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By Yiannis Zourmpanos, InvestorPlace
High-growth dividend stocks are essential for assembling a robust income portfolio. These stocks offer the dual benefits of capital appreciation and regular income through dividends. One needs to focus on companies with solid fundamentals that derive constant growth and profitability to identify the top picks.
Investing in dividend stocks is a strategic way of securing long-term financial returns, mainly if the stocks at issue belong to sectors known for stability and growth. This article looks at the top three dividend stocks within the communication, real estate, and healthcare sectors, each chosen for their potential for solid growth and a dependable dividend yield.
The communication sector includes companies that are most likely to have a stable cash flow and high barriers to entry, thus constituting a reliable group of dividend payers. Real estate investment, primarily through REITs, is also quite attractive in paying dividends, driven by rental income and property appreciation. The healthcare sector is usually considered one of the most resilient and has one of the strongest demands, given a close-to-bursting aging demographic and recent advances in medical technology.
Verizon (VZ)
Verizon (NYSE:VZ) is a leading telecommunications company. The company’s stock offers a forward dividend yield of 6.5%, backed by a dividend increase for 19 years. The introduction of MyPlan in 2023 boosted subscriber engagement. Interestingly, over 30% of Verizon’s subscribers adopted MyPlan, highlighting its popularity and positive impact on revenue.
The adoption rate exceeded 30% within a year. Further, MyPlan’s success is expected to drive further revenue growth with premium mix adoption, and additional perks contribute to this growth. Verizon’s adjusted EBITDA increased by 2.8% year-over-year (YOY) in the second quarter (Q2) of 2024, reaching $12.3 billion, reflecting an improved operational edge. Indeed, the increase is attributed to lower upgrade activity and disciplined growth.
Moreover, consumer postpaid phone gross adds were approximately 1.8 million in Q2 2024, a 12% YOY increase. Strong performance in mobility and broadband segments contributes to higher EBITDA, which reinforces Verizon’s profitability. Verizon’s free cash flow increased 7% YOY to $8.5 billion in the first half of 2024, which underscores strong cash generation capabilities.
In short, Verizon is on the high-growth dividend stocks list based on solid subscriber growth and increased free cash flow, which boosts its capability to deliver reliable dividend payments.
Has Jeff Bezos Found the Next Nvidia?
If you've sat back and watched companies like Nvidia and AMD soar over 2,000% over the past several years…
And turn $5,000 into $105,000
And wondered what was next…
You need to listen very closely…
Because Jeff Bezos has just found the next big thing…
Realty Income (O)
Realty Income (NYSE:O) is a real estate investment trust (REIT) specializing in retail, industrial, and data center properties. The stock offers a 5.4% forward yield attached to 32 years of dividend growth. Diversification is a key strength for Realty Income. The company diversifies its investments across geography, asset types, and client relationships.
Moreover, in the first quarter of 2024, Realty Income invested $598 million with an initial weighted average cash yield of 7.8%. The investments spanned retail, industrial, and data centers. Over half of the volume, around $323 million, was in Europe and the U.K. This had an 8.2% initial weighted average cash yield. The remaining $275 million was invested in the U.S. at a 7.3% yield. This diversification spreads risk and capitalizes on market opportunities.
Further, the company’s international investments at higher yields seek superior risk-adjusted returns. Realty Income’s portfolio health shows a high occupancy rate of 98.6%. Additionally, the company achieved a rent recapture rate of 104.3% on 198 leases renewed or re-leased. This high rate indicates strong demand and effective lease renewal management.
Overall, Realty Income’s diversified portfolio and high occupancy rates make it a solid mark among high-growth dividend stocks.
Pfizer (PFE)
Pfizer (NYSE:PFE) is a major pharmaceutical company developing innovative drugs and vaccines. The stock provides a 5.5% dividend yield with 15 years of progressive payments. In Q2 2024, Pfizer had a diluted EPS of one cent that was impacted by one-time costs from the Manufacturing Optimization Program. As a result, adjusted diluted EPS, excluding these costs, was 60 cents. Indeed, this difference highlights the impact of operational changes on short-term profitability.
Further, Pfizer raised its full-year adjusted diluted EPS guidance to $2.45-$2.65. This increase reflects more substantial revenue expectations and operational efficiency. The guidance includes a 40-cent earnings dilution due to the Seagen acquisition, indicating that new investments will positively impact EPS long-term despite short-term dilution.
Moreover, Pfizer achieved an adjusted gross margin of 79% for Q2, up from 76% last year. This increase is due to a favorable sales mix from non-COVID products and effective cost management. The improved gross margin demonstrates Pfizer’s successful optimization of its product mix and shows effective control of production costs, which is crucial for sustaining profitability.
To conclude, Pfizer stands out among the top high-growth dividend stocks based on improved gross margins, increased EPS guidance, and strategic investments that reflect the potential for reliable dividend returns.
As of this writing, Yiannis Zourmpanos held long positions in VZ, O and PFE. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Yiannis Zourmpanos is the founder of Yiazou Capital Research, a stock-market research platform designed to elevate the due diligence process through in-depth business analysis.
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