When it comes to finding stocks for substantial gains, dividend stocks do not often disappoint. Various dividend stocks vary by total yield, the overall growth profile of the underlying business, and other fundamentals. But if a company is paying out a dividend, it generally means it’s a stock that’s generating sufficient cash flow to power future growth while returning capital to shareholders.
Particular focus will be paid in this article to companies with the potential to increase dividends over time and provide capital appreciation to investors as well. Let’s dive into three top dividend stocks that are likely to provide strong total returns over the long term.
Restaurant Brands (QSR)
One of the top defensive stocks in the market I’ve been pounding the table on for some time, Restaurant Brands (NYSE:QSR) is a defensive dividend stock worth considering. The fast food giant operates under four key banners: Tim Horton’s, Burger King, Popeye’s and Firehouse Subs. These underlying businesses have grown well, with Restaurant Brands aiming to have 40,000 restaurant locations and potentially reach $60 billion in revenue and $3.2 billion in operating income in the coming years.
Notably, Tim Horton’s is one segment that is seeing significant attention from the company’s management team, with a menu shift focusing on enhancing existing offerings during the day and adding cold beverages to the menu. Additionally, Burger King is expected to modernize 90% of its locations through marketing.
Aside from Burger King and Tim Hortons, Popeye’s and Firehouse Subs are seeing strong growth. Focusing on expanding into new markets in Latin America and Asia, Restaurant Brands’ total return over the long haul should be impressive. With a current dividend yield of 3.3%, there’s a lot to like about how this company is positioned right now.
PepsiCo (PEP)
With brands like Lay’s, Doritos, and various popular beverages, PepsiCo (NASDAQ:PEP) has seen revenue surge to $91.5 billion over the past year. The snack giant saw earnings surge to $9.1 billion, allowing Pepsi to pay out a quarterly dividend of $1.355, translating to a yield of 3.3%.
That’s the kind of yield many investors can get out of bed in the morning for, particularly when one considers the company’s long-term growth rate. Generating strong free cash flow from its core beverage and snack businesses, there’s a lot to like about how Pepsi is positioned to continue to grow its offerings and market share domestically and around the world.
Of course, concerns remain around the potential for spending to drop off as a result of GLP-1 drugs and the potential for folks to cut back on discretionary purchases if a recession hits. I’m of the view that this company’s core brands and offerings remain an inexpensive luxury for most. So, if there is a slowdown, it won’t likely translate into massive losses over most time frames. Overall, the trend has been up and to the right for Pepsi, for good reason.
Notably, Pepsi has also become a strong dividend growth play for many investors. Paying out a growing dividend for 52 years gives this company Dividend King status, and I don’t see that changing anytime soon.
Meta Platforms (META)
Outpacing most Nasdaq companies, social media behemoth Meta Platforms (NASDAQ:META) saw an impressive 57% surge in 2023. Its AI investments, now integrated across its apps, are enhancing ad performance and user experience. A revenue boost of 27% and net income growth of 117% seen this past quarter clearly were enough to convince many investors to invest their hard-earned capital into META stock.
With more than 3.2 billion daily users, Meta’s core loyal customer base is impressive. The company continues to monetizewell on its current offerings, with plenty of verticals to improve monetization, from AI integrations to its metaverse ambitions. Now trading at a reasonable price-earnings multiple of just 28 times, META stock offers incredible value. And a dividend yield (small, albeit) of 0.4% is simply the cherry on top.
I expect Meta to continue to grow its distributions to shareholders over time, particularly as the company’s cash hoard grows. Reinvesting in its core business is great. But adding a dividend means META stock is bound to appeal to a much wider swath of investors. That’s great for current investors, as well as future capital inflows into this stock relative to the overall indexes.
On the date of publication, Chris MacDonald 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
