Dividend Darlings: Uncovering Robust Income Opportunities Amidst AI Frenzy

TipsForTraders | June 6, 2024

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Dividend stocks, long cherished for their ability to furnish investors with a steady income stream, continue to present significant opportunities for total returns. Total returns not only account for the yield obtained through dividends but also factor in capital gains and other distributions an investor might accrain over the period of holding. For instance, if an investor buys a stock at $20 that yields a 3% dividend and its price escalates to $22 within a year, the investor realizes a 13% total return—10% from the price appreciation and 3% from dividends.

Over the past 15 years, our coverage at 24/7 Wall St. has spanned various market cycles, yet the current scenario is quite unique. Despite the excitement surrounding breakthroughs in artificial intelligence, several top-tier companies offering substantial dividends have been overshadowed. As AI reshapes industries and daily living, savvy investors might find now an opportune time to scout for undervalued stocks in this sector.

However, a word of caution is due following standout earnings from Nvidia Corp. (NASDAQ: NVDA) and its subsequent 10-for-1 stock split, which added further momentum to an already vigorous stock market rally. Investors should remain vigilant as potential recessions or major market corrections could surface in the latter half of the year.

Highlighted below are three stocks that stand out this June for their dividend yield and market potential:

Altria Group Inc. (NYSE: MO): This titan in the tobacco industry offers a lucrative entry point for value investors with an attractive 8.46% dividend yield. Altria’s portfolio includes well-known brands such as Marlboro and Black & Mild, and more recent ventures like the on! Oral nicotine pouches. Despite selling a portion of its stake in Anheuser-Busch InBev S.A. (NYSE: BUD), Altria still retains a significant shareholding, supplemented by a $2.4 billion stock buyback plan.

Chevron Corp. (NYSE: CVX): As a beacon of stability in the energy sector, Chevron provides a secure 4.14% dividend yield. It operates across the upstream and downstream sectors, dealing with crude oil, natural gas, and an array of petrochemical products. Its recent move to acquire Hess Corp. (NYSE: HES) in a massive $53 billion all-stock deal underlines its strategic ambitions to bolster its portfolio, despite facing legal and arbitration challenges that might delay the deal’s finalization.

Pfizer Inc. (NYSE: PFE): Previously soaring high with its COVID-19 vaccine, Pfizer now navigates through a phase where booster uptake has dwindled. Nonetheless, with a solid 5.68% dividend—which has seen consistent annual increases for 14 years—and a diversified product range in therapeutics, Pfizer remains a prime pick for dividend seekers. Despite reporting a decrease in profits, Pfizer’s earnings still exceeded expectations, maintaining its appeal among investors looking for high-yield opportunities in the pharmaceutical sector.

In conclusion, while the allure of cutting-edge technologies like AI captivates much of the investment world’s attention, substantial value still lies in traditional sectors through dividend stocks. Investors who choose to diversify their portfolios with these resilient dividend payers are not just investing in companies but in their continued ability to generate income through thick and thin. As the landscape evolves, these stocks provide a financial buffer and an opportunity to benefit from market corrections and economic shifts, proving that sometimes, traditional investment avenues remain among the safest bets.