I’ve been trading stocks and options since the Netscape IPO, and one of the biggest myths I’ve heard is, “Dividend investing is boring.” This mostly stems from the misconception that dividend stocks are safe and prices don’t move too much.
Certainly, there’s something to be said about the massive, triple-digit price movements of tech stocks and the like. However, they also present massive risks to investors who can’t time their entries right or are simply driven by FOMO.
On the other hand, dividend stocks that can grow 20% annually can double your money in less than five short years. Couple that with consistent dividend payouts, and your portfolio could be looking at not-insignificant growth over the long term.
So, today, let’s look at some of the best dividend stocks, with at least 30% upside - let's call it a high degree of growth potential.
How I Screened For The Best Dividend Stocks Today
Usually, I screen stocks using pre-prepared watchlists, but today, I wanted to scan the whole stock market. That means NYSE, AMEX, NASDAQ, Over-The-Counter, and even non-common stocks. Barchart’s Screener feature allows me to do just that, with the added benefit of fine-tuning my search with dozens upon dozens of technical and fundamental metric filters.
For this analysis, I used the following filters:
- CURRENT ANALYST RATINGS — 4.5 and above (Strong Buy Recommendation). This filter gives me an idea of the overall sentiment around the stock. Strong buy recommendations are often based on a company’s future outlook, current product line-up, and/or impressive performance.
- NUMBER OF ANALYSTS — 16 and above (Very High). I’ve been using this filter for a lot of my stock screens. That’s because having a good score is not enough; you also need to consider how many people, or, in this case, how many financial analysis firms, gave the stock a good score. Anyone with any background in research knows that sample size is important in getting better, more accurate results.
- ANNUAL DIVIDEND YIELD (%) — 4.5% and above (High to Very High). I often say that high dividend yields aren’t the end-all, be-all of income investing. However, it is an important consideration, especially when looking for the best dividend stocks in the market. So, I set the filter to 4.5% and above.
After setting my filters, I clicked on SEE RESULTS, which returned four companies from thousands of listed US stocks. Then, I checked their potential upsides based on analysts’ high target prices and ensured that only companies with more than 30% upside potential were included.
So, let’s look at the top three, which I will present based on the order of lowest to highest yields.
Diamondback Energy (FANG)
Let’s start with a company that has a strong snake motif. Diamondback Energy is an independent oil and natural gas company based primarily in the Permian Basin. The company is focused on acquiring, developing, and exploring oil and natural gas reserves. Diamondback also holds mineral interests in the Permian Basin through its subsidiary, Viper Energy.
Diamondback recently announced its Q1FY’24 results, and they’re looking good. Total revenue reached $2.23 billion, increasing 16% year over year. Basic EPS also increased from $3.88 to $4.28.
In Q1'24, the company paid 90 cents in base dividend and a $1.07 variable dividend, for a total of $1.97. Due to the variable dividend, Diamondback’s annual payout fluctuates, so forward yields will not be accurate. On a trailing twelve-month basis, however, the company has an annual rate of $9.26, translating to a 4.69% yield.
It also has an impressive 4.71 average score based on 24 analysts and has a 33% upside potential based on its high target price of $263.
Vici Properties Inc (VICI)
I discussed Vici Properties in my latest piece about highest-yielding REITs. Seeing it on this list again strengthens my conviction that it is a good pick as one of the best dividend stocks.
Vici Properties owns and operates hospitality and entertainment properties and has quite an attractive portfolio that includes Caesars Palace, MGM Grand, and the Venetian Resort in Las Vegas.
Vici’s Q1’24 results are in, and they’re looking great. Total revenue grew 8.4% YOY, while adjusted funds from operations per share grew 6.1%. As a result, the company has reaffirmed its 2024 full-year guidance.
Its positive price performance is reflected in its 4.67 average score from 21 analysts, and it has an upside potential of 53.24% based on a $43 high target price.
Dividend-wise, the company is expected to pay $1.66 annually, translating to a 5.91% yield. However, as I mentioned in the REITs article, it typically increases dividends during the September announcement, so you have that to look forward to.
Enterprise Products Partners LP (EPD)
Not only is Enterprise Products number one on this list of the best dividend stocks right now, but it is also a newly minted Dividend Aristocrat—though still on an unofficial basis until the S&P updates or rebalances the Aristocrat Index.
Enterprise Products is a midstream energy service. In short, it gathers, transports, and stores natural gas, crude oil, refined products, and petrochemicals, connecting producers to consumers. The company saw marginal growth across most financial metrics in Q1FY’24, including operating income, net income, and diluted EPS.
EPD stock has a $2.06 forward annual dividend rate, translating to an impressive 7.32% yield. Not only has EPD increased dividends for 25 years straight, but the company has also raised dividends four times in the last two years. With its reasonable pace of growth and excellent prospects, 17 analysts have given EPD stock an average score of 4.65 and a 32% upside potential based on its $37 high target price.
Final Thoughts
“Safe” doesn’t always mean boring or slow-moving, as these top-shelf dividend stocks clearly show. If income investing is not for you, then, by all means, trade within your risk tolerance. However, these three stocks might be your best bet if you’re looking for safe investments with excellent potential returns.
On the date of publication, Rick Orford 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.
