Dividend stocks will always have a place in any long-term investor's portfolio. The opportunity to generate additional income for your retirement and growth is one of the best deals any investor could get from the stock market. However, not all companies pay dividends, and not all dividend stocks are the same. The good thing is that with the allure of these types of investments, investors have created a classification specifically for dividend stocks. These classifications allow investors to screen for companies with a longer history of paying out dividends and still have room to grow their dividends. This is your middle-of-the-field dividend stock, known as your "Dividend Contender."
What is a Dividend Contender?
A dividend contender is a company that pays dividends and has been constantly increasing its dividend payments for the last 10-24 years. Copmanies with a long history of dividend hikes have proven that these companies have business models that can support increasing dividend payments to their shareholders over the years. This makes dividend contenders a viable addition to any portfolio looking to cash in on the additional stream of income but also its growth.
Now let’s look at some buy-rated dividend contenders offering the highest yields right now.
Cogent Communications Holdings Inc. (CCOI)
Cogent Communications Holdings, Inc. is a multinational, Tier 1 facilities-based Internet service provider (ISP) specializing in providing businesses high-speed Internet access, colocation services, and Ethernet transport. The company offers on-net Internet access services exclusively through its facilities running from its network to its customer's premises. Their offerings cater to customers located in buildings that are physically connected to its network without relying on third-party providers to deliver their services. Its services consist of high-speed Internet access and private network services ranging from 100 megabits per second to 400 gigabits per second. The company mainly caters to small and medium-sized businesses, communications service providers, and others.
CCOI offers a dividend yield of 5.80% and a 5-year dividend growth rate of 97.78%. The company has constantly increased its dividends for 11 years, making it a recent addition to dividend contenders.
Analyst Ratings
CCOI is rated a “Moderate Buy” based on 4 Strong buys, 1 Moderate buy, 3 Holds, and 1 Strong sell recommendation from analysts. The mean target price is $70.33, and a high price of $95.00, an upside of 44.31%.
Verizon Communications Inc. (VZ)
Verizon Communications Inc. is a holding company offering communications, information, and entertainment products and services to businesses, consumers, and governmental agencies. It is one of the big three communications companies in the U.S. It has reportable segments:
- Verizon Consumer Group
- Verizon Business Group
Its consumer segment offers wireless services across the U.S. under the Verizon brand and a wireline communications service that caters to nine states in the Mid-Atlantic and Northeastern U.S., as well as Washington D.C., over its fiber-optic network and traditional copper-based network. Its business segment provides both wireless and wireline communications services and products that include data, video, and conferencing services, local and long-distance voice services, security and managed network services, and network access to deliver various Internet of Things services and products.
VZ has a dividend yield of 7.43%, which is relatively high for its size. The company has a dividend payout ratio of 51.35% and a 5-year dividend growth rate of 10.78%. The company has been increasing its dividend payouts for 18 straight years. Few more years, we may see it as a dividend aristocrat.
Analyst Ratings
Analysts rate VZ as a “Moderate Buy” based on 3 Strong buys, 3 Moderate Buys, and 11 Hold recommendations. The mean target price is set to $43.62, with a high target price of $64.00, a potential upside of 82.91%.
KeyCorp (KEY)
KeyCorp is a bank-based financial services company that operates through its subsidiary KeyBank National Association (KeyBank). Through its subsidiaries, it provides a range of retail and commercial banking, student loan refinancing, investment management, commercial leasing, consumer finance, commercial mortgage servicing, special servicing, and investment banking products and services catered to individual, corporate, and institutional clients. Its services mainly operate in 2 segments:
- Consumer Banking - offers a range of deposit and investment products, lending, mortgage, personal finance, etc.
- Commercial Banking - an aggregation of its Institutional and Commercial operation that delivers capital market products and services to middle market clients.
KEY offers an impressive dividend yield of 8.63% with a payout ratio of 41.34%. Also, its 5-year dividend growth rate is an outstanding 107.98%. The company has also raised its dividend for 11 consecutive years, giving investors a constant stream of increased income in their portfolio.
Analyst Rating
Analyst rate KEY as a “Moderate Buy” based on 5 Strong buys, 2 Moderate buys, 8 Holds, and 1 Strong sell from analyst recommendations. The mean target is set to $13.47 and a high target of $20.00, a potential upside of 102%.
Final Thoughts
Investing in dividend stocks has always been one of the best ways to increase your portfolio growth and income. However, not all companies that offer dividends will be the same. Proper due diligence is always necessary, as a high dividend yield does not always equate to a healthy company.
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.
