Two Notable S&P 500 Dividend Stocks Worth Investing in during January
The stock market's recent bull run has pushed the S&P 500 up by an impressive 23% over the past year. However, this growth has resulted in a low yield of just 1.24% for the index—the lowest since 2000. If you're an investor looking to boost your passive income in 2023, the retail and telecommunications sectors offer some compelling dividend payers. Here are two solid options:
1. Target (TGT)
Industry giants like Walmart and Costco have weathered economic challenges well, with their share prices soaring, but they don't provide high dividend yields and trade at high valuations. That's where Target steps in. With a 3.24% forward dividend yield and a reasonable P/E ratio, Target provides excellent value to investors.
Target generates substantial revenue, with $107 billion in trailing revenue from nearly 2,000 stores and e-commerce operations. The company has a proven track record of resilience, having paid a dividend since 1967. Despite a weak consumer spending atmosphere, Target reported a 2.4% year-over-year increase in traffic during its last quarter. However, customer spending has stagnated with just a 0.3% increase in comparable sales.
Target's forward P/E of 16 looks quite reasonable compared to competitors with much higher earnings multiples. The company's solid value and high dividend yield make it an attractive investment. Furthermore, Target's same-day delivery program is experiencing strong growth, which could potentially lead to increased sales opportunities in the long term.
Target's quarterly dividend of $1.12 stands at $52% of total earnings, providing plenty of room to grow the dividend in the future. With such excellent value and higher yields, investing in Target could potentially pay you returns for years to come.
2. Verizon Communications (VZ)
Investing in top wireless service providers can be a smart way to boost passive income. The telecom sector may be slower to grow, but with steady customer fees for services like internet and wireless connectivity, telecoms like Verizon Communications can generate consistent cash flow and pay generous dividends.
With a quarterly dividend of $0.6775, Verizon has grown its dividend consistently since 1984. The stock's current forward dividend yield sits at a strong 6.99%, appealing to investors searching for higher yields in the face of rising interest rates and potential recession worries.
Verizon's third-quarter earnings report showed promising results, with wireless service revenue growing by 2.7% year-over-year and new postpaid phone subscribers increasing by 239,000. The company also reported 9 consecutive quarters of 375,000 or more broadband additions. New products like myPlan and myHome have resonated well with customers, demonstrating positive growth.
Though concerns about a possible recession and slowing subscription growth seem to be influencing Wall Street, Verizon's payout ratio of 58% indicates a strong capacity to maintain and grow its dividend going forward.
While Target and Verizon may not offer the highest growth potential, they provide solid passive income solutions for investors. Their consistent dividends and reliable growth characteristics make them worthy choices for those seeking long-term investments.
If you're interested in diversifying your investment portfolio and seeking stable income sources, considering other finance opportunities besides the stock market might be beneficial. For instance, bonds or peer-to-peer lending could offer lower risk yet promising returns.
During tough economic times, some investors might consider shifting their focus from growth stocks to dividend stocks that offer consistent income. These types of investments can provide a financial safety net during market volatility and contribute to a stable cash flow.
