Dividend stocks have long held a special place in the hearts of investors, especially for those who value relative stability and a steady stream of income. In the current environment, with so many high-yield stocks taking a trip to the woodshed in 2023, the spotlight now is squarely on dividend stocks that not only offer regular shareholder payouts, but also have a track record of long-term price stability - names that have consistently outperformed analysts' expectations and delivered robust earnings.
To avoid falling into any unexpected yield traps, our selection of top dividend stocks here is based on their historical performance, dividend track record, and future growth potential. So, if you're eager to shore up your portfolio as the major market benchmarks fall into correction territory, take a look.
CSCO: A Generous and Growing Tech Dividend
Cisco Systems (CSCO) is one of the leading technology companies in the world, providing networking, cloud, security, and collaboration solutions to businesses and consumers. The company has a long history of rewarding its shareholders with generous and growing dividends.
CSCO currently yields 2.92% annually, and has increased its dividend each year consistently for over a decade. In 2023, Cisco stock is up about 11% YTD.
The tech giant already holds a massive 41% market share of the enterprise networking pie globally, but revenue from software and services is growing. Priced at 13 times forward earnings, CSCO is attractively valued compared to the sector median. Plus, their balance sheet is solid, which is a positive for tech companies in this high interest rate environment.
In the past four quarters, CSCO has consistently outperformed consensus earnings estimates. Looking ahead, their earnings per share (EPS) is expected to grow by 4.68% this fiscal year and 4.19% next fiscal year.
Now, if you're eyeing CSCO, the mean target price is around $59.28. That's about 15% upside from current levels. Out of 19 analysts, six say it's a “strong buy,” two go for a “moderate buy,” ten say “hold,” and one suggests a “strong sell.”
BKR: A High and Sustainable Energy Dividend
Baker Hughes (BKR) is a leading energy technology company that provides solutions for the oil and gas, LNG, and renewable energy sectors. The company has been delivering strong growth and profitability, as well as rewarding its shareholders with a high and sustainable dividend.
In 2023, Baker Hughes’ stock price has soared by 20% - significantly outperforming the S&P 500 ($SPX), and on pace with the Nasdaq Composite ($NASX).
So, what's fueling this growth? Along with higher energy prices, Baker Hughes secured quite a few new LNG contracts during Q3. The latest bottom-line beat continued a trend of topping Wall Street's expectations.
And, of course, when we talk about Baker Hughes, we've got to talk about dividends. The stock currently boasts an annual dividend yield of 2.20%, with the payout to shareholders growing every year since 2017. The company maintains a dividend payout ratio of 52%, striking a balance between rewarding shareholders and fueling its own growth.
As for analyst sentiment, the consensus leans toward a “strong buy,” which is the endorsement from 14 out of 18 analysts tracking the stock. Two recommend a “moderate buy,” and 2 more advise a “hold.” The average target price for the stock is $40.37, indicating 14% potential upside from current levels.
EQIX: A Strong and Steady Data Center Dividend
Equinix (EQIX) is a leading data center REIT that provides digital infrastructure solutions for enterprises, cloud providers, and network operators. Despite a tough market for REITS generally in 2023, Equinix’s stock price has risen by 10% to keep pace with the S&P 500.
The main driver behind Equinix’s resilience in the REIT space is likely its tech footprint, offering exposure to strong secular tailwinds like digital transformation, cloud adoption, and the explosive growth of artificial intelligence (AI). Notably, Equinix’s interconnection revenues - a key source of recurring revenues - increased sequentially in Q3, while EPS of $8.19 once again surpassed Wall Street's expectations.
Equinix also hiked its quarterly dividend by 25% to $4.26 per share, extending its 8-year streak of dividend growth. The company's dividend yield currently stands at 1.85%.
Analysts are looking favorably at EQIX, with the average target price of $834.33 suggesting 17% upside from current levels. Among 21 analysts, 13 say it's a “strong buy,” 1 advises a “moderate buy,” and 7 recommend a “hold.”
Takeaway
These high-quality dividend stocks warrant serious consideration for inclusion in your portfolio. Amidst market uncertainty, these stocks offer long histories of reliable dividend payments, solid earnings, and plenty of potential for future growth. While it's crucial to conduct your due diligence and weigh these options against your investment goals and risk tolerance, these companies all deserve a closer look as you work on shaping a diversified and potentially rewarding portfolio.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
