The Dividend Dreamboats: 3 Stocks That Will Make Your Portfolio Swoon

Stocks to buy

Dividend stocks attract many investors due to their cash flow. You can receive quarterly payouts that grow every year while holding onto your shares. Dividend investors who reinvest their payouts will receive larger dividends every quarter.

However, you don’t only have to benefit from cash flow. Some dividend-paying corporations continue to outperform the stock market while distributing cash to their investors. Strong financials are a common pillar for all of these companies. You typically see rising profits and strong top-line growth. You should look for those details with any stock. But dividend stocks offer additional information that you can’t get from growth stocks.

Further, it’s usually a good sign if a dividend-paying company has maintained an impressive dividend growth rate over several years. If a company raises its annual dividend from $1 per share to $1.01 per share, that doesn’t exude much confident. However, a company that raises its annualized dividend from $1 to $1.20 looks more promising. 

So, if you’re looking for some ideas, you may want to monitor these dividend stocks.

Watsco (WSO)

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Watsco (NYSE:WSO) distributes air conditioning and heat refrigeration equipment in the U.S. The company has been in business since 1956 and has delivered impressive returns for investors. Shares are up by 10% year-to-date (YTD) and have gained 183% over the past five years.

Despite those gains, Watsco still offers a respectable 2.33% yield. Dividend growth remains strong at an annualized growth rate of 10.49% over the past five years. 

Also, Watsco held its financials steady in the first quarter with a 1% year-over-year (YOY) improvement in revenue. The company achieved record cash flow and mentioned improved business trends ahead of the summer selling season. This tailwind should help the company deliver better earnings in the future. Net income was lower YOY, but the company maintained a 5.6% net profit margin.

Thus, investors get a nice dividend while they wait for the stock to regain momentum. The corporation should also continue to hike its dividend at a growth rate close to or at double-digits.

Alphabet (GOOG, GOOGL)

Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) has been outperforming the stock market for more than a decade. The tech giant has received more interest from investors as it keeps costs under control and logs impressive gains. Shares are up by 26% YTD and have soared by 224% over the past five years.

Recently, Alphabet issued its first dividend which is $0.20 per share. Since the tech company is raising its profit margins and swimming in money, investors can expect a high growth rate for several years. The current yield is 0.45%.

Advertising accounts for most of Alphabet’s revenue and played a pivotal role in the company’s successful first quarter. Overall revenue increased by 15% YOY while net income was up by 57% YOY. Additionally, Cloud computing has been a notable growth driver in recent quarters. This segment makes up more than 10% of total revenue and should continue to grow as artificial intelligence (AI) raises the demand for cloud platforms.

American Express (AXP)

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American Express (NYSE:AXP) has been outpacing the stock market with a 24% YTD gain and a 91% increase over the past five years. The credit and debit card issuer trades at a 19 P/E ratio and offers a 1.20% yield.

The company makes a small percentage out of each transaction through an AMEX credit or debit card. Those transactions should become more frequent as the company continues to win support among Millennials and Gen Z consumers. American Express revealed that it’s attracting more of those consumers in its Q1 of 2024 press release, which also covered the company’s earnings. Revenue increased by 11% YOY while net income surged by 34% YOY. 

The financial firm trades at a more reasonable valuation than several competitors. Also, American Express has been expanding its profit margins which can result in high dividend hikes in the years ahead. A recent 17% dividend hike suggests that American Express can maintain its stellar dividend growth rates.

On this date of publication, Marc Guberti held a long position in GOOG. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Marc Guberti is a finance freelance writer at InvestorPlace.com who hosts the Breakthrough Success Podcast. He has contributed to several publications, including the U.S. News & World Report, Benzinga, and Joy Wallet.

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