Wednesday, May 29, 2024
Stock Market

If You Can Only Buy a Dividend Stock, It Better Be One of These

It’s nice to own stocks that are well-positioned to rally and pay you for waiting for them to do so. That’s especially true for older investors who want to buy stocks, and generate income. Even better, companies with significant dividends usually have strong, stable businesses. As a result, dividend stocks tend to be a good fit for conservative investors. With that said, here are seven of the best dividend stocks to buy now.

Best Dividend Stocks: Volkswagen (VWAGY)

German automaker V0lkswagen (OTC:VWAGY) boasts a 5.6% dividend yield. And the company’s top line surged 18% last quarter, year over year. Plus, in the first half of the year, operating profits surged 13% to 13.9 billion euros. Boding well for the company’s long-term outlook, its deliveries of electric vehicles soared 50% year-over-year in the first half of 2023.

Additionally, I’m bullish on Volkswagen’s decision to partner with two Chinese automaker, SAIC and Xpeng (NYSE:XPEV). Partnering with these firms will increase Volkswagen’s chances of developing models that appeal to Chinese consumers, since the Chinese automakers likely have a deeper understanding of the local market than the German automaker does. Further, as I’ve noted in past columns, Xpeng is a leader in advanced driver assistance systems.

Best Dividend Stocks: Intel (INTC)

Intel’s (NYSE:INTC) dividend yield is only 1.4%. But, with the chip maker’s business on the comeback trail and boasting multiple, positive, long-term catalysts,  I would not be surprised if the firm meaningfully raises its payout in a year or two.

The sales of Intel’s largest business, its Client Computing unit, jumped to $6.8 billion in Q2 from $5.8 billion in Q1. And the revenue generated by its Data Center and AI business increased to $4 billion last quarter from $3.7 billion in Q1. Also encouragingly, the sales of the company’s chip manufacturing business climbed 307% year-over-year to $232 million. I expect the company to become a big beneficiary of the AI revolution.

Best Dividend Stocks: GSK (GSK)

GSK (NYSE:GSK) has a hefty dividend yield of 3.86%.

The company has multiple, rapidly growing vaccines and treatments, including its cervical cancer vaccine, its shingles vaccine, and its HIV drugs. Moreover, GSK’s RSV vaccine and one of its cancer treatments, Jemperli, look poised to be blockbusters.

Despite all of these positive drivers, GSK stock has a very low forward price-earnings ratio of just 9.3. I think that’s because investors were worried about the lawsuits the company faced over Zantac. However, a federal judge earlier this year dismissed all of the federal lawsuits related to the drug, and GSK was able to settle one of the first lawsuits against it in a state court over the drug. Given these points, I don’t expect GSK to be badly hurt by the litigation over Zantac.

IBM (IBM)

IBM (NYSE:IBM) has an enticing dividend yield of 4.7%.In a previous article,  I noted that the company had unveiled Watson X, which Barron’s calls “new software platform for building enterprise AI models and applications. ”

Moreover, an analyst referred to Watson X as a potential “blockbuster.” Not long after, more than 150 enterprises, including Citi and NASA , were already using the system. Also noteworthy, Bank of America said IBM’s AI business is taking off, noting that the number of consulting deals it signed had rise 24% last quarter versus the same period a year earlier.

Speaking of last quarter, the revenue of OpenShift, IBM’s hybrid cloud platform, soared over 30% YOY in Q2 “and now has $1.1 billion in annual recurring revenue, CFO Jim Kavanaugh reported. Analysts, on average, expect the company’s earnings per share to climb to $10.05 in 2024 versus $9.13 in 2022. Given these points and the fact that the shares have a low forward price-earnings ratio of 15, I view IBM as one of the best dividend stocks to buy now.

Restaurant Brands International (QSR)

Restaurant Brands International (NYSE:QSR) has a 2.8% dividend yield. Starting in the latter half of 2022, I became upbeat on QSR stock due to the popularity of its restaurants. Later, I became even more enthused after it hired Patrick Doyle, the brains behind Domino Pizza’s (NYSE:DPZ) turnaround.

In May, QSR showed that my faith in it was not misplaced, as it reported that its revenue had soared 9.7% in the first quarter versus the same period a year earlier, while its global comparable sales jumped 10% year-over-year. Further, its BITDA, excluding certain items and acquisitions, increased  15.6% to $588 million.

General Motors (GM)

General Motors (NYSE:GM) only has a 1% dividend yield. But given the strength of its recent financial results and of the U.S. auto market, I believe that the automaker is likely to raise its payout.

On July 25, GM delivered “beat and raise results” for the second quarter, as its bottom line jumped 52% versus the same period a year earlier and the firm ” increased its 2023 sales guidance to $12 billion – $14 billion from $11 billion – $13 billion.” Wall Street appears to have been pleased with the results. Also importantly,. GM should benefit from the strengthening U.S. auto market, while it’s making significant strides when it comes to electric vehicles and autonomous vehicles.

Darden Restaurants (DRI)

Darden Restaurants (NYSE:DRI) has an attractive dividend yield of 3%. The company owns multiple, iconic restaurant chains, including Olive Garden, Bahama Breeze, and Longhorn Steakhouse.

On June 22, the company reported strong fiscal fourth quarter results. Specifically, its revenue climbed 6.4% versus the same period a year earlier, while its earnings per share jumped 15% year-over-year and its same restaurant sales increased 4% YOY.

While I do expect the growth of spending on vacations to slow, I believe that the continued, strong labor market will enable U.S. consumers to continue to spend a great deal of money on eating out. Of course, DRI is likely to benefit from that trend going forward. Analysts, on average, expect DRI’s EPS to climb by an impressive average of 9% in each of the next five years.

On the date of publication, Larry Ramer was long XPEV and INTC. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been PLUG, XOM and solar stocks. You can reach him on Stocktwits at @larryramer.

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