Investing

5 Dividend Stocks That Could Deliver Life-Changing Returns

Lee Jackson

Published: December 19, 2023 11:25 am

Last Updated: December 22, 2023 7:13 am

After years of a low-interest rate environment, which has reversed in a big way over the last 18 months, many investors continue to turn to equities not only for growth potential but also for solid and dependable dividends, which help to provide an income stream. What this equates to is total return, which is one of the most influential investment strategies.

We always like to remind our readers about the impact total return has on portfolios because it is one of the best ways to help improve the chances for overall investing success. Again, total return is the combined increase in a stock’s value plus dividends. For instance, if you buy a stock at $20 that pays a 3% dividend, and it goes up to $22 in a year, your total return is 13%—10% for the increase in stock price and 3% for the dividends paid.

We screened our 24/7 Wall St. dividend equity research database for stocks that pay big dividends. Based on past trading and current Wall Street expectations, we could see their equity price rise from 10% to as much as 50% higher over the next few years. Five top companies hit our screens; all are rated Buy across Wall Street.

Pioneer Natural Resources

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This is a stock many Wall Street analysts love for a pure crude oil play that employs a variable dividend strategy and pays a massive 6.18% dividend. (NYSE: PXD) operates as an independent oil and gas exploration and production company in the United States.

The company explores, develops, and produces oil, natural gas liquids (NGLs), and gas. It has operations in the Midland Basin in West Texas.

As of December 31, 2021, the company had proved undeveloped reserves and developed non-producing reserves of:

• 130 million barrels of oil,
• 92 million barrels of NGLs, and
• 462 billion cubic feet of gas and
• Owned interests in 11 gas processing plants.

Pioneer production services are supported by 100 well-servicing rigs, more than 100 cased-hole, open-hole, offshore wireline units, and advanced coiled tubing units.

In October, Exxon Mobil Corporation (NYSE: XOM) and Pioneer Natural Resources jointly announced a definitive agreement for ExxonMobil to acquire Pioneer. The merger is an all-stock transaction valued at $59.5 billion, or $253 per share, based on ExxonMobil’s closing price on October 5, 2023. Under the terms of the agreement, Pioneer shareholders will receive 2.3234 shares of ExxonMobil for each Pioneer share at closing. The implied total enterprise value of the transaction, including net debt, is approximately $64.5 billion.

The Pioneer dividend plus the capital gain on where the stock will get tendered is an almost 20% gain, and that doesn’t count how much the Exxon stock could rise as oil moves higher in 2024. Should the legacy oil stock return to the 52-week highs, investors could have a massive 40% gain.

Altria

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This maker of tobacco products offers value investors a great entry point now and a massive 9.39% dividend. Altria Group Inc. (NYSE: MO) is the parent company of Philip Morris USA (cigarettes), UST (smokeless), John Middleton (cigars), Ste. Michelle Wine Estates and Philip Morris Capital Corp. PMUSA enjoy a 51% share of the US cigarette market, led by its top cigarette brand, Marlboro.

Altria also owns over 10% of Anheuser-Busch InBev (NYSE: BUD), the world’s largest brewer, which some feel is worth more than $10 billion and a company segment that could be sold. Given the public relations disaster the company has gone through this year, it could very well be on the chopping board.

Last June, the company purchased NJOY Holdings, which makes electronic cigarettes and vaping products, for $2.75 billion. The company has increased its dividend for 52 consecutive years and announced another increase effective October 10th when the dividend moves to $0.98 per share from $0.94.

Trading near a 52-week low, should the company trade back to highs printed in the spring of 2022, investors would score close to a 40% total return gain when combined with the considerable dividend.

Pfizer

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This top pharmaceutical stock was one of the biggest winners in the ongoing COVID-19 vaccine sweepstakes, but as sales have slowed to a trickle, the stock got crushed. Pfizer Inc. (NYSE: PFE) discovers, develops, manufactures, markets, distributes, and sells biopharmaceutical products worldwide and pays investors a fat 6.31% dividend.

