Analysts Highlight Three Dividend Stocks Likely to Boost Investor Income and Portfolio Stability

Imagine your savings account is like a garden: if you only plant one type of flower, you might not have blooms all year. That’s why smart investors look for different ways to get steady “blooms”—or income—from their investments. With interest rates lower and the stock market bouncing up and down, finding stocks that pay you regular dividends can help keep your portfolio healthy and growing.

Why Dividend Stocks Matter for Investors

Dividend stocks pay you cash just for owning them, kind of like getting a little thank-you note from a company every few months. When interest rates fall, the money you get from savings accounts and bonds goes down, so dividend stocks become more attractive. According to Nasdaq, companies in the S&P 500 that pay dividends have outperformed those that don’t over the past 50 years.

Three Dividend Stocks to Watch

• Devon Energy (DVN): An oil and gas company with a 2.5% dividend yield.
• EOG Resources (EOG): Another energy company, offering a 3.7% dividend yield.
• CVS Health (CVS): A big pharmacy chain, paying a 3.4% yield.

Devon Energy: Bull vs. Bear

• Bull Case: Devon is returning lots of cash to shareholders, with $401 million paid out last quarter. JP Morgan recently upgraded the stock, pointing out that Devon is meeting its goals to make its business more efficient and expects strong cash flow to continue. The company also has land in some of the best oil regions in the U.S.
• Bear Case: Some of Devon’s oil wells haven’t been as productive recently, and its price target was cut a little. Oil and gas prices can swing a lot, which can affect profits and dividends.

Devon’s dividend yield is close to the average for the S&P 500, but its focus on giving cash back to investors stands out. According to Statista, the average S&P 500 dividend yield is about 1.7% in 2024, so Devon pays more than average.

EOG Resources: Bull vs. Bear

• Bull Case: EOG is known for steady performance, even when oil prices change a lot. It promises to give at least 70% of its extra cash back to shareholders through dividends and buying its own stock. EOG is also using new technology to find more oil and lower its costs. Analysts think EOG is a leader in its field.
• Bear Case: Like all oil companies, EOG’s profits depend on the price of oil and gas, which can drop fast if the global economy slows down or if there’s too much supply.

Historically, energy stocks like EOG can be bumpy, but their dividends can help cushion the ride. During the past decade, energy sector dividends have often been higher than other sectors, according to S&P Global.

CVS Health: Bull vs. Bear

• Bull Case: CVS is working hard to improve its business, and it expects earnings to grow by “mid-teens” percentages through 2028. Analysts like its plan to cut costs, focus on its best business areas, and possibly buy back more of its own stock soon. CVS has a long history of paying dividends and is gaining market share in its pharmacy business.
• Bear Case: CVS faces tough competition and has had trouble with rising costs in its health insurance segment. If these problems continue, profits could be squeezed, and dividend growth may slow.

Pharmacy and healthcare stocks like CVS can offer stability when other parts of the market are shaky. According to Fidelity, health care stocks have historically held up better than most sectors during market downturns.

Investor Takeaway

• Look for dividend stocks with a history of steady payouts, especially when interest rates are low.
• Diversify: Don’t put all your eggs in one basket—consider mixing energy, health care, and other sectors.
• Watch for companies improving their business and returning cash to shareholders, like Devon, EOG, and CVS.
• Remember that even dividend stocks can be risky if their industry faces big challenges.
• Use dividend stocks to help smooth out your portfolio’s ups and downs and create a more reliable income stream.

For the full original report, see CNBC