3 Strong Buy High-Yield Dividend Stocks With Over 40% Upside Potential
Investing
Investors love dividend stocks, especially those with high yields, because they provide a substantial income stream and offer significant total return potential. Total return includes interest, capital gains, dividends, and distributions realized over time. In other words, the total return on an investment or a portfolio consists of income and stock appreciation. At 24/7 Wall St., we consistently emphasize the potential of total return to our readers. It is one of the most effective ways to enhance the prospects of overall investing success. Once again, total return refers to the collective increase in a stock’s value, including dividends.
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Three of our favorite high-yield dividend stocks have big upside to assigned Wall Street price targets.
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High-yield dividend stocks could surge higher if the Federal Reserve lowers rates in September.
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High-yield stocks offer dependable streams of passive income.
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We constantly screen our 24/7 Wall St. passive income stock research database for the best ideas. Three stocks that most investors are very familiar with are ideal choices for growth and income investors seeking reliable dividend passive income, as well as some growth potential to keep pace with inflation. All are rated Buy at the top Wall Street firms we cover, and all have over 40% upside potential to the price targets set by top analysts that follow the companies.
Why do we cover high-yield dividend stocks?
Since 1926, dividends have contributed approximately 32% of the total return for the S&P 500, while capital appreciation has contributed 68%. Therefore, sustainable dividend income and capital appreciation potential are essential for total return expectations. A study by Hartford Funds, in collaboration with Ned Davis Research, found that dividend stocks delivered an annualized return of 9.18% over the 50 years from 1973 to 2023. Over the same timeline, this was more than double the annualized return for non-payers (3.95%).
AES
This conservative utility stock offers a hefty dividend and considerable upside potential. AES Corp. (NYSE: AES) operates as a diversified power generation and utility company in the United States and internationally. AES ranks as the top seller of renewable power to corporate customers and operates two of the fastest-growing utilities in the U.S. The stock offers a big forward dividend yield and has increased its dividend for 12 consecutive years. Although AES’s share price has fallen almost 60% from its peak in late 2022, Wall Street expects a rebound, with the average analyst’s 12-month price target reflecting an upside potential of 47%.
The company owns and operates power plants to generate and sell power to customers, such as utilities, industrial users, and other intermediaries; owns and operates utilities to develop or purchase, distribute, transmit, and sell electricity to end-user customers in the residential, commercial, industrial, and governmental sectors; and generates and sells electricity on the wholesale market.
It uses various fuels and technologies to generate electricity, such as:
- Coal
- Gas
- Hydro
- Wind
- Solar
- Biomass
- Renewables, comprising energy storage and landfill gas
The company owns and operates a generation portfolio of approximately 34,596 megawatts and distributes power to 2.6 million customers.
Susquehanna has a Buy rating on the shares with a massive $16 price target.
Devon Energy
Down nearly 33% from its 52-week high, this S&P 500 energy stock has been affected by volatility in oil and gas prices, despite its attractive dividend policy, which includes a fixed dividend that has more than doubled since 2021, as well as a variable dividend component. Devon Energy Corp. (NYSE: DVN) is an oil and gas producer in the United States with a diversified multi-basin portfolio headlined by an acreage position in the Delaware Basin. The company is primarily engaged in the exploration, development, and production of oil, natural gas, and natural gas liquids (NGLs).
Devon Energy is one of the largest U.S. oil and gas producers with significant production capabilities in the Delaware Basin located in West Texas and Southeastern New Mexico. The company offers a solid forward dividend yield with both fixed and variable components. The average price target for Devon reflects an upside potential of 42%, with 20 of 31 analysts rating it a Buy or Strong Buy.
It owns a portfolio of assets located in the:
- Delaware Basin
- Rockies
- Eagle Ford
- Anadarko Basin
The Delaware Basin operates in southeast New Mexico and across the state line into west Texas. It offers exploration and development opportunities from many geologic reservoirs and play types, including the oil-rich Wolfcamp, Bone Spring, Avalon, and Delaware formations.
The company’s Rockies development consists of its Williston Basin and Powder River Basin assets.
The Eagle Ford operations are located in Texas’s DeWitt and Karnes counties.
The Anadarko Basin development is located in western Oklahoma. It has a joint venture with Dow to develop a portion of its acreage in the Anadarko Basin.
Piper Sandler has an Overweight rating and a huge $58 target price.
CVS Health
This is another bargain value high-yield dividend idea that is a growth and income investor’s dream. CVS Health Corp. (NYSE: CVS) is a health solutions company. CVS Health is one of the biggest pharmacy retailers in the United States, with its CVS Caremark unit being one of the leading pharmacy benefit managers, and owns Aetna, one of the largest health insurers. The stock provides a hefty forward dividend yield. The average 12-month price target is 41% above CVS’ current share price, with 18 of 28 analysts rating it a Buy or Strong Buy.
The company’s segments include:
- Health Care Benefits
- Health Services
- Pharmacy & Consumer Wellness
- Corporate/Other
The Health Care Benefits segment offers a range of traditional, voluntary, and consumer-directed health insurance products and related services, including medical, pharmacy, dental and behavioral health plans, medical management capabilities, PDPs and Medicaid health care management services.
The Health Services segment provides a full range of PBM solutions, delivers health care services in its medical clinics, virtually, and in the home, and offers provider enablement solutions.
The Pharmacy & Consumer Wellness segment dispenses prescriptions in its retail pharmacies and through its infusion operations, provides ancillary pharmacy services including:
- Pharmacy patient care programs
- Diagnostic testing and vaccination administration
- Health and wellness products and general merchandise
Truist Financial has a Buy rating with an $84 price objective.
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