These top-tier dividend stocks offer income and upside potential.
There are 500 stocks in the S&P 500 at any given point -- hence the name. Many of them pay a dividend, and several have steadily grown their payouts over the years. However, only 65 S&P 500 members have delivered at least 25 years of consecutive dividend increases.
These elite dividend stocks -- known as Dividend Aristocrats -- often make great investments for those seeking a steadily rising passive-income stream. A few of them look like particularly attractive investments these days -- according to Wall Street analysts -- because they trade well below their consensus price targets. Three that stand out are ExxonMobil (XOM -0.84%), Essential Utilities (WTRG -0.06%), and NextEra Energy (NEE -1.46%). They all currently trade at least 10% below the analysts' consensus price targets.
The fuel to continue rallying
ExxonMobil is having a fantastic year. The oil giant's share price has rallied nearly 73%. Add in its high-yielding dividend, and Exxon's total return is even higher.
Even with that surge, analysts see more upside ahead for ExxonMobil's stock price. The average price target of $120 per share implies about 10% upside potential from its recent stock price of around $110 per share.
In addition to that upside, Exxon currently offers an attractive dividend that yields 3.3%. That's more than double the 1.6% dividend yield on the S&P 500. Add that payout to the consensus price target, and Exxon could deliver a 13% total return over the next year. That's a potentially strong return, given the current economic uncertainty.
Exxon recently increased its dividend, nudging the payout up by another 3.4%, marking its 40th consecutive year of dividend growth. The oil giant should have the fuel to continue growing its payout.
It's investing heavily to expand its traditional and lower-carbon energy businesses to supply the global economy with the fuels it needs today while preparing for a cleaner future. It also boasts having a cash-rich balance sheet, giving it the flexibility to buy back billions of dollars in stock. Those catalysts should help fuel Exxon's stock over the coming year, as long as oil prices don't dive.
A low-risk, high-return proposition
Essential Utilities increased its dividend by 7% earlier this summer. That marked the utility's 32nd dividend increase in the last 31 years. With its payout rising, and its stock price under a bit of pressure this year, Essential Utilities now yields 2.4%.
Essential Utilities' slumping stock price had shares recently trading at around $48 apiece. The analysts' consensus price target is slightly more than $53.50 a share, which implies the stock has about 11% upside potential. Add in the dividend yield, and the total-return potential is over 13%. That's an attractive return for a low-risk utility.
Essential Utilities, which operates water and gas utilities across several states, expects to continue growing its dividend in the coming years. The company plans to invest $3 billion across its existing operations through 2024, enabling it to continue increasing rates.
In addition, it expects to continue acquiring utilities as opportunities arise. These dual growth drivers should give it the fuel to continue growing its cash flow, dividend, and shareholder returns.
Powerful dividend growth
NextEra Energy gave its investors a 10% raise earlier this year. It now has more than 25 consecutive years of increasing its payout. The utility has grown its dividend at a nearly 10% annual rate since 2006, a rapid pace for a utility.
The company expects to deliver roughly 10% annual dividend growth through at least 2024. It can easily afford to continue growing its payout at a high rate.
NextEra entered this year with a 60% dividend-payout ratio, below the roughly 65% average in the utility sector. It also expects to grow its adjusted earnings per share by 10% annually through 2025 at the high end of its guidance range.
NextEra Energy is investing a massive amount of money in building new renewable energy and storage capacity across the U.S. It's also expanding its Florida electric utility, building out a national water utility, and investing in energy transmission and natural gas pipeline projects.
The company's visible growth has analysts estimating NextEra should hit $93 a share within the next year. With the stock recently trading around $85 a share, it has about 10% implied upside potential to the analysts' consensus price target. Add in its 2%-yielding dividend, and NextEra Energy could deliver a 12% total return over the coming year.
Elite dividends with upside potential
ExxonMobil, Essential Utilities, and NextEra Energy currently trade at least 10% below the consensus price targets of Wall Street analysts. In addition, they offer above-average-yielding dividends, which are likely to continue growing. Put those two factors together, and these top-tier dividend stocks look like great investment opportunities right now.