD) offers a high yield of 7.55% and has a track record of continually increasing dividends.
- Broadcom (AVGO), yielding 1.9%, stands out for its strong position in the semiconductor sector and growth potential in 2024.
- Extra Space Storage (EXR), a high-yield REIT, has shown an impressive 400% growth over the last decade.
Dividend stocks have historically been favorites among investors, offering stable returns and a reliable income stream. These listed companies not only present capital appreciation opportunities but also share a portion of their profits directly with shareholders through regular dividends.
While some investors prioritize growth-focused strategies, others appreciate the stability and long-term potential for gradual increases that dividends provide.
Recognizing these benefits, especially in uncertain market conditions, Finbold decided to conduct a stock market analysis as we approach the end of 2023. This analysis focuses on identifying three promising dividend stocks positioned for potential takeoff in the coming year.
Broadcom (AVGO)
Pressured by macroeconomic headwinds and the dominance of the Big Seven AI-powered companies, dividend stocks didn’t offer much in 2023. However, next year could provide a more favorable environment for these companies, particularly due to expected rate cuts by the Federal Reserve.
Charlie Gaffney, managing director at Morgan Stanley, believes companies “with strong business franchises” could attract investor attention in 2024 because they “can generate tremendous amounts of free cash to generate distributions and grow dividends over time.”
For this reason, Gaffney picked semiconductor giant Broadcom (AVGO) as a dividend stock that could perform well in 2024. The chipmaker has a 1.9% yield and has had a “phenomenal performance” in 2023 with a profit since the beginning of the year of more than 100%.
A 1.9% yield means that the annual dividends paid by Broadcom represent 1.9% of its current stock price.
Looking ahead, AVGO has more room to grow in the coming year, mainly due to current cloud computing and AI trends, the analyst said.
Enterprise Products Partners (EPD)
Enterprise Products Partners (EPD) is a midstream energy company primarily involved in the transportation, storage and processing of petroleum, natural gas and petrochemical products.
The company has been delivering consistent financial performance for years, allowing it to increase dividends to shareholders for over 2 decades. Additionally, its dividend has grown at a CAGR of 7%.
EPD currently offers a high yield of 7.55% and has returned approximately $51 million to its shareholders through dividends and share buybacks.
The company estimates its $6.8 billion capital projects will be operational by 2025, a move that would add to its organic growth and lead to future earnings, subsequently fueling higher dividend payments.
The stock saw tepid growth in 2023, rising just 8.1% since the start of the year.
Extra Storage Space (EXR)
Extra Space Storage (EXR) is a real estate investment trust (REIT) specializing in the ownership and operation of self-storage facilities.
The REIT company currently pays a quarterly dividend of $1.62 per share, with a dividend yield of 4.19%. EXR has been distributing significant dividend payments for approximately 13 years and is one of the best-performing REITs over that period.
More specifically, Extra Storage Space has produced more than 400% in total returns over the last 10 years (17.6% annualized), outperforming the broader S&P 500.
The company’s growth catalysts put it in a strong position to continue growing its dividend. Although EXR is unlikely to continue growing its payout at the same rate, the REIT company will likely continue to deliver industry-leading dividend growth.
The company’s shares are up more than 12% since the start of 2023.
In the third quarter of 2023, the company reported $748 million in revenue, up nearly 50% from a year earlier.
