Analysts Highlight Three Dividend Stocks With Strong Growth Potential for Investors

Picking dividend stocks is a bit like choosing the best fruit at the grocery store—you want something that’s ripe now and will last a while. With the stock market bouncing up and down lately, many investors are looking for steady income, and that’s where dividend stocks come in.

Why Dividend Stocks Matter for Investors

Dividend stocks pay you a part of the company’s profits, usually every few months. This is like getting a paycheck just for owning the stock. With tech and AI stocks swinging wildly and the economy feeling uncertain, these regular payments can help keep your investment portfolio more stable. According to Nasdaq, dividend stocks have historically outperformed non-dividend stocks during tough times in the market.

Bullish Case: Why Experts Like These Dividend Stocks

• Diamondback Energy (FANG): This energy company works in the Permian Basin, a big oil and gas area in Texas. It recently gave back nearly $900 million to investors through dividends and share buybacks. Its dividend yield is about 2.8%. Experts like its low cost to produce oil, making it tough to beat when oil prices drop. Analyst Scott Hanold and AI tools both rate this stock as a buy, with price targets as high as $173.
• Permian Resources (PR): Another oil and gas company, Permian Resources, has a higher dividend yield of 4.5%. It’s been growing without spending more money, and experts think it may raise its dividend in the future. The company is also buying back its own shares and keeping its debt low—which investors like.
• Duke Energy (DUK): Duke is a giant utility company that makes and sells electricity and gas. It pays a 3.4% dividend yield and just reported strong profits. Duke has a big plan to spend up to $105 billion on new projects by 2030, which could lead to more growth and possibly higher dividends.

Bearish Case: The Risks and Downsides

• Energy Prices Can Swing: Companies like Diamondback and Permian depend on oil and gas prices. If energy prices fall, profits and dividends could shrink.
• Regulation and Debt: Utilities like Duke Energy have to deal with government rules and need to borrow lots of money for big projects. If borrowing costs go up or rules change, profits could get squeezed.
• Not All Dividends Are Safe: Sometimes, companies have to cut their dividends if business gets tough. It’s important to check if the company’s profits really cover their dividend payments. According to a Morningstar analysis, a payout ratio above 80% can be a warning sign for dividend cuts.

How These Stocks Stack Up

All three companies have strong reasons to attract investors. Diamondback and Permian are benefiting from the ongoing need for energy, while Duke Energy offers a more stable, utility-based income. Each has support from top Wall Street analysts, but it’s smart to remember that no investment is risk-free.

Extra Data: The Power of Dividends

Over the past 50 years, dividends have made up about 40% of the total returns for the S&P 500, according to Fidelity. This means that getting paid to own stocks can really add up and help smooth out the bumps during rough markets.

Investor Takeaway

• Look for reliable dividend payers: Focus on companies with a history of steady or growing dividends, and check if they earn enough to keep paying them.
• Diversify your holdings: Don’t put all your money in one sector. Mix energy, utilities, and other industries for a safer income stream.
• Watch the payout ratio: A lower payout ratio usually means the dividend is safer. Avoid companies paying out nearly all their profits.
• Pay attention to analyst ratings: While expert opinions help, do your own research to make sure the stock fits your goals and risk tolerance.
• Remember the long game: Dividend investing can shine during market ups and downs, but patience is key. Reinvesting dividends can boost your returns over time.

For the full original report, see CNBC