3 Top Dividend Stocks for Stable Income

Dividend stocks are rightfully a staple in today’s investment portfolios because they offer regular, ongoing cash payments. But when a company can deliver steady share price appreciation in addition to stable payouts, a virtual holy grail is reached.

So, what are three top dividend stocks that look most promising now?

PepsiCo

PepsiCo, Inc. (NASDAQ:PEP) products are enjoyed more than a billion times each day in over 200 countries.

The company’s portfolio is one that contains the world’s most iconic brands, each of which generates more than $1 billion annually in retail sales. In 2023, PepsiCo reached net revenues of $91.4 billion thanks to its wide range of sports and soft drinks and ready-to-eat foods.

PepsiCo hasn’t slowed down this year by any means either. In Q1 2024, PepsiCo’s net revenue rose by 2.3% year-over-year, reaching $18.25 billion while gross profit rose by 1.5% year-over-year, to $10 billion.

Profit margins increased between Q2 and Q3 2024 to $2.72 billion, while net income grew by 5.7% compared with Q3 2023.

Back in April, management stated that the quarterly dividend would be $1.355 for each share of common stock, 7% higher than Q3 2023.

Q2 2024 payments were made on June 28, 2024, to all shareholders of record as of June 7, 2024, marking the company’s 52nd consecutive annual dividend increase.

PepsiCo pays an annual dividend of $5.42 per share, which is a return of 3.26% based on the current stock price. In the last three years, the company’s dividends have grown at a CAGR of 7.5% and it’s noteworthy that the average yield over the past four years is 2.73%, a good bit lower than the present yield.

PerpsiCo stands out for its impressive margins, especially its trailing-12-month gross profit margin is 54.15%, which is 53.2% higher than the industry’s average of 35.35%. Another standout statistic it that the company’s trailing-12-month EBITDA margin of 17.83% is 38.4% higher than the industry average of 12.89%.

This year is anticipated to be one of highest revenue-generating years for PepsiCo’s with $94.42 billion forecast. Meanwhile, analysts say earnings-per-share could rise by 7.1% compared to FY 2023. In each of the last four quarters, PepsiCo has outperformed expectations for EPS.

Looking ahead to next year, it’s forecast that revenues will rise by 4.6% while EPS is set to go up by 8.1% compared to FY2024. 

Analysts are optimistic about PepsiCo’s stock and forecast a rise of 13.79% to reach a consensus target price of $185.03.

McDonald’s

McDonald’s Corporation (NYSE:MCD) has more than 40,000 locations in over 100 countries. Remarkably, about 95% of its restaurants around the world are owned and operated by local independent franchisees, allowing the company to collect a percentage of sales, which remain in the billions.

Earlier this year, McDonald’s saw total revenues increase by 4.6% from the prior year to reach $6.17 billion while operating income rose by 8.1% from Q1 2023 to $2.74 billion. Non-GAAP net income rose by 1.1% to $1.96 billion.

In May, the company announced that it would pay a quarterly cash dividend of $1.67 per share, which was paid out to all investors with a stake as of June 3 in June 2024.

McDonald’s has now increased dividend payouts for 22 years in a row. The company’s annual dividend of $6.68 represents a yield of 2.7% based on the current stock price. For the past three fiscal years, dividends have grown at a CAGR of 8.5%, a positive trend for investors who are committed to a long-term holding.

Profitability and cash flows remain exemplary with a trailing-12-month EBITDA margin of 53.60%, which is well above the industry average of 11.35%.

The stock’s trailing-12-month levered FCF margin of 24.50%, also substantially higher than the industry average of 5.52%.

Both the top and bottom lines are forecast to grow in the coming years. By the end of FY2024, McDonald’s revenue is slated to rise by 4.4%, bringing it up to $26.62 billion while earnings per share are projected to climb by 2.2% to reach $12.20.

Another positive note is that McDonald’s has beaten forecasted revenue and earnings figures in three of its last four quarters.

Over the next 5 years, revenues are expected to compound annually at a growth rate of 5.8% while earnings are set to climb by 7.2%.

Analysts believe McDonald’s stock is primed for a strong future, and forecast a rise of 23.6% to reach the $309 per share price target.

Verizon Communications

Verizon Communications, Inc. (NYSE:VZ) is a conglomerate of telecommunications, technology, information, and entertainment products divided into two segments, Verizon Consumer Group and Verizon Business Group.

The company kicked off the year strongly with positive Q1 results as total operating revenues increased marginally versus the year prior to $32.98 billion.

The balance sheet looked reasonably health too with cash and cash equivalents of $2.37 billion versus $2.07 billion last year. It’s sitting on a mountain of current assets too, which now resides at $37.96 billion versus $36.81 billion in FY 2023.

In June, Verizon’s Board of Directors approved its quarterly dividend of $0.665. The dividend is slated for payment on August 1, 2024 to all who were shareholders as of July 10, 2024.

The company has a real fortress around its dividend and plans to hike the payout later this year, thereby maintaining its 17-year tradition of annual dividend growth. The company’s annual dividend of $2.66 translates to a 6.84% yield based on the current stock price. This sits nicely above the average dividend yield over the previous four years of 5.70%.

Verizon remains heavily profitable with a trailing-12-month EBITDA margin of 35.83%, higher than the industry’s average of 18.64% by 92.3%. 

Net income margin remains decent at 8.44%, and notably it is above the industry average of 2.83% by a factor of almost 3x. 

For the fiscal year ending in December 2024, it is forecasted that Verizon’s revenue will increase marginally to $135.21 billion while earnings per share are expected to land at $4.57.

A positive for shareholders is that Verizon has now beaten EPS forecasts in three of the last four quarters.

For fiscal 2025, revenue is expected to go up by 1.5% to $137.16 billion and EPS will set to pop by 2.6% to $4.69 per share.

Analysts remain buoyant around the stock’s prospects and forecast it will rise by 11.42% to reach a target price of $45.82 in the future.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.