In many cases, dividend stocks tend to be all-or-nothing affairs. Companies that consistently pay out dividends are usually uninspiring and perhaps tedious names. We’ve heard their names pop up on every passive-income related publication. Their inclusion is akin to the eleventh track of an otherwise stellar album.
On the flipside, we have organizations that are exclusively focused on growth. Whatever earnings they generate, they immediately reinvest into their business. These are the sexy names in the markets. However, sexy comes at a cost: no dividends for you!
Naturally, the most ideal compromise is dividend stocks that also have upside potential in the markets. Perhaps it’s an industry stalwart that’s shedding its legacy image and investing in the sectors of tomorrow. Or, it could be a risky, high-yield dividend play whose underlying company is turning the corner.
Whatever the case may be, passive-income investments aren’t necessarily boring or ultra-conservative. Here are four dividend stocks to buy that are also capital growth stories!
Dividend Stocks with Growth Stories: International Business Machines (IBM)
Dividend Yield: 3.9%
Among dividend stocks, International Business Machines Corp. (NYSE:IBM) is a true classic. First, IBM stock has been around for longer than many of our readers have been alive. Second, IBM, while traditionally labeled a “boring” investment, has done a great job of rewarding its shareholders. Currently, its dividends have a yield of just under 4%.
Many people view IBM stock as a stable place to conservatively grow their portfolio; an investment that won’t rock the boat one way or the other. That, however, was the old IBM. The new IBM intends to stir up the pot, which is what makes the company an underappreciated capital-gains play. InvestorPlace contributors Will Ashworth and Ian Bezek rest their hopes on the blockchain, artificial intelligence, and cloud computing.
You can count me in among the believers. Cloud-computing is already a fiercely-competitive sector, and IBM stock looks primed to take advantage. As I mentioned a few days ago, “IBM is shedding its legacy image of hardware provider to a Software as a Service (SaaS) solution.”
As far as their business is concerned, IBM’s blockchain and artificial-intelligence divisions go hand-in-hand. Both ultimately have the end purpose of utilizing technology to replace functions previously operated by (fallible) human agents. With its massive resources and big-data analytics, IBM is a perfect candidate to push the blockchain and AI further.
Therefore, don’t look at IBM stock as a mere play on dividends; this old dog is ready to learn some new tricks.
Dividend Stocks with Growth Stories: CBL & Associates Properties (CBL)
Dividend Yield: 12.8%
Dividends are a funny thing. Certainly, a company that yields passive income is better than a company without, all other elements being equal. But dividend stocks with too high of a payout are also cause for concern. Such high-yield investments are typically traps set for the unsuspecting or rookie investor. But CBL & Associates Properties, Inc. (NYSE:CBL) might be the rare exception.
Now, don’t get me wrong — I view CBL stock as an extremely speculative play. The company’s dividends nearly yield an alarming 12.8%, or 98% higher than most real estate investment trusts. Earlier this year in March, I advised against buying CBL. I wrote that “the problem remains a radical shift in American consumerism. People are simply not going out to shopping malls as they used to.”
Consequently, CBL stock shed more than 18% within two months of my article’s publishing date. But here’s why I’m changing my view.
Since closing at $7.01 on May 16, CBL stock gained an impressive 20%. While I still view the retail sector as ugly, CBL positions itself with prime brand names. A notable example I used in my article is Cheesecake Factory Inc (NASDAQ:CAKE). At the time, I dismissed the retail REIT’s portfolio as essentially representing lipstick on a pig.
However, the markets don’t lie. CBL is holding up better than many other dividend stocks in its category. If President Donald Trump can make significant headway in his economic agenda, CBL might swing as high as its dividends.
Dividend Stocks with Growth Stories: The GEO Group (GEO)
Dividend Yield: 7.5%
When people think about dividend stocks, a penitentiary isn’t the first thing that comes to mind. Yet this is the out-of-the-box idea that I’m forwarding with The GEO Group Inc (NYSE:GEO). Admittedly a cynical investment, GEO stock may nevertheless continue to benefit from President Trump’s law-and-order administration.
When news broke during the 2016 election that the real-estate mogul won, GEO stock gapped up 21% the following day. While it’s impossible to determine for sure without running a big-data analysis, GEO’s move is one of the biggest post-2016 election swings for a major publicly traded firm. That’s no surprise because Trump was extremely outspoken about law enforcement. Even more cynically, his anti-illegal immigration stance is “good” for GEO’s business.
But what I’m really keying in on, besides the company’s 7.5% yield on its dividends, is marijuana. The little, green plant creates massive prisoner backlogs. The failed “War on Drugs” wasted many lives and tax-payer dollars. One of the few beneficiaries are privately-owned corrections facilities; hence, GEO stock.
Under the Obama administration, America appeared to at least tolerate the idea of marijuana legalization. Not so with President Trump. With Attorney General Jeff Sessions, we can expect an aggressive stance on anything related to drugs. Again, this development is a net positive for GEO stock.
While I freely admit that GEO is not a “feel-good” investment among dividend stocks, it is a smart one. Sometimes, it really is better not to fight the macro trend.
Dividend Stocks with Growth Stories: GameStop (GME)
Dividend Yield: 7.8%
GameStop Corp. (NYSE:GME) has had a tough year, with its shares down 23% so far. Unfortunately, the downtrend forces GME stock into the speculative category. Nevertheless, over the longer term, GameStop can be great again, and I’m not just referring to the 7.5% yield on its dividends.
As many people know, video games represent substantial cash-cows for computer programmers and developers. It’s not just the rabid response among Sony Corp (ADR) (NYSE:SNE) PlayStation and Microsoft Corporation (NASDAQ:MSFT) Xbox fans. Gaming has transitioned from a personal hobby to an actual profession. Case in point is the almost ludicrous rise of e-tournaments. But as ridiculous as these developments may appear, they’re tailwinds for GME stock.
But the most astounding news is the possibility that video gaming could become an Olympic sport. That’s right! Forget dedicating years of your life perfecting athletic excellence; you could earn a gold medal simply for rotting your brain in front of a television screen. All joking aside, the likelihood of video games in the Olympics is slim. Nevertheless, the idea being proposed suggests long-term potential for GME stock.
Finally, the robust and seemingly undying demand for gaming makes GameStop somewhat resilient against Amazon.com, Inc. (NASDAQ:AMZN). Undoubtedly, GameStop is losing market share to e-commerce competitors. However, there’s plenty of love to go around. Moreover, GME stock levers what Amazon can’t — instant gratification.
As of this writing, Josh Enomoto is long SNE stock.