In today’s market, investors increasingly seek assets offering a balance between growth potential and income generation. Dividend stocks targeting upside can be a compelling option, providing investors with a steady stream of income while offering the potential for capital appreciation. 

When selecting dividend stocks targeting upside, it’s crucial to consider a company’s financial health, dividend history, valuation and future growth prospects. Companies with a history of consistent dividend payouts and sustainable FCF generation are more likely to increase their dividends over time. Additionally, a company’s valuation metrics like the price to earnings (P/E) and payout ratio can further help identify opportunities. 

Now, let’s uncover the top three dividend stocks targeting upside in 2024 and beyond!

Mastercard (MA)

Mastercard (NYSE:MA) is among the top dividend stocks targeting upside for 2024. The company facilitates trillions of dollars in transactions per year and has grown its dividend at a 20% CAGR over the last decade. 

Mastercard’s strong financial position, coupled with the rising adoption of digital payments, positions it well for consistent dividend growth. The increasing shift towards cashless transactions, the expansion of e-commerce and the growth of emerging markets will propel their future earnings potential. Additionally, Mastercard is actively expanding its digital payment solutions. That includes venturing into areas like blockchain technology and generative AI to accelerate fraud detection. 

While Mastercard’s valuation currently reflects much of its future growth prospects, the company remains a strong buy. Mastercard’s gross margins have remained robust, and it continues to see an acceleration in cross-border transactions. Furthermore, a payout ratio of around 20% puts the company in a good position to continue growing its dividend per share. That makes Mastercard one of the top dividend stocks with upside by 2028.

Automatic Data Processing (ADP)

Automatic Data Processing (NASDAQ:ADP) is a leading human capital management company flying under the radar. ADP has an exceptional track record of dividend payments, having increased its dividend for 49 consecutive years. 

ADP’s core business of payroll processing provides a recurring revenue stream, ensuring consistent cash flow generation. Moreover, the company continues to expand its HCM offerings and is leveraging generative AI to establish guardrails, biases, accuracy and security of its customer’s data. ADP has a large moat, demonstrated by its strong operating margins, return on capital employed (ROCE) and FCF generation. For example, the company saw a record FCF of $4 billion in the 2023 fiscal year, while growing its dividend per share by double-digits year-over-year (YoY).

The market segments it operates in have reached maturity, offering recurring revenue streams. ADP also remains a leader in HCM. The company continues to invest in new technology to solidify its footing. Furthermore, its valuation looks attractive relative to their peers. With a dividend yield of 2.24%, ADP’s consistent dividend growth history makes it well-positioned to outperform over the next decade.

Deere & Co (DE)

Deere & Co (NYSE:DE), a leading manufacturer of agricultural equipment, presents an interesting opportunity for investors seeking dividend stocks targeting upside. Deere has a healthy dividend yield of 1.43%, providing investors with a steady stream of income.

Deere & Co has delivered strong operational results since the 2020 COVID pandemic. The company’s operating income and EPS have skyrocketed, driven by strong demand for agricultural equipment. Even with construction activity slowing due to higher interest rates, Deere has persisted. Now, with the prospect of lower interest rates and a rise in infrastructure spending, the future looks extremely bright. 

While Deere’s valuation might be sensitive to commodity price fluctuations, the company maintains a loyal customer base. Its valuation has remained extremely cheap, despite delivering strong YOY growth over the last three years. Additionally, operating margins remained strong in Q1 FY24, despite YOY net sales and net income declines. As the global economy gets a boost in infrastructure spending, DE stock remains a top stock to snap up for long-term gains.

On the date of publication, Terel Miles 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.