3 Dividend Stocks to Double Up on Right Now

The article advocates for dividend-paying stocks, citing that reinvested dividends contributed 85% of the S&P 500's total returns from 1960-2024, making them attractive amidst anticipated lower interest rates. It highlights three specific opportunities: Verizon (VZ), yielding nearly 7% after a recent dip despite strong Q2 results and raised guidance; Realty Income (O), a REIT with a 5.3% monthly dividend yield and a long history of increases; and Kimberly-Clark (KMB), a consumer staple "Dividend King" yielding 4.2% while executing a strategic transformation. These examples showcase income generation and potential value in companies trading at discounts to the broader market.

Analysis

The article emphasizes the significant role of reinvested dividends in long-term wealth creation, noting they accounted for 85% of the S&P 500's cumulative total returns from 1960 through 2024. With interest rates anticipated to head lower and several high-dividend stocks trading at attractive multiples, the current market environment is presented as opportune for income-producing investments. This perspective suggests a strategic shift towards dividend-focused portfolios.

Verizon (VZ) presents a compelling case, with its shares down 8% following a recent CEO transition, pushing its dividend yield to just under 7%. Despite this short-term sentiment dip, the company reported a strong Q2 with revenue up 5% to $34.5 billion and EPS up 8% to $1.18, alongside raised full-year guidance. Its current P/E of 9.3 represents a substantial discount to the S&P 500, and new CEO Dan Schulman brings a proven track record of growth from his tenure at PayPal.

Realty Income (O), a monthly dividend REIT, offers a 5.3% annualized yield and has a history of 111 consecutive quarterly dividend increases, achieving a 13.5% compound annual return since its 1994 IPO. Kimberly-Clark (KMB), a Dividend King with 53 consecutive years of payout increases and a 4.2% yield, is executing a strategic transformation to enhance growth and profitability. Both companies provide defensive characteristics and consistent income streams, trading at P/E ratios (16.6 for KMB) below the S&P 500 average.

Key Decisions for Investors

• Consider increasing exposure to dividend-paying stocks, particularly given their historical contribution to total returns and the current interest rate environment.
• Evaluate Verizon (VZ) for its attractive nearly 7% yield and discounted valuation, noting its strong Q2 performance and the potential for renewed growth under new leadership despite recent share price volatility.
• Assess defensive income plays like Realty Income (O) and Kimberly-Clark (KMB) for their consistent dividend growth, relative valuation discounts, and portfolio stability, especially amidst broader economic uncertainties.