While investors typically acquire dividend stocks because of their passive income, certain enterprises also bring compelling growth opportunities. Put another way, the companies on this list allow you to have your cake and eat it, too.
One of the top attributes of dividend stocks for capital gains is that you’re getting a multi-pronged deal. First, the most consistent dividend providers represent established businesses. Heading into uncharted waters regarding the post-pandemic recovery process, you can have confidence in these stalwarts. Second, dividend stocks tend to be less volatile than their growth-only counterparts. That’s because when the stuff hits the fan, passive income payers usually enjoy stable and robust financials. And third, when dividend-paying companies grow, the expansion is likely to be a sustainable one.
Of course, all investment ideas carry risks. However, you can do a lot worse than buying established dividend stocks for capital gains.
Toyota (TM)
At first glance, automotive giant Toyota (NYSE:TM) might seem an unnecessary risk for dividend stocks for capital gains. Since the start of the year, shares have already swung up over 28%. Just how much more can this titan expand? Fundamentally, perhaps a lot more.
First, you have to remember that Toyota was a bit late to the game when it came to electric vehicles. Well, that’s changing, which theoretically expands its total addressable market. Also, with its development of a solid-state battery, it could potentially shift the paradigm. So, investors would be smart to wager on Toyota.
For passive income, the company carries a forward yield of 2.82%. This ranks favorably compared to the broader consumer discretionary sector’s average yield of 1.89%. Also, the payout ratio sits at only 27.05%, providing confidence in yield sustainability.
Finally, analysts peg TM as a consensus moderate buy. Their average price target lands at $207.79, implying over 17% upside potential.
Coca-Cola (KO)
A soft drink giant and an icon of American capitalism, investors love Coca-Cola (NYSE:KO) for various reasons. Usually, though, they focus on KO being one of the top dividend stocks. However, it could turn into a capital gains machine. Yes, it’s down more than 7% since the start of the year. Still, the fundamentals shine bright.
Basically, you have two factors working favorably for Coca-Cola. First, inflation remains stubbornly elevated, which means that people will need to start thinking about cheaper forms of caffeine. Second, return-to-office initiatives have become more aggressive, including the use of veiled threats. Cynically, this framework should boost caffeine demand.
Currently, Coca-Cola carries a forward yield of 3.15%. That’s noticeably higher than the consumer staples sector’s average yield of 1.89%. Also, the company commands 62 years of annual dividend increases. Lastly, analysts peg KO as a strong buy with a $71.82 price target, implying over 23% upside.
Philip Morris (PM)
A tobacco giant, Philip Morris (NYSE:PM) at first glance might not seem an ideal opportunity for dividend stocks for capital gains. As various reports indicate, smoking prevalence has declined globally for men and women. Folks just don’t find the underlying practice appealing anymore. So, why would PM rise higher, especially after it lost almost 8% since the January opener?
While smoking rates have faded, the indulgence hasn’t gone away altogether. Let’s get that out of the way. More importantly, the company enjoys a clear advantage in the vaping, or e-cigarette market. Essentially, Philip Morris knows what smokers want. Therefore, it can craft a digital alternative that mimics the analog experience. Right now, the company carries a forward yield of 5.42%, which is quite generous. To be fair, the payout ratio of 74.58% is elevated. Still, it features 14 years of consecutive dividend increases, a status it won’t want to give up cheaply.
In closing, analysts peg PM as a unanimous strong buy with a $116.71 price target, implying almost 25% upside.
NextEra Energy (NEE)
A powerhouse name in the renewable energy space, NextEra Energy (NYSE:NEE) offers a compelling idea for dividend stocks for capital gains. To cut through the fluff, NEE, over the long run, sells itself. With the broader political and ideological winds pushing renewables, NextEra enjoys business expansion opportunities. Still, there is a rather large issue to address.
Since the beginning of this year, NEE slipped more than 20%. In the trailing one-year period, shares lost almost 26% of equity value. While not exactly a confidence booster for dividend stocks, with time, NextEra should pull itself together. It’s too relevant and commands a moat.
Regarding passive income, NextEra carries a forward yield of 2.8%. While it’s lower than the utilities sector’s average yield of 3.75%, the company also commands 30 years of dividend increases. Turning to Wall Street, analysts peg NEE as a consensus strong buy. Their average price target for the next 12 months stands at $84.90, implying 27% upside.
Qualcomm (QCOM)
A top-tier semiconductor and technology enterprise, Qualcomm (NASDAQ:QCOM) has seen better days. Fundamentally, various chipmakers have struggled this year due to fading demand for smartphones and PCs. That’s a kick to the teeth for Qualcomm because it specializes in connectivity solutions. Since the start of the year, QCOM slipped about 1% below parity, hardly an inspiring performance.
Nevertheless, connectivity as a concept will never go away. More importantly, Qualcomm should maintain its leadership position in key market subsegments. And if that’s not an enticing proposition, shares trade at only 11.52X forward earnings, lower than 81.7% of its peers. Subsequently, it’s one of the top dividend stocks for capital gains.
Currently, the tech giant carries a forward yield of 3.01%. That’s well above the underlying sector’s average yield of 1.37%. Also, the payout ratio sits at only 34.82%. Turning to the Street, analysts peg QCOM as a consensus strong buy. Their average price target comes in at $137.79, implying nearly 30% upside.
Viper Energy (VNOM)
Based in Midland, Texas, Viper Energy (NASDAQ:VNOM) is structured as a limited partnership to own, acquire, and exploit oil and natural gas properties in North America. While hydrocarbon resources don’t exactly align with contemporary political and ideological sensibilities, they could remain relevant for years to come. Carrying an advantage in terms of energy density, hydrocarbon replacement won’t happen anytime soon.
Also, the energy market has been rising in recent sessions. Due to a cynical combination of geopolitical flashpoints and diplomatic tensions with the Middle East, the price of crude has been marching higher. Therefore, it’s possible that Viper – which has been deflated compared to sector peers – could make a bounce back.
Looking at passive income, Viper commands a forward yield of 3.74%. Its payout ratio, while somewhat elevated at 51.66%, is well within reason for sustainability confidence. Lastly, analysts peg VNOM as a unanimous strong buy. Their average price target clocks in at $37.63, implying over 30% upside potential. Thus, it’s a solid idea for dividend stocks.
Travel + Leisure (TNL)
Headquartered in Orlando, Florida, Travel + Leisure (NYSE:TNL) is a timeshare company. Per its public profile, it develops, sells, and manages timeshare properties under several vacation ownership clubs. Fundamentally, TNL represents one of the riskiest ideas among dividend stocks for capital gains. Essentially, investors must hope that the revenge travel phenomenon continues to undergird shares.
So far, TNL has been doing a decent job, gaining 11% since the January opener despite various consumer pressures. To add fuel to the bullish fire, consumers still appear to be prioritizing experiences denied them because of Covid-19. Thus, it’s possible that TNL may continue defying gravity.
According to data from TipRanks, TNL carries a dividend yield of 4.32%. This investment resource reports that the underlying consumer cyclical sector’s average yield sits at only 0.992%. Just as well, TNL’s payout ratio comes in at a very reasonable 35.38%. On a final note, analysts peg TNL a strong buy with a $53.80 price target, implying 37% upside potential.
On the date of publication, Josh Enomoto 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.