As interest rates stay higher for longer, pushing traders towards fixed-income alternatives, dividend stocks return to investors’ strategies after being sidelined for years. However, the terrain for dividend stocks has evolved, reflecting broader investment preferences and strategy shifts.
In the past, during the era of zero interest rates, investors eagerly funneled money into growth stocks, promising significant future returns while overlooking the financial solidity of these companies. However, the current investment climate is more discerning, with a marked shift away from speculative stocks in favor of more reliable options.
That trend is clear when looking at dividend stocks, albeit with a twist. Investors now seek the stability typically associated with dividend-paying companies and the potential for long-term growth within these value investments. With short-term Treasuries offering yields above 5%, income stocks need to provide substantial appeal through higher yields, prospects for long-term capital appreciation or, ideally, a combination of both.
Medtronic (MDT)
Medtronic (NYSE:MDT) is an exceptional dividend stock. It combines the stability inherent in medical device sales with aggressive shareholder value initiatives.
In the wake of the pandemic, as surgical procedures began to rebound, Medtronic’s current share price is increasingly attractive from a value perspective, particularly given the company’s deep-rooted commitment to its dividend program. With a history of nearly five decades of consistent dividend growth, Medtronic has lived up to its CFO’s pledge to return a minimum of half its free cash flow to shareholders in 2023, hitting a respectable 3.5% total yield.
A pioneer in the medical device industry, Medtronic capitalizes on its culture of innovation by forging collaborative, risk-managed partnerships with hospital networks to enhance patient outcomes and curtail healthcare costs. These alliances make Medtronic an attractive collaborator amid rising healthcare costs. Coupled with continuous technological advancements, including a strategic partnership with Nvidia (NASDAQ:NVDA), Medtronic is poised for future growth, further improving its dividend stock potential.
Realty Income (O)
Realty Income (NYSE:O) is usually somewhere on a list of dividend stocks to buy, but that’s because it’s such a solid dividend stock and offers monthly distributions. Recent per-share pricing may seem troubling, but it conceals Realty Income’s recent growth initiatives and long-term potential as a dividend stock.
With an impressive occupancy rate exceeding 98% across its portfolio and 80% of its retail tenants operating in industries known for their resilience during economic downturns, Realty Income is the definition of a “recession-proof” business. At the same time, the company’s triple-net lease structure transfers all operational risks and expenses, including maintenance costs, to its tenants, effectively shielding Realty Income from escalating costs of materials and labor. Additionally, the firm enjoys the security of long-term leases, with an average exceeding 15 years and an active lease duration nearing a decade.
Moreover, Realty Income is actively seeking avenues for expansion, notably through a recent sale-leaseback deal with French retail giant Decathlon SE. That strategic move, combined with the stock’s attractive valuation and dividend reliability, positions Realty Income as a prime candidate for investors aiming to secure top dividend stocks in the current market.
AT&T (T)
AT&T (NYSE:T) is carving out its niche as an exciting growth-oriented dividend stock, not just offering a substantial 6.53% total yield but also driving forward the vision of a globally connected future. A key investment underscoring this growth strategy is its funding of AST SpaceMobile’s (NASDAQ:ASTS) project to launch satellite-based cell services, anticipated to commence commercially in 2024. This initiative significantly enhances AT&T’s growth outlook for 2024, challenging the stereotype that dividend stocks lack excitement and are merely stable investments.
In its latest earnings report, AT&T displayed its forward momentum, even though its earnings didn’t meet analysts’ predictions. That shortfall presents an attractive entry point for investors, especially when growth potential is considered. The report boasted a nearly 4% increase in wireless service revenue year-over-year, highlighting AT&T’s success in retaining customers and strategically adjusting prices in a tough economic environment. Notably, AT&T’s postpaid phone net additions, totaling 526,000, surpassed the anticipated 487,500, a remarkable feat given the competitive nature of the telecom industry.
The performance not only demonstrates AT&T’s strong market position but also signals promising growth potential, especially if its investment in AST SpaceMobile’s innovative satellite cell service project delivers as expected.
On the date of publication, Jeremy Flint held no positions (directly or indirectly) in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.