For investors looking to bolster their retirement funds or generate reliable passive income, dividend stocks often present an attractive opportunity, especially when yields exceed the modest 1.3% offered by typical S&P 500 ETFs, such as the Vanguard S&P 500 ETF. Despite the general market appreciation that has outpaced dividend growth in recent years, causing yields to compress, stocks like United Parcel Service (UPS), American Electric Power (AEP), and Southern Company (SO) continue to provide compelling dividends over 3%.
These companies are not only holding strong but are also demonstrating potential for growth, making them worthy considerations for investors. United Parcel Service boasts a noteworthy dividend yield of 4.9%, providing an appealing return for its shareholders. While the third-quarter earnings report didn't meet all expectations and there are uncertainties about the year's financial targets, the company is taking strategic steps to fortify its business model. UPS is navigating a challenging market by focusing on cost efficiency and investing in advanced technology to automate operations.
Despite embracing more economical delivery options that have affected revenue per piece, overall delivery volumes are on the rise. This strategic adaptation is expected to yield positive financial results as the market stabilizes, potentially increasing their earnings per share from $7.47 in 2024 to $8.78 in 2025. With plans to generate a significant profit margin in the fourth quarter, UPS is positioned to support and possibly grow its dividend, making it a solid choice for dividend-focused investors.
Meanwhile, American Electric Power stands as a symbol of consistency with its 114-year streak of consecutive quarterly dividend payments. Currently offering a 3.8% forward yield, AEP’s consistency is backed by its operations predominantly in regulated markets, providing stable returns through assured pricing frameworks. The company’s robust business model and strategic foresight offer reliable dividends. Over the next few years, AEP anticipates operating cash flow growth from $6.7 billion in 2024 to $8.6 billion by 2028.
Coupled with its target payout ratio of 60% to 70% of its operating earnings, AEP is set to accommodate increasing dividends from $1.9 billion in 2024 to $2.6 billion in 2028, illustrating a strong commitment to shareholder returns and making it an irresistible option for income-seeking investors. Southern Company, known for its diversified energy portfolio, recently experienced a stock price correction, providing an attractive entry point for value investors.
Despite the dip, the company reported robust earnings growth for the third quarter, with EPS rising from $1.30 to $1.40 year-over-year, and achieved total earnings of $3.9 billion for the first nine months of 2024. This financial strength underpins its consistent dividend growth, with an impressive 23-year track record of annual dividend increases. As one of the largest U.S. utilities, Southern Company stands out with its balanced energy generation spanning fossil fuels, and renewable sources like wind and solar.
Its recent dividend hike to $2.88 per share results in a yield of 3.3%, underscoring its attractiveness for long-term income investors. The recent sector-wide sell-off provides a strategic buying opportunity in Southern Company for those seeking stable and profitable investments with assured dividends. These three stocks – UPS, American Electric Power, and Southern Company – offer substantial dividend yields exceeding 3%, and each maintains a resilient business strategy poised for future growth.
Their commitment to rewarding shareholders through steady and increasing dividends positions them as top picks for investors prioritizing consistent income with the potential for appreciation in value.
