Wagering on dividend growth stocks offering yields of 4% to 8% can harmonize income with capital appreciation potential. However, the tempo of sustainability is imperative to consider as you look to scrutinize the payout ratio, growth prospects, and the firm’s financial health.
A high yield might be a false crescendo, signaling deeper issues in earnings or cash flows. Market rhythms and sector trends compose more layers of complexity, influencing dividend stability. Herein lies the charm of dividend growth stocks. They provide robust regular income with appreciation potential, appealing to those seeking consistency and lower risk. Established with profitable encores, these companies don’t just return cash dividends, they are increasing payouts on a yearly basis.
Ambev (ABEV)
- 3-Year Dividend Growth Rate (10y Median): 11.55%
- Dividend Yield: 5.90%
Ambev (NYSE:ABEV) isn’t a beverage-only company, as it offers a bubbling fountain of diverse offerings, from beers and soft drinks to food products.
Despite a 10% dip in ABEV stock this year, its second-quarter results pour a refreshing glass of resilience. Its proven so with its non-GAAP EPS of R$16 cents and revenue hitting R$18.9 billion, a 5.1% increase year-over-year (YOY). And it particularly impressed with a normalized EBITDA surge of 34.2%. Also, margins are fizzing, with gross margin swelling 170 basis points and EBITDA margin rising 300 basis points.
Looking ahead, Ambev has set the bar high, thirsting for greater robust organic normalized EBITDA growth in 2023 than the 17.1% bump witnessed last year. Moreover, it stands out in terms of profitability, with its net income and EBITDA growth rising to 17.5% and 27%, respectively. Finally, its free cash flow margin remains at an impressive 13% YOY, powering its near 6% yield.
Stellantis (STLA)
- 3-Year Dividend Growth Rate (10y Median): 15.10%
- Dividend Yield: 7.90%
Stellantis (NYSE:STLA), the powerhouse behind Chrysler and a member of Detroit’s Big Three, is more than weathering the recent United Auto Workers’ strike. In fact, it’s cruising with confidence. Despite the industry’s rumblings, STLA stock remains remarkably resilient.
The first half of the year saw Stellantis shift gears, revving up its transition to electrified, software-defined models across its fleet of 14 legendary brands. Revenues accelerated 12% YOY to €98.4 billion, fueled by burgeoning shipments. At the same time, adjusted operating income advanced 11% to €14.1 billion, flaunting a robust 14.4% margin.
On the innovation speedway, Stellantis isn’t tapping the brakes either. Its Pro One initiative, spotlighting commercial vehicles from six brands, promises a turbocharged future. With expected reported earnings today, projected revenue of $46.3 billion might seem a softer purr compared to last year. But savvy investors hear a potential buy-the-dip roar for this 8% yielder.
Cheniere Energy Partners (CQP)
- 3-Year Dividend Growth Rate (10y Median): 12.50%
- Dividend Yield: 7.60%
Cheniere Energy Partners (NYSEAMERICAN:CQP) stands as a compelling tale in the high-voltage world of energy. Amid the dazzle of renewables and EVs, this titan of the liquid natural gas (LNG) industry holds its ground with aplomb.
Sprawling across the Gulf Coast, Cheniere’s operations showcase a network that is nothing short of astounding. It’s a stronghold in infrastructure that remains unmatched and formidable. More than just muscle, the firm rewards shareholders with stability, with it recently announcing a $1.03 per share quarterly dividend, consistent with its history. It currently yields a solid 7.60%, with a track record of dividend growth stretching over six impressive years.
A glance at the books reveals resilience. Despite the price-induced sales slump, net income is robust, up by 31%. More encouraging is that free cash flow margins have climbed a noteworthy 20% YOY. Cheniere isn’t just surviving. It’s thriving, demonstrating that there’s substantial energy in LNG’s reality.
On the date of publication, Muslim Farooque 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.