Throughout history, investors have often sought refuge in dividend stocks, considering them steadfast havens of continuous income even during tumultuous economic times. A recent study by Hartford Funds underscored that from 1940 to 2023, dividend income contributed an average of 34% to the S&P 500 Index’s total return, demonstrating relatively lower volatility. As the Federal Reserve hints at potential rate cuts in the coming year, dividend stocks could emerge as a compelling option for investors hunting for yield.
Taking this tenet to heart, let’s explore three dividend stocks with enduring track records of payout consistency and robust fundamental performance.
The Costco Wholesale Symphony
Founded in 1976, Costco Wholesale (COST) stands tall as a premier chain of membership warehouses encompassing a vast array of merchandise, ranging from groceries to electronics. With a commanding market cap of $315.5 billion, Costco has witnessed a 6.4% surge in stock performance Year-To-Date (YTD) and proffers a modest dividend yield of 0.57%. Notably, Costco has diligently increased its dividend payouts over the past 19 years, maintaining a comfortable payout ratio of 27.06%, leaving ample room for continued growth.
The latest quarterly results showcased a tale of mixed metrics for Costco. While the fiscal Q2 2024 earnings surpassed expectations, revenue figures fell short. However, the quarter witnessed a 5.7% climb in net sales to $57.3 billion, with an impressive EPS growth of 18.8% to $3.92, outpacing consensus estimates.
Moreover, Costco’s adept management of its warehouse and membership expansions, growing at rates of 3.2% and 6% per year, respectively over the past decade, further underscores its unwavering commitment to generating steady revenue streams, fortifying its defensive allure among investors.
Eager eyes on Wall Street anticipate Costco’s earnings to burgeon by 7.62% and 9.42% in FY 2024 and 2025. Analysts en masse have designated the stock a “Strong Buy,” forecasting a target price of $774.58, signaling a potential spike of around 10% from current levels.
The Cigna Group Saga
Hailing from Connecticut, The Cigna Group (CI) was conceived in 1982 following a merger of two entities and now operates as a global health services behemoth, offering an extensive suite of products and services. With a substantial market cap of $106.15 billion, CI has witnessed a stellar 20.6% uptick in stock valuation this year, with a commendable dividend yield of 1.4% and a modest payout ratio of 19.6% suggesting ample room for future dividend hikes.
The recent quarterly performance of CI sent waves of exuberance through the market as the company outperformed revenue and earnings expectations in Q4. Clocking revenues of $51.1 billion, up 11.7% from the previous year, CI’s EPS surged by 35.3% to $6.79, transcending Street predictions. The company’s strategic launch of its Behavioral Health Practice Group and the burgeoning prospects in its Specialty Pharmacy business underscore its potential for robust growth in the near future.
Enthusiastic analysts envisage CI’s earnings to spike by 13.03% in FY 2024 and maintain an upward trajectory with 12.52% growth in FY 2025. The Wall Street choir deems CI stock a “Strong Buy,” forecasting a target price of $380.63, indicative of a 5.4% upsurge from current levels.
The Resilient Elegance of General Dynamics
Our trio culminates with General Dynamics (GD), an aerospace and defense stalwart founded in 1952 with headquarters in Reston, Virginia. Boasting a market capitalization of approximately $79.7 billion, GD has witnessed an impressive 11.7% YTD stock appreciation and offers a generous dividend yield of 1.81%. With a dividend legacy spanning 29 years, GD’s “Dividend Aristocrat” status is well-deserved, sustained by a sturdy payout ratio of 43.93%.
In the backdrop of its late January earnings disclosure, General Dynamics delivered a mixed bag of results, surpassing revenue estimates while falling short on earnings. With Q4 revenues scaling to $11.7 billion, showcasing a 7.5% escalation from the previous year, GD’s EPS of $3.64, though slightly under the consensus, marked a 1.68% uptick. The recent FAA certification for GD’s business jet, the G700, heralds a promising uptick in earnings for FY 24.
Geopolitical tensions worldwide offer a protective bulwark for GD, as it garners over 70% of its revenues from the U.S. government, a key player in global conflicts. Analysts foresee GD’s earnings to soar by 21.38% in FY 2024, followed by a steady 11.72% growth in FY 2025. The stock enjoys a unanimous “Strong Buy” rating on Wall Street, with a mean target price of $295.93, promising a modest 2% increment from current levels.
On the date of publication, Pathikrit Bose did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are solely for informational purposes. For more information, kindly refer to the Barchart Disclosure Policy.
The viewpoints and expressions articulated herein are those of the author and may not necessarily align with those of Nasdaq, Inc.
