The allure of dividend stocks has grown increasingly hard to ignore in recent months, as investor risk appetites have pivoted sharply away from pure growth. The best dividend picks not only provide shareholders with a steady stream of passive income - they also have healthy balance sheets, strong operational capabilities, consistent earnings, and are leading players in their respective industries. During times of heightened economic uncertainty, like the one we're in now, these stocks can provide investors with a sense of stability.
In this piece, we'll highlight three top stocks from different industries that offer healthy dividend yields, have a strong history of operational prowess, and provide plenty of upside potential going forward, according to the analysts tracking the shares.
Goldman Sachs Group
The financial services giant Goldman Sachs Group (GS) has been around for quite some time - since 1869, to be precise. It provides a wide range of services to corporations, financial institutions, governments, and individuals, including investment banking, securities trading, asset management, and wealth management.
Currently commanding a market cap of $102.36 billion, Goldman shares are down 7.5% in 2023 so far.
The dividend yield for GS stands at 3.30%. Moreover, the company has paid dividends consistently for 23 years, and raised its dividend for 11 consecutive years - both of which are well above the sector medians. Most recently, Goldman raised its quarterly dividend to $2.75 from $2.50 per share.
The company's latest quarterly results were mixed, as revenue eased by 8% from the prior year to $10.9 billion, while earnings plummeted by 60% to $3.08 - falling short of the consensus estimate of $3.15. However, revenue topped Wall Street's expectations.
Overall, analysts remain optimistic on GS, which has a consensus “Moderate Buy” rating. Out of 17 analysts covering the stock, 10 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, and 6 have a “Hold” rating.
Further, the mean target price of $391.61 indicates an upside potential of about 26.1% from current levels.
PepsiCo
Global beverages giant PepsiCo (PEP) has been refreshing consumers for well over a century now. Founded in 1898 in New York, Pepsi has gone on to become one of the largest food and beverage companies in the world, with operations in over 200 countries and territories. PepsiCo's portfolio of brands includes Pepsi, Diet Pepsi, Mountain Dew, Gatorade, Tropicana, Quaker, Frito-Lay, and Doritos.
With its current market cap hovering around $220.39 billion, Pepsi stock is down 11.1% on a YTD basis.
Meanwhile, Pepsi's current dividend yield of 3.02% comes in above the sector median of 2.78%. Moreover, Pepsi has a storied history of raising dividends consistently over the past 50 years - establishing it as not just a dividend aristocrat, but a dividend king.
Pepsi's latest results for the second quarter were solid, with both revenue and earnings showing yearly growth. Revenues rose by 10.4% from the previous year to $22.3 billion, while EPS jumped 12.4% to $2.09 - topping the consensus estimate of $1.96. In fact, Pepsi's EPS has consistently surpassed Wall Street's expectations, with a beat reported in each of the past five quarters.
Analysts have assigned PEP a consensus rating of “Moderate Buy” with a mean target price of $195.54. This denotes an upside potential of roughly 23% from current levels. Out of 14 analysts covering the stock, 7 have a “Strong Buy” rating and 7 have a “Hold” rating.
Home Depot
We conclude our list with the world's largest home improvement retailer - Home Depot (HD). Around since 1978 and headquartered in Atlanta, GA, Home Depot has over 2,300 stores in the United States, Canada, and Mexico. The company sells a wide range of products, including building materials, home improvement products, lawn and garden products, décor items, and facilities maintenance, repair, and operations products.
HD's market cap currently stands at $291.7 billion, while its stock is down 6.5% in 2023.
Home Depot's dividend yield of 2.80% is just above the sector median of 2.50%. Plus, the retailer has raised its dividend each year for the past 14 years.
The company's latest results for the second quarter were marked by a decline in both revenue and earnings. Revenues for the quarter came in at $42.9 billion, down 2% from the previous year. Further, EPS fell 8% from the year-ago period to $4.65. However, EPS still managed to beat the Street's expectations of $4.45. As a matter of fact, Home Depot's EPS have trumped expectations in each of the past five quarters.
Overall, analysts remain upbeat on the stock, which has an average “Moderate Buy” rating and a mean target price of $350.50. This denotes an upside potential of roughly 20.6% from current levels. Out of 27 analysts covering the stock, 15 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, and 11 have a “Hold” rating.
Final Takeaway
Although the companies mentioned have pulled back in 2023, these remain established names in their respective industries - and all seem likely to navigate the current economic environment quite capably, given their track record over countless business cycles in past decades.
On top of that, their ability to pay back shareholders through dividends, with a focus on dividend growth, is compelling.
On the date of publication, Pathikrit Bose did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
