Strong Buy Dividend Stocks for Steady Returns in 2024

Author: Logan Wright Updated: 09-13-2024 10:18 AM

Investing in Dividend Stocks

Dividend stocks serve as a fundamental element of many investment strategies, offering operators a reliable source of income along with opportunities for capital growth. In today’s diverse market, making informed choices about dividend stocks can significantly influence overall portfolio performance. Here, we evaluate three stocks that analysts have identified as Strong Buys: VICI Properties, American Tower, and Royal Bank of Canada.

VICI Properties: Leadership in the Gaming Sector

Beginning with VICI Properties (VICI), a real estate investment trust (REIT) known for its ownership and acquisition of leisure, hospitality, and gaming venues. Formed as a spinoff from Caesars Entertainment, VICI has rapidly evolved into a prominent player within the gaming sector. It boasts assets worth over $35 billion and includes iconic properties like Caesars Palace, MGM Grand, and Mandalay Bay, located primarily in Las Vegas and other key U.S. markets.

Strong Performance and Dividend Growth

In the past year, VICI’s stock has increased by 8%, with significant acceleration since July, showcasing impressive financial metrics. For instance, revenue soared by 6.6% year-over-year, reaching $957 million in the second quarter. This growth aligns with VICI’s philosophy of prioritizing experiential investments over mere consumer goods, a clear reflection of its tagline, 'Invest in the experience.'

Dividend Yield and Valuation Metrics

In light of its robust financial results, VICI has opted to elevate its dividend payouts by 4.2%, now standing at $0.4325 quarterly, which translates to a forward dividend yield of 5.15%. From a valuation standpoint, VICI’s forward price-to-AFFO (Adjusted Funds From Operations) ratio is 15.1x, notably lower than both the sector average of 16.8x and its historical average of 16.2.

American Tower: Infrastructure for Communication

Next, we explore American Tower Corporation (AMT), a leading REIT engaged in the ownership and management of wireless communications infrastructure on a global scale. Since its establishment in 1995, American Tower has become an integral part of the telecommunications landscape, operating over 224,000 communication sites across 25 countries.

Revenue Growth and Strategic Expansion

The company has demonstrated commendable performance with a total property revenue increase of 6.9% on an FX-neutral basis. With a focus on organic growth coupled with strategic acquisitions, American Tower is keen on maintaining its expansion trajectory in burgeoning markets, especially in Africa and Europe.

Dividend Yield and Financial Stability

American Tower provides a forward dividend yield of 2.67%, which is supported by a payout ratio of 61% based on projected AFFO for 2024. Although its 22.8x forward P/AFFO ratio might appear on the higher side compared to the REIT sector's average, the company’s strong fundamentals, including an EBITDA margin of 62.5%, contribute to its compelling investment case.

Royal Bank of Canada: A Banking Powerhouse

Lastly, we target Royal Bank of Canada (RY), a longstanding financial institution with roots tracing back to 1864. As a universal bank with operations spanning personal and commercial banking, wealth management, and insurance, RBC stands out as the 10th largest investment bank globally by fees.

Financial Performance and Growth

RBC recently reported a 7% net income increase year-over-year, driven by growth in its residential mortgage business. Notably, the Personal & Commercial Banking division experienced a substantial 15% revenue rise, benefiting from elevated interest rates.

Future Outlook and Valuation

With a forward dividend yield of 3.4% and a trading valuation of 13.8x forward earnings, RBC presents a solid income option, although it trades at a premium compared to sector averages. The forward price-to-earnings-to-growth (PEG) ratio at 2.06 signifies a notable 65.4% premium over the sector, requiring careful consideration for potential investors.

Conclusion: Choosing the Right Investment

Upon assessing these investment options, it becomes clear that each stock has its strengths. VICI Properties stands out with its focus on experience-driven engagement and attractive valuation compared to market averages. Conversely, American Tower offers significant growth potential through its telecom infrastructure maintenance, while Royal Bank of Canada delivers robust income growth amidst solid financial performance. For those aiming for stable income paired with growth, VICI might represent the most favorable choice in a shifting consumer landscape.

Frequently Asked Questions

What are dividend stocks?

Dividend stocks are shares in companies that pay out a portion of their earnings to shareholders regularly, providing both income and potential capital appreciation.

Why are VICI Properties rated as a Strong Buy?

VICI Properties is rated as a Strong Buy due to its solid financial results, attractive valuation metrics, and focus on experiential investments that resonate with current consumer trends.

How does American Tower generate revenue?

American Tower generates revenue primarily through leasing its communication infrastructure, such as cell towers and antennas, to major telecom providers under long-term contracts.

What is the significance of Royal Bank of Canada’s dividend yield?

Royal Bank of Canada's dividend yield reflects the income investors can expect from holding its shares, making it an appealing choice for income-focused investors.

Which stock is the best choice for income investors?

VICI Properties stands out in this evaluation as providing a compelling combination of income and growth potential in today's market environment.

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