Investors buy dividend stocks for a few reasons. For one, they provide income via dividends that act as a bonus on top of capital appreciation over time. It’s always nice to see the stock prices of companies in your portfolio rise. To then get an extra few percentage points of performance through dividends is an added bonus. Second, firms that pay dividends tend to be more stable. They also tend to grow over time in a relatively predictable manner.
It’s a simple but powerful combination that has served investors well and will continue to serve them well. What’s also nice is that in these inflationary times, dividends serve to blunt the effects of rising prices.
Here are seven of the best dividend stocks to buy, for those seeking both income and upside in this current market.
Solaris Oilfield Infrastructure (SOI)
Solaris Oilfield Infrastructure (NYSE:SOI) is an interesting dividend stock for energy investors.
The firm’s most recent earnings report notes that Solaris Oilfield Infrastructure “provides mobile equipment that drives supply chain and execution efficiencies in the completion of oil and natural gas wells.” That’s a bit vague. Those mobile systems deliver proppant which is a solid material like ceramics or treated sand, used to keep hydraulic fractures open in oilfields.
Solaris Oilfield Infrastructure’s fundamentals portray a sort of mixed bag. Revenues declined by 10.96% in Q2, falling to $77.2 million. That isn’t positive no matter how you spin it. However, revenues did increase by over 11% during the first half of 2023. Additionally, Solaris Oilfield Infrastructure’s net income increased in both Q2 and the first six months of the year.
More income means the company can easily continue to pay dividends that currently sit above 4%.
Valero (NYSE:VLO) is another energy stock investors should take a look at. Many readers will recognize Valero for its gas stations which are ubiquitous throughout the U.S. However, Valero is also among the largest oil refiners globally, operating 15 refineries across the U.S., Canada, and the U.K. Valero has also grown to become the world’s second-largest refiner of renewable diesel.
The company, like nearly every other energy firm, has had a wild few last years. Indeed, 2021 provided massive growth for the firm with revenues growing more than 75% to $113.97 billion. Of course, 2022 was even better. The company’s revenue soared above $176 billion, but is generally considered to be an aberration year, given the company’s record profitability. That said, this year Valero should easily eclipse its 2021 top-line performance.
There’s nearly $20 of upside beyond VLO’s current share price, per consensus views. Add to that a dividend yielding above 3% that hasn’t been reduced in 13 years, and Valero becomes very attractive.
Public Storage (PSA)
Public Storage (NYSE:PSA) offers investors three things that I’d argue make it a screaming buy at this point: growth, value, and relatively strong income for investors.
The growth argument is very straightforward in regard to Public Storage. The firm’s 3-year revenue and EBITDA growth rates are near the 90th percentile within its sector. Public Storage also released strong earnings on Aug. 2 that showed continued growth in 2023.
The value argument behind PSA stock is also simple. Currently, PSA stock trades lower than 61% of competitors relative to earnings, suggesting that it is currently undervalued and a potential deal for investors.
And then there’s the income argument for Public Storage. The dividend’s forward yield exceeds 4%, which is relatively high. While the yield is relatively high, the firm hasn’t reduced the dividend since 1992. It is precisely the kind of high-yielding, lower-risk option investors should want to consider.
Recall a recent trip to the supermarket and you’ll understand why PepsiCo (NYSE:PEP) is a buy. High prices and high demand for its products have resulted in continued strong earnings for the firm.
A bag of chips and a soda costs more than it did in the recent past. However, it hasn’t fazed snackers, with consumers continuing to absorb price hikes for snacks. Pepsi CFO Hugh Johnston notes that snacking hasn’t suffered a demand pullback like higher ticket items have. He characterizes soft drinks and snacks including Mt. Dew and Lay’s as affordable luxuries that remain in high demand. Johnston also notes that these small luxuries are taking the place of larger items as consumers tighten their purse strings.
The effect has been positive for Pepsi, as Q2 revenues exceeded Wall Street’s expectations by $600 million. The bonus for investors is that even as Pepsi surges, it continues to offer upside based on share price consensus expectations.
Kraft Heinz (KHC)
Kraft Heinz (NYSE:KHC) is another food producer stock investors should consider for its dividend and growth profile, although its narrative is different from that for Pepsi.
The primary difference between the two is that Kraft Heinz didn’t beat revenue expectations in Q2. Sales grew by 2.6% to $6.72 billion, falling somewhat short of expectations. However, the 79 cents in earnings from the firm did exceed expectations and increased 12.9% on a year-over-year basis.
Strong earnings mean the firm can reinvest in its business lines while also continuing to reward investors with dividend payouts. Kraft Heinz includes a dividend yielding 4.5% currently. That’s an attractive proposition for most investors.
The company expects organic revenue growth in the range of 4-6% this year. In Q2, organic revenues grew by 4%, so it’s entirely reasonable to expect that range to continue to year-end. Kraft Heinz shares sport a beta of 0.67, so it’s a good place to park capital for the purposes of preservation while simultaneously offering dividend income.
It’s currently a great time to make a bet on Pfizer (NYSE:PFE). The company is undergoing a Covid-19 vaccine hangover. It’s gone from a massive winner to a “what have you done for me lately” story in the eyes of many investors.
The pandemic is over, meaning Pfizer’s cash flows from its vaccine have dried up. This led to the company visibly missing revenue expectations for the second quarter. What, then, should logically galvanize investors to put their capital behind Pfizer at this point?
The answer is growth expectations. The company has given notice that it will roll out 19 new products or new uses in the coming 18 months. Investors will receive a dividend that adds nearly 5% to their returns for making that bet on the company’s future growth.
Pfizer is doing what winning pharmaceutical firms do – creating blockbuster products, reinvesting windfall revenues into future growth, and developing the next iteration of that growth cycle. Notably, PFE stock is as cheap as it’s been this year. The income and upside narrative is stronger for PFE stock than just about any other pharmaceutical name right now of this quality.
Brookfield Renewable (BEPC)
Brookfield Renewable (NYSE:BEPC) is something of a hybrid between utility stock and green energy growth stock. The firm owns and operates a portfolio of renewable energy assets that provide income, hence its likeness to utility firms. Meanwhile, it clearly touches on the growth trends the green energy sector provides, and therefore offers meaningful upside.
Wall Street certainly believes that Brookfield Renewable will provide meaningful upside to investors. The consensus price target analyst have assigned BEPC shares is $10 above its current price of $28. Brookfield Renewable provides substantial dividend income with a yield of 4.8%. That combination has kept the firm on the radar of many investors, who may be looking for undervalued income-producing gems.
I would note that BEPC shares are inexpensive as well. The company’s price-to-earnings ratio of 3.45-times means that shares are priced lower than 91% of competitors relative to earnings. Thus, Brookfield Renewable is another very compelling growth and income story to consider now.
On the date of publication, Alex Sirois 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.