- Devon Energy is well positioned for longer-term growth on account of its shale-rich assets and low extraction costs.
- Last year, Stellantis paid a $1.13 per share distribution; there’s reason to believe the April 2023 payment will be the same if not more.
- Wall Street’s average price target has been inching higher in the wake of Verizon’s latest earnings report.
- Verizon has a 6.6% dividend that has been increased for 18 consecutive years.
When it comes to sports cars and sports teams, performance matters. The same goes for stocks.
Investors wanting to know how a stock or portfolio performs should look at the total return. Total return refers to an investment’s overall gain (or loss) during a given period. With stocks, it's the combination of share price appreciation and any dividend payouts.
Historically, stocks that generate above-average capital gains typically pay low or no dividends. Early-stage technology companies are an example. Conversely, companies that offer above-average dividend yields usually experience more modest price appreciation. Consumer staples and real estate come to mind.
There are, however, times when stock offers the best of both worlds — significant upside and significant income. Such stocks are a good fit for investors with a ‘growth & income’ strategy.
Three worthy candidates are based on Wall Street price targets and forward dividend yields.
Is the Devon Energy Stock Selloff an Opportunity?
Devon Energy (NYSE:DVN) has been trading at its lowest level since August 2022. The shale oil and natural gas producer fell last week after its fourth-quarter earnings missed the consensus estimate. A late January fire at a gas compression facility was to blame for lower-than-expected oil and gas production in the first quarter.
A sign of more to come or an opportunity for long-term investors? Most on Wall Street see it as an opportunity.
Crude oil futures continue to slide from their June 2022 peak, with recession concerns coinciding with rising inventories. But it's not all bad. OPEC and the IEA recently increased their forecast for oil demand growth in anticipation of higher China consumption.
Regardless of where oil prices go in the next 10 months, Devon Energy is well positioned for longer-term growth on account of its shale-rich assets and low extraction costs. This is the general thesis among the bulls and why the consensus price target is still above $70. Nearly 40% price return potential plus a 6.6% dividend give Devon Energy an attractive total return profile.
What Automaker Offers a High Dividend Yield?
Netherlands-based automaker Stellantis (NYSE:STLA) has moved nicely off its October 2022 low, but sell-side research firms see it heading higher. The average price target is around $20, which implies about 20% upside from here. Why not just buy domestically and go with Ford (NYSE:F)? Ford’s current target implies only a 10% upside — and less than 30% of analysts are bullish compared to 70% for Stellantis.
Stellantis is not immune to the challenges faced by the global auto industry. Supply chain issues remain, costs are up, and consumers are putting the brakes on new car purchases. But the Fiat Chrysler-PSA Group combination is making the most of the current environment.
As the company reports full-year results this week, revenue has topped Street expectations in the last five quarters. With a lineup of luxury brands like Alfa Romeo and Maserati, demand from affluent customers is proving resilient. In Q3, Stellantis boasted the highest average transaction price in the U.S. at $53,000. Electric vehicle sales have also been strong, which bodes well for the rollout of the first all-electric Jeep, the Jeep Avenger.
Last year, Stellantis paid a $1.13 per share distribution. With profits improving and financial statements in good shape, there’s reason to believe the April 2023 payment will be the same, if not more. This means investors could walk off the lot with a 6.7% dividend yield and a 20% upside.
Is Verizon a Good Growth & Income Play?
Verizon Communications (NYSE:VZ) has a 6.6% dividend that has been increased for 18 consecutive years. The forward payout ratio is 55% meaning the earnings expected in the current fiscal year should adequately cover the quarterly dividend.
Normally not a runner; the telecom leader has some decent upside. According to Verizon's latest earnings report, Wall Street’s average price target has been increasing. The new $46.50 bogey points to an 18% upside and a total return potential of almost 25%. Not bad for a stodgy phone company.
While there’s reason to be cautious about Verizon shares heading into a potential recession, there’s a silver lining. Fourth-quarter subscriber acquisition numbers were strong, indicating a possible inflection point. More than 1.4 million customers came to Verizon last quarter. With a price hike, migrations to higher-level plans, and the Tracfone acquisition, wireless revenue grew 6% year-over-year.
Verizon’s 5G buildout likely peaked last year, which is good news for income investors. Spending on 5G networking should trend lower in 2023, leading to better cash flow and a more stable dividend. Switching from AT&T to Verizon could net more than a tote bag — a better total return.