In market uncertainties, the only way to keep cool with your investment is to choose high-quality dividend stocks that can provide steady payouts and grow over time. In fact, when it comes to dividend stocks, you should be less concerned about dividend yield and more about dividend growth. The emphasis will always remain on high quality since a lot of companies do make dividend payments but often scale back once the payout ratio is too high.
When looking for the top dividend growth stocks for your portfolio, consider the Vanguard Dividend Appreciation ETF (NYSEARCA: VIG) — the largest U.S.-listed dividend ETF. It tracks the performance of the S&P U.S. Dividend Growers Index and has a large collection of dividend-paying stocks with a record of increasing their dividends.
Better, when you choose high-quality companies with strong dividend growth, you’ll notice that the dividend grows whenever earnings grow. The trick is to focus on the best names in the industry which have a strong track record of dividend growth and consistent payouts.
Let’s take a look at the three dividend stocks with huge return potential for long-term investors.
Dividend Stocks: Coca-Cola (KO)
At the top of my list is the dividend aristocrat Coca-Cola (NYSE:KO). A well-established company with a solid reputation in the industry, Coca-Cola is known for dependable dividends and impressive earnings growth. KO stock is trading for $64 today and is up 11% in the past six months. The stock hasn’t gone to impressive highs nor has it slumped too low. It was trading for $38 in March 2020 and has steadily grown since.
KO stock hasn’t gone below $54 since Oct. 2022 and I believe the momentum will continue. As a long-term investor in KO stock, you will be able to enjoy passive income through steady dividends over the years. If you are into dividend investing, this is one stock to own. It has a yield of 2.94% and recently announced a quarterly dividend of 46 cents a share or $1.84 annualized which is why it is one of the best long-term dividend stocks to own.
Another reason to bet on Coca-Cola is its potential to thrive even during a pandemic, market uncertainty, or a recession. No matter where the economy goes from here, there will be people who will still consume beverages and this is where Coca-Cola will benefit. It already has over 36% market share in North America and is set to expand there. In the past two decades, the stock has returned more than 396%. The company has also beaten estimates in the past four quarters and is set to report results today. Wall Street Analysts are also bullish on the stock. Barclays analyst Lauren Lieberman has raised the price target of the stock to $72 and has an Overweight rating ahead of the results.
Devon Energy (DVN)
Devon Energy (NYSE:DVN) is a hydrocarbon exploration company located in Oklahoma City. DVN stock is one of the top dividend stocks with huge return potential for long-term investors. It is trading at $53 today and is a great bargaining opportunity right now since it is trading much lower than the all-time high of $79. The stock is down 4% over the past year and down 7% year to date. It has a forward yield of 6.63% and a payout ratio of over 51%.
In the last quarter, the company declared a dividend of $0.89. The company increases and decreases the dividends in line with the earnings but with a surge in oil prices, the company has managed to reward investors. Oil is going high soon and OPEC has announced production cuts which has led to a rise in oil prices, which will benefit the company. Yes, the dividend will be variable and oil prices could find an equilibrium in the near future, but this is one company that has the potential to continue rewarding shareholders. It is one of the high-yield dividend stocks to consider.
DVN stock has generated more than 1500% returns for investors in the last three decades. In the annual results, it revealed a fixed 11% dividend increase for 2023 which can be significantly rewarding for investors. Moreover, Wall Street analysts are bullish on the stock. Raymond James has a price target of $70 with a Strong Buy rating since the firm expects an in-line quarter with the production also falling in line. Further, Piper Sandler analyst Mark Lear has a price target of $87 with an Overweight rating. The company is set to report results on May 9.
NextEra Energy (NEE)
The world is moving towards renewable energy and NextEra Energy (NYSE:NEE) is one of the top renewable energy stocks to own. If you are looking for one stock that has a steady dividend payout and massive potential for capital appreciation, consider investing in NEE stock. The company owns massive wind and solar power networks through which it provides power to millions of customers.
No matter the economic situation, NEE stock is set to thrive. It is trading for $78 and is up 7% in the past six months. The stock has generated over 92% returns in the past five years and I believe this is only the beginning. Financially, the company has a net margin of 19.79% and a dividend yield of 2.37%. The company recently announced a dividend of $0.47 and aims to increase the dividend per share by 10% per year through at least 2024.
For 2023, it expects an adjusted EPS ranging from $2.98 to $3.13. Erste Group analyst Stephan Lingnau has a Buy rating for the stock while 11 analysts at Tipranks have a buy rating and only 1 has a hold rating with a price target of $91.73, a 16% upside from the current level.
On the date of publication, Vandita Jadeja 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.