Research highlights that dividends play a crucial role in generating total equity returns. Since 1926, dividends have accounted for around 32% of the total return for the S&P 500 index. Therefore, consistent dividend payments, along with the potential for capital appreciation, are key considerations for total return expectations.
Given these insights, here are three dividend stocks for stable income, tailored for investors aiming to strengthen their financial base.
Caterpillar (CAT)
First on the list is Caterpillar (NYSE:CAT). The leading play in construction and mining equipment is well-positioned to benefit from secular growth trends, including urbanization, infrastructure development and the transition to sustainable energy sources. With a diversified revenue stream, strong brand recognition and a dividend increase streak of almost three decades, CAT stock appeals to long-term income investors.
In the fourth quarter of 2023, Caterpillar’s sales rose 3% year-over-year to $17.1 billion, driven by robust demand across all segments and geographies. Operating profit margin expanded to 18% despite inflationary pressures. Fourth-quarter earnings per share almost doubled to $5.28, up from $2.79 in the previous year.
Infrastructure spending stateside is in part driven by the $1.2 trillion U.S. Infrastructure Investment and Jobs Act. Moreover, the shift to clean energy is a significant tailwind that boost Caterpillar’s earnings prospects.
As governments worldwide ramp up spending on rebuilding aging infrastructure, the company stands to be a key beneficiary given its diverse array of machinery and equipment. Additionally, it supports the clean energy shift by providing mining equipment for electric vehicles and renewable energy metal production.
Year-to-date, CAT shares have returned 24% and currently boast a dividend yield of 1.4%. The stock is changing hands at 18.09 times forward earnings and 2.8 times trailing sales. Given its strong fundamentals and growth prospects, any potential drop in Caterpillar’s price presents an opportunity for long-term investors.
Nucor (NUE)
Next up is Nucor (NYSE:NUE). As North America’s largest steel producer and recycler, Nucor is a dividend-paying company that could help balance investors’ asset allocation before a potential tech selloff in 2024. With a dividend increase streak spanning five decades, Nucor offers an enticing combination of growth at a reasonable valuation and a steadily rising income stream.
Despite lackluster fourth quarter results, 2023 represented the third-most profitable year in Nucor’s history. Consolidated net sales in the fourth quarter declined 12% YOY to $7.70 billion. Net earnings fell 37% YOY to $785 million, or $3.16 per diluted share. The company issued first quarter 2024 guidance for net earnings of $3.55 to $3.65 per share.
Analysts point out that Nucor is primed to benefit from rising demand for sustainable building materials due to its leadership in recycled steel production. It offers a sustainable alternative to traditional methods reliant on mining iron ore and coal.
So far in 2024, NUE stock is up 13% and currently comes with a 1.1% dividend yield. With shares trading at a favorable 10.98 times forward earnings and 1.4 times trailing sales, Nucor’s solid performance and growth potential make it a worthy addition to the watchlist.
WisdomTree US MidCap Dividend Fund (DON)
The final pick on our list is the WisdomTree US MidCap Dividend Fund (NYSEARCA:DON), an exchange-traded fund launched in June 2006. It offers investors exposure to dividend-paying mid-cap U.S. companies, blending growth potential and income stability.
DON holds a diversified portfolio of 333 stocks, while the top 10 holdings constitute around 9.5% of $3.7 billion in total assets. Leading names include Vistra (NYSE:VST), Corebridge Financial (NYSE:CRBG), Packaging Corp of America (NYSE:PKG), Viatris (NASDAQ:VTRS) and Conagra Brands (NYSE:CAG), spanning industries from electric power generation to consumer goods and financial services. For sector breakdowns, we see financials at 24.6%, industrials at 16.9% and consumer discretionary at 12.3%. Thus, the ETF offers enough diversification to capture market opportunities.
Year-to-date, DON has advanced 4.7%. It currently boasts a trailing price-to-earnings ratio of 12.93. With a dividend yield of 2.33% and an expense ratio of 0.38%, DON presents a potential option for those seeking stable income from dividend-rich mid-cap stocks.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines
Tezcan Gecgil, PhD, began contributing to InvestorPlace in 2018. She brings over 20 years of experience in the U.S. and U.K. and has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Publicly, she has contributed to investing.com and the U.K. website of The Motley Fool.