Irrespective of the time and conditions of the stock market, savvy investors seek not only dividends but also growth prospects. The article lists three distinct stocks, each with its unique promise of returns and resilience. They’re all dividend stocks to buy for income.
The first one, an automotive giant, is steering towards a greener future by embracing electric and hydrogen technologies and expanding into emerging markets. The second, riding the waves of the energy market capitalizes on the shifts in global oil production and cleverly navigates logistical challenges. Lastly, the third, in the maritime sector, sets sail with eco-friendly vessels, long-term charter agreements, and a focus on niche market dynamics.
The article explores these three companies, exploring their strategies, performance, and potential for investors seeking dividends and growth opportunities. Whether a seasoned investor or a curious novice, these stocks offer enticing prospects.
Toyota Motor (TM)
Toyota Motor (NYSE:TM) offers a dividend yield of 2.25%. Its fundamental goal is to achieve carbon neutrality. By 2035, Toyota aims to reduce global new vehicle CO2 emissions by over 50% by adopting a multi-pathway approach.
It focuses on battery electric vehicles (BEVs), aiming to sell 1.5 million units by 2026 and launching 10 BEV models, ranging from luxury to compact and commercial vehicles. Collaboration with partners and in-house production capacity expansion is part of Toyota’s strategy to secure the necessary battery supply.
Furthermore, Toyota is investing in three new platforms for BEVs: the body and chassis, electronic platform, and software platform. This holistic approach aims to create a unique and rational vehicle structure for BEVs, enhancing their appeal and efficiency. While BEV is the central focus, Toyota acknowledges the significance of hydrogen as an energy source.
The company is actively advancing hydrogen technology, especially in regions with high hydrogen demand, like Europe and China. Toyota focuses on commercial applications of fuel cell electric vehicles (FCEVs). It underscores Toyota’s belief in the potential of hydrogen to power various mobility solutions. It’s one reason it’s one of those dividend stocks to buy for income.
Emerging markets, particularly in Asia, are expected to grow significantly (30% or more) by 2030. Toyota recognizes the importance of increasing its presence in these markets to secure long-term growth.
Therefore, the company plans to strengthen its earnings base by focusing on hybrid electric vehicles (HEVs) to capture market growth. Lastly, Hybrid technology remains a key strength for Toyota, bridging traditional internal combustion engines and full electrification, catering to diverse consumer preferences.
One of the most specific indicators of Frontline’s (NYSE:FRO) upside viability is its exceptional financial performance. For instance, in Q2 2023, Frontline reported its highest Q2 profit since 2008, even when considering an adjusted profit of $0.95 per share. The consistent payment of dividends, such as the cash dividend of $0.80 per share (dividend yield of 15.73%), signifies delivering value to its investors.
Frontline has capitalized on the rise of new oil exporters, such as the United States, Brazil, and Guyana. These emerging players have increased demand for tanker services, boosting Frontline’s ton-mile growth. The OPEC-led production cuts, primarily in the Middle East, have driven ton-miles, particularly for VLCCs. Thus, Frontline’s position in this segment has allowed it to benefit from these production adjustments.
Fundamentally, the Russian price cap on crude oil at $60 per barrel has complicated the logistics of shipping Russian oil. As a result, some vessels have shifted away from serving the Russian market, returning to non-Russian markets such as Suezmax and Aframax. While this has put pressure on rates due to increased capacity in these segments, Frontline has navigated this situation by optimizing its fleet utilization.
The company is capitalizing on refinery maintenance schedules that directly impact tanker demand. Seasonal fluctuations in demand for products like diesel and gasoline create opportunities for Frontline to optimize its fleet deployment.
As refineries complete maintenance and prepare for increased production, Frontline anticipates a surge in demand for transporting oil. This proactive approach positions the company to take advantage of the seasonal uptick in demand, ensuring consistent business opportunities.
Finally, the limited order book for new vessels in the VLCC and Suezmax segments strengthens the Frontline’s long-term prospects.
Euroseas (NASDAQ:ESEA) provides a dividend yield of 7.84%. It acquired the motor vessel Terataki, a modern, eco-friendly 2,800 TEU feeder container ship. This vessel complies with EEDI Phase 3 standards and incorporates sustainability-linked features such as Alternative Maritime Power.
Notably, the company secured a 36- to 40-month charter agreement with Asyad Lines for the motor vessel Terataki at a growth rate of $48,000 per day. Additionally, Euroseas extended the contract for the motor vessel Joanna for six to eight months at a daily rate of $13,900.
They also secured new charters for motor vessels Rena P and Emmanuel P, each for 20 to 24 months, at $21,000 per vessel per day. These charter agreements are expected to contribute substantial additional revenues, ranging from $2 million to $4 million, over the same period. Such long-term contracts provide revenue stability and enhance financial performance.
Also, Euroseas has new buildings in progress, including seven eco-friendly feeder containerships with a total carrying capacity of 16,000 TEU. This expansion is expected to increase the company’s total carrying capacity to over 75,000 TEU upon delivery in 2024.
Furthermore, Euroseas boasts a high charter coverage rate, with approximately 93% of its fleet fixed for 2023 and almost 64% for 2024. This stability in charter coverage at profitable rates provides a strong revenue foundation. It is reducing the company’s exposure to charter rate fluctuations.
Finally, the company’s focus on the 1,000 to 3,000 TEU range, including feeder vessels, aligns with favorable market dynamics, as this size category is expected to decline in the coming years. This positions Euroseas to benefit from reduced competition and improved charter rates in this segment. This makes it one of those dividend stocks to buy for income.
On the date of publication, Yiannis Zourmpanos did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.