Tech-based growth stocks may seem like the right strategy, but if you want to have a strong portfolio, you can’t ignore dividends.
Some investors may want to keep all their portfolio in high-growth tech stocks and funnel all their cash into the business during the early stages of business development. But ignoring the value of stocks that pay dividends is an elementary mistake. Here are three dividend stocks to watch.
exxon mobil
The world may be moving towards a greener future, but fossil fuels aren’t going away tomorrow. As such, I think ExxonMobil (XOM -0.08%) makes an attractive income investment as it has a yield of about 3.2% at its current price and trades at a P/E ratio of 14x.
Sales and earnings can fluctuate depending on oil prices, but the company consistently earns tens of billions of dollars annually (excluding 2020). With more than $26 billion in cash and equivalents at the end of the second quarter, ExxonMobil has sufficient capital to continue paying dividends. Additionally, oil prices have hovered above $70 for the past several years, providing strong cash flow for the company.
Among the 30 analysts who follow ExxonMobil and are tracked by MarketWatch, the average price target was $130 at the time of writing, implying an 8% upside potential over the next 12 months. Investors will also benefit from dividends. The dividend has been increasing every year for decades, and we expect it to continue to do so. To me, companies like ExxonMobil continue to be important to our lives despite the negative rhetoric we see every day about fossil fuel-based businesses. In that context, I see this as a solid dividend strategy that will be around for quite some time.
Kenview
Last year, Johnson & Johnson spun off its consumer products division as Kenvue (KVUE -1.44%).
Since then, the new company hasn’t changed much, but it still generates a dividend of about 3.7% at its current share price. Kenvue’s brand portfolio includes leading brands such as Listerine, Tylenol, Motrin, Neutrogena and Band-Aid.
In the company’s most recent quarter, diluted earnings per share were worse than in 2023 due to stagnant sales and asset impairment charges. Excluding that impairment, the company’s adjusted earnings per share were $0.32, compared with $0.31 in the year-ago period. .
Overall, I think there is some neglected value here. Kenvue’s brand lineup was built by Johnson & Johnson, which knows a thing or two about building value, and if you play your cards right, it’s a solid product to own into the future. It has the potential to become a great stock. As the company points out on its investor relations page, the company has created more than 100 new “product innovations” each year since 2020. I think that level of innovation, combined with the company’s position in everyday consumer health products, means the company can buck the trend. The slow sales growth seen last year. This is a long game and I think the company needs time to find itself after its split from Johnson & Johnson.
ford
Automakers tend to have price-to-earnings ratios of around 10 to 12 times (unless, of course, Tesla is the case). Ford (F -1.51%) stock falls right in that range, with a P/E ratio of 11x. Low valuations relative to earnings mean a company like Ford needs to generate fairly meaningful earnings growth to drive up its stock price. Ford may not have much upside potential, but the upside is that it’s a great dividend stock, offering a 5.4% yield at its current share price.
Dividend yield data by F YCharts
The stock’s average yield over the past five years has been 4.46%. We think the strength of the balance sheet and the company’s track record of paying good dividends paint an optimistic outlook for future dividends. Ford has more than $34 billion in cash on its books and generated nearly $3.41 billion in free cash flow in its most recent quarter. I think the automaker is well capable of keeping its dividend covered.
And don’t forget: Ford’s F-150 pickup has been the most sought-after truck model for more than 40 years, and pickups are a breadwinner for most automakers in the United States. This puts Ford in a great position to grow revenue. It may not be the most exciting stock in the world, but I think the automaker’s dividend is very safe.
David Butler has no position in any stocks mentioned. The Motley Fool has a position in and recommends Kenvue. The Motley Fool recommends the following options: Long January 2026 $13 call on Kenvue. The Motley Fool has a disclosure policy.
