Dividend growth stocks are among our favorite investment groups because you get so much bang for your buck. Not only do the companies pay dividends but business growth typically means capital appreciation as well. What this boils down to is called total returns, or the sum of your dividends and capital returns, and dividend growth stocks deliver the best total returns.
This is especially true of dividend growth stocks that have a history and outlook for distribution increases because dividend increases help maintain your portfolio yield over time while also increasing the yield-per-dollar on each dollar you invest. And if the analysts like the stocks too, all the better, because their attention (if it's the right kind) will help keep stock moving higher.
So that’s why we were so interested when AbbVie (NYSE:ABBV), Juniper Networks (NYSE:JNPR), and Pepsico (NASDAQ:PEP) turned up on our screen for upgrades as we enter the Q1 earnings reporting season.
1. Juniper Networks Upgraded On Market Share Opportunity
Juniper Networks has been trending steadily higher for the last two years on its growth, value, and analysts' support. The stock yields about 2.45% making it the lowest yielder on our list today but still a healthy payout compared to the broad market. The company has been raising the dividend for the last 5 years as well, and just got an upgrade from Citi from Sell to Neutral on the expectation it can grab some market share from Cisco (NASDAQ:CSCO) due to disruptions related to supply chain issues and the situation in Ukraine.
The upgrade has the consensus edging up to a weak Buy from firm Hold and comes with a price target of $36. This is slightly above the consensus price target which has been trending higher over the last 30, 90, and 365 day periods. In regards to dividend health, Juniper Networks has a rock-solid balance sheet and is paying out only 45% of its earnings with earnings growth in the forecast. We expect to see the company issue the 6th consecutive increase at the end of the fiscal year.
2. AbbVie Gets Double-Boost After Positive Study Results
AbbVie reported positive results from a phase II trial of a pipeline drug and it got two price target upgrades because of it. Goldman Sachs and Barclays upped their targets to $140 and $176 versus the $156 Marketbeat.com consensus while maintaining Neutral equivalent ratings.
Their rating is below the consensus of a firm Buy which has been steady over the past year. Turning to the dividend, AbbVie is the highest yielding stock on our list at 3.3% and it has the most aggressive outlook for dividend increases as well. The company is paying out 42% of its earnings and has no red flags on the balance sheet so we are expecting to see a 9th consecutive increase at or near the current CAGR of 17%.
Pepsico, A King Of Dividend Growers
Pepsico doesn’t have the highest yield, the best outlook for growth, or even a double-digit expectation for dividend increases but it does have something that AbbVie and Juniper Networks don’t. Pepsico has been increasing its dividend for 49 years making it a virtual Dividend King.
Dividend Kings have raised their payouts for at least 50 years and are proven to be sound, safe, consistent dividend payers and dividend growers regardless of economic conditions. The analyst's activity in the stock has been a little mixed of late but is net bullish and trending higher over time.
The latest shoutout comes from JP Morgan which favors the name over other consumer staples for its inflation-fighting power. JPMorgan (NYSE:JPM) has an Overweight rating on the stock compared to the Marketbeat.com consensus of weak Buy.
