When investors think about dividends, their first instinct might be passive income. Of course, owning enough dividend-yielding shares could lead to quarterly payouts which one could theoretically live off of.
However, there might be a better way to view dividend stocks. One way is to view dividend as a bonus for owning the stock, allowing you to continuously compound your position in the company. In other words, the best dividend stocks to buy are those worth reinvesting the dividend in, rather than taking the payout in cash.
For savvy investors, this means picking dividend stocks not just based on the percent yield, but also on the future potential value of reinvesting that yield.
In some ways, this mirrors the concept of “money attracts money” which can only be true if two factors remain steady. First, the broader economic trend needs to be in growth, rather than in recession, for dividend yields to keep growing. Second, the company providing the dividend must have an upward trajectory in the works, rather than one of stagnation.
Verizon (VZ)
Last year marked the 17th year that Verizon (NYSE:VZ) raised its dividend, despite a year of decreasing revenues and tightened margins.
However, its Q1 2024 earnings report has shown a jumpstart in its wireless service revenue. The company’s wireless segment saw a year-over-year revenue growth of 3.3%, bringing it to $19.5 billion. Now, that 6.69% dividend yield looks pretty stable.
Read More : The Key Differences Between A Passport Card & A Passport Book
Yet, it’s not only Verizon’s telecom services that drive its growth potential. Rather, the company has been quietly investing in 5G mobile edge computing since 2022, in an attempt to court the business of the future.
Specifically, many analysts, including myself, have forecasted that the need for edge computing — which is a form of live, on-demand, high-speed cloud computing — could catapult Verizon into a new industry.
Moreover, competitors like T-Mobile (NASDAQ:TMUS) and AT&T (NYSE:T) have yet to furnish operational 5G mobile edge networks at the same level as Verizon’s. Pair this early leg up with VZ’s propensity for dividend yield, and you get one of the best dividend stocks to buy for the decade.
Chevron (CVX)
Earnestly speaking, it’s difficult to predict the future of the oil industry. On one hand, many clamor for ending the use of fossil fuels. On the other, many tout its importance as a resource and the economics of the cheap energy it provides.
Regardless of where you stand on fossil fuels, it’s hard to deny the importance of Chevron (NYSE:CVX) to the global energy market.
The best part for investors? Chevron is about to get even bigger. With a $53 billion takeover of Hess (NYSE:HES), CVX stock could soar as investors realize the potential of Chevron’s resources in the expansion of Guyana’s oil industry.
Read More : Federal Judge Suspends Joe Biden’s Plan to Slash Credit Card Late Fees to $8
Moreover, with a 4.15% dividend yield, CVX provides a continuous stream of cash dividends for re-investment in its expansion. Ultimately, regardless of what many current Western governments aim to achieve with the restriction of fossil fuels, there will always be a market for oil and gas.
Ketchup and boxed macaroni might not be in line with current healthy trends, but that doesn’t mean that Kraft Heinz (NASDAQ:KHC) is done for.
Currently, analyst ratings are mixed. Some are saying the stock is overweight, others are calling it a buy. Such has been the general perception of the stock and its brands since it began floundering back in 2017.
Since then, the stock has lost over half of its value, due to shrinking revenues and overall consumer trends shifting away from its products. Moreover, the company’s dividend has remained fixed at 40 cents per share since 2019. Thus, it appears like KHC is in limbo, but that has kept its price steadily growing over the last 5 years.
So, what’s the point for investors? Right now, KHC represents a gargantuan corporation with considerable mass trading at a significant discount. It’s still profitable and could have a lot to offer investors over the next decade if it turns its brand image around.
On the date of publication, Viktor Zarev did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Read More : The Key Differences Between A Passport Card & A Passport Book
Viktor Zarev is a scientist, researcher, and writer specializing in explaining the complex world of technology stocks through dedication to accuracy and understanding.