The company offers medicines and vaccines in various therapeutic areas, including:

• Cardiovascular metabolic and women’s health under the Premarin family and Eliquis brands
• Biologics, small molecules, immunotherapies, and biosimilars under the Ibrance, Xtandi, Sutent, Inlyta, Retacrit, Lorbrena, and Braftovi brands
• Sterile injectable and anti-infective medicines and oral COVID-19 treatment under the Sulperazon, Medrol, Zavicefta, Zithromax, Vfend, Panzyga, and Paxlovid brands.

Pfizer also provides medicines and vaccines in various therapeutic areas, such as:

• Pneumococcal disease
• Meningococcal disease,
• Tick-borne encephalitis
• COVID-19 under the Comirnaty/BNT162b2, Nimenrix, FSME/IMMUN-TicoVac, Trumenba, and the Prevnar family brands
• Biosimilars for chronic immune and inflammatory diseases under the Xeljanz, Enbrel, Inflectra, Eucrisa/Staquis, and Cibinqo brands; and amyloidosis, hemophilia
• Endocrine diseases under the Vyndaqel/Vyndamax, BeneFIX, and Genotropin brands.

Pfizer trades over 50% below the highs printed in December 2021. Returning to those levels with the vast dividend would be a 60% gain from current levels. That, by any measure, would be a life-changing gain for one stock.

Verizon Communications

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This top telecommunications company currently offers tremendous value and pays a gigantic 7.12% dividend. Verizon Communications, Inc (NYSE: VZ) is one of the largest US telecom companies. It provides wireless and wireline services to retail, enterprise, and wholesale customers.

The company’s wireless network serves approximately 120 million mobile connections with 115 million postpaid subscribers. Verizon’s wireline business has undergone a period of secular decline due to wireless substitution and cable competition.

Verizon also provides:

• Converged communications
• Information
• Entertainment services over America’s most advanced fiber-optic network and delivers integrated business solutions to customers worldwide

Verizon and the other big telecom giants have been mauled this year over concerns over lead phone lines, and while this could keep a lid on the stock in the near term, many feel it’s the best buying opportunity in years.

Verizon traded over the $60 level in December of 2020. Returning to those highs would be a 40% gain for the shares. Add in the considerable dividend, and investors have a shot at a massive 50% total return home run.

Walgreens Boots Alliance

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This huge drugstore chain is a safe retail play for investors looking to add health care now and trades at a very cheap 7.5 times 2023 earnings expectations. Walgreens Boots Alliance (NYSE: WBA) is a pharmacy-led health and beauty retail company. It operates through three segments: Retail Pharmacy USA, Retail Pharmacy International, and Pharmaceutical Wholesale.

The Retail Pharmacy USA segment sells

• Prescription drugs and various retail products
• Health and wellness products
• Beauty,
• Personal care
• Consumables
• General merchandise is sold through its retail drugstores.

Walgreens also provides specialty pharmacy and mail services; this segment operates nearly 10,000 retail stores in the United States under the Walgreens and Duane Reade brands and six specialty pharmacies.

The Retail Pharmacy International segment sells:

• Prescription drugs
• Health and wellness items
• Beauty
• Personal care
• Consumer products through its pharmacy-led health and beauty stores and optical practices, as well as through boots.com and an integrated mobile application.

This segment operated 4,428 retail stores under the Boots, Benavides, and Ahumada in the United Kingdom, Thailand, Norway, the Republic of Ireland, the Netherlands, Mexico, and Chile, and 550 optical practices, including 165 on a franchise basis.

The Pharmaceutical Wholesale segment engages in the wholesale and distribution of specialty and generic pharmaceuticals, health and beauty products, and home healthcare supplies and equipment, as well as provides related services to pharmacies and other healthcare providers.

The stock traded at twice its current level less than two years ago. With the potential for a buyout always possible between the huge dividend and a retracement to 2022 highs, shareholders could reap a massive 60% gain.