Here are three well-positioned stocks with potential upside and a dividend yield exceeding 5%.
Dividends provide investors a valuable strategy for building long-term wealth, especially when reinvested. The following stocks not only offer a dividend yield over 5%, but each also has distinct reasons for being considered long-term holds.
Heating up
The global renewable energy sector is experiencing significant growth. In 2023, global annual renewable capacity additions increased by nearly 50%, marking the fastest growth rate in the past two decades. This year also represented the 22nd consecutive year of record-setting renewable capacity additions, a trend that is appealing to investors.
Among companies poised to benefit in this environment is Clearway Energy (CWEN). As one of the largest owners of clean energy generation assets in the U.S., Clearway Energy’s capacity spans approximately 9,000 MW across 26 states. Its portfolio includes wind, solar, energy storage assets, and environmentally friendly natural gas generation facilities.
Moreover, the recent Federal Reserve rate cut allows Clearway to fund acquisitions more affordably. The company has multiple investments lined up in renewable energy projects and provides clear transparency around its dividend, which currently offers a yield of 5.5%. The dividend is projected to grow between 5% to 8% through 2026, with a payout ratio ranging from 80% to 85%.
As renewable energy continues to expand, Clearway Energy is considered a long-term hold with a robust dividend.
Acquisition and 5G
Verizon Communications (VZ) is the largest U.S. telecommunications company by revenue. It primarily earns from internet and phone subscriptions and equipment sales. Recently, Verizon announced an agreement to acquire Frontier in an all-cash transaction valued at $20 billion. This strategic move will incorporate one of the largest pure-play fiber internet providers, significantly expanding Verizon’s fiber footprint and adding 2.2 million fiber subscribers. Management expects the acquisition to generate at least $500 million in annual cost synergies.
Verizon’s long-term viability also hinges on its advancements in 5G technology. The high barriers to entry in the industry ensure that Verizon remains one of the few companies with a nationwide 5G network.
The company recently increased its dividend for the 18th consecutive year, and its current yield is 6%. With its strategic acquisition and focus on 5G, Verizon is seen as a stock to hold indefinitely.
EV woes
Ford Motor Company (F) presents an interesting case of potential upside despite challenges in its electric vehicle (EV) segment. While its Ford Blue and Ford Pro divisions are profitable, the model e unit dedicated to EVs is projected to lose up to $5.5 billion in 2024.
In response, Ford has delayed up to $12 billion in EV investments and reduced capital expenditure on EVs from 40% to 30%. The company also canceled plans for a line of EV SUVs, minimized battery factory plans, and is developing a low-cost EV platform targeting prices around $25,000.
The transition to EVs in the auto industry has been slower than anticipated, with losses impacting the bottom line. However, if Ford’s model e division eventually breaks even, it could significantly enhance profitability and capacity to increase dividends.
The automotive industry is undergoing a cyclical shift and an EV revolution, positioning Ford as a wise long-term investment. Ford’s current dividend yield is 5.7%, and it occasionally provides supplemental dividends when there is excess cash.
Buy and hold
These three stocks offer investors avenues to participate in the growing renewable energy industry, gain access to the future of 5G, and benefit from decreasing EV prices. Each company provides a dividend yield exceeding 5% and represents strong candidates for long-term investment.
