Markets are likely to trade sideways over the next few months, and may face another pullback similar to the one seen in August. Investors can use a pullback as an opportunity to buy stocks on a drop.
Or they can look for steadier stocks that can pay a sizeable income while continuing to trend higher. Many stocks are still near 52-week highs. A few of them are also companies that offer dividend growth over time.
Since over an investment lifetime, reinvested dividends can account for more than half of a portfolio’s return, owning some dividend stocks can take some of the wild swings out of owning just growth plays.
That’s why companies like Verizon (VZ) look attractive here. Shares are trading at 16 times earnings, even with the stock near 52-week highs. And shares yield 6.2%, but it’s likely that a dividend increase is in the cards.
Plus, the company’s earnings can likely increase should its proposed merger with Frontier Communications (FYBR) goes through.
Action to take: Investors looking for high income now and continued income growth can get both with Verizon, the third-highest yielding stock in the S&P 500.
The company’s strong cash flow should continue to allow it to pay out increasing dividends to shareholders over time.
For traders, the January 2025 $45 calls, last trading for about $1.10, could see mid-double-digit returns on a continued rally through the end of the year.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.