Throughout history, dividend stocks have stood out as enduring favorites for investors, offering stable returns and a reliable income stream.
These publicly traded companies not only present opportunities for capital appreciation but also share a portion of their profits directly with shareholders through regular dividends.
While some investors prioritize growth-focused strategies, others appreciate the stability and long-term potential for gradual increases that dividends provide.
Picked for you
Recognizing these benefits, especially in uncertain market conditions, Finbold decided to conduct a stock market analysis as we approach the end of 2023. This analysis focuses on identifying three promising dividend stocks poised for a potential breakout in the coming year.
Broadcom (NASDAQ: AVGO)
Pressured by macroeconomic headwinds and the dominance of AI-driven Magnificent Seven companies, dividend-paying stocks did not offer much in 2023. However, next year may provide a more favorable environment for these companies, particularly because of the expected rate cuts by the Federal Reserve.
Morgan Stanley’s managing director Charlie Gaffney believes that companies “with solid business franchises” could attract investor attention in 2024 as they “can generate tremendous amounts of free cash to generate distributions and grow dividends in time.”
For this reason, Gaffney picked semiconductor giant Broadcom (NASDAQ: AVGO) as a dividend-paying stock that could do well in 2024. The chipmaker is yielding 1.9% and has performed “phenomenally well” in 2023 with a year-to-date gain of more than 100%.
A yield of 1.9% means that the annual dividends paid by Broadcom represent 1.9% of its current stock price.
Looking ahead, AVGO has more room for growth in the coming year, primarily due to the current cloud computing and AI trends, the analyst said.
Enterprise Products Partners (NYSE: EPD)
Enterprise Products Partners (NYSE: EPD) is a midstream energy company primarily engaged in the transportation, storage, and processing of oil, natural gas, and petrochemical products.
The company has been delivering steady financial performance for years, allowing it to increase shareholder dividends for more than 2 decades. Moreover, its dividend has grown at a compound annual growth rate (CAGR) of 7%.
At the moment, EPD offers a high yield of 7.55% and has returned roughly $51 million to its shareholders through dividends and stock buybacks.
The company estimates that its $6.8 billion in capital projects will be operational by 2025, a move that would add to its organic growth and further drive future earnings, subsequently fueling higher dividend payments.
The stock saw tepid growth in 2023, rising just 8.1% year-to-date.
Extra Storage Space (NYSE: EXR)
The REIT company currently pays a quarterly dividend of $1.62 per share, with a dividend yield of 4.19%. EXR has been distributing significant dividend payments for roughly 13 years and is one of the top-performing REITs over that period.
More concretely, Extra Storage Space has produced over 400% in total return over the last 10 years (17.6% annualized), outperforming the broader S&P 500.
The company’s growth catalysts placed it in a strong position to continue growing its dividend. Although it is unlikely that EXR will continue growing its payout at the same pace, the REIT firm is likely to continue delivering sector-leading dividend growth
The company’s shares have risen over 12% since the start of 2023.
In Q3 2023, the company reported $748 million in revenues, up nearly 50% from a year ago.
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