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Soaring More Than 30%, These 3 Dividend Stocks Are Not Too Good to Be True

By David Jagielski - Nov 20, 2019 at 7:00AM

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Investors can earn both a good dividend and some capital appreciation with these stocks.

The "growth versus dividend" debate is eternal. The good news, however, is that with the three stocks listed below, you can get the best of both worlds: a recurring dividend payment as well as a good return. All three stocks have been high performers in 2019 and could continue to be next year too.

1. Target

Target ( TGT -1.42% ) has done a phenomenal job of creating value for its shareholders this year. Through the first eight months of the year it has risen by more than 60%. The retailer got a big boost in August when its Q2 results beat expectations, and the company raised its guidance for the year. Same-store sales growth of 3.4% continue to look strong, as the retail industry does not appear to be in bad shape despite concerns about a possible slowdown in the economy.

In addition to strong stock returns thus far, shareholders also earn a good dividend from the company, which yields 2.4% per year. It's a modest payout but one that's been growing over the years. A dividend aristocrat, Target has increased its dividend payments for more than four decades, with its latest increase being a 3.1% hike.

Calculator, book, and pen on top of a pile of money.

Image Source: Getty Images.

A solid dividend payer and one of the top retailers in the country, Target is a great long-term hold, regardless of where the economy might be headed in the short term.

2. S&P Global

S&P Global ( SPGI -1.46% ) provides stock market intelligence and analytics that can contribute valuable information during all stages of the business cycle. The company has been experiencing a gradual but persistent increase in share price, rising more than 50% from January through to the end of October. S&P consistently posts strong numbers, with its most recent quarter reporting profits of $617 million, rising by 25% year over year. S&P has steadily been increasing its revenues over the years, rising from $5.3 billion in 2015 to $6.3 billion in 2018, for an increase of 18%.

The stock offers a modest dividend currently yielding just 0.9%. However, that would have been higher had it not been for the stock's high returns this year. Another dividend aristocrat, S&P has also increased its dividend for more than 40 consecutive years, with its most recent hike being a 14% increase in its quarterly payments from $0.50 to $0.57.

This is another great long-term hold not just for the dividend but because the insight and information that S&P provides are always going to be needed in the business world.

3. ResMed

ResMed ( RMD -0.61% ) provides the softest returns of all three stocks listed here, but it's still up over 30% this year as of the end of October. Although the stock got off to a rough start in January after the company fell short of expectations in Q2 of fiscal 2019, it has more than recovered since then. Most recently, its first-quarter results for fiscal 2020 were much more impressive: Revenues were up 16%, sending the stock soaring and reminding investors how quickly outlooks can change.

With strong profits over the years, the medical equipment company is another promising long-term hold for investors. It also offers a dividend of 1% per year. Although it's no aristocrat, paying a dividend only since 2012, the company has increased its payouts over the years. Dividend payments of $0.28 five years ago have since grown to $0.39, an increase of 39%, averaging a compounded annual growth rate of 6.9% during that time.

Key takeaways

All three stocks are promising long-term holds. However, for risk-averse investors, a stock like S&P might be the best choice, given not only its track record but that its business is a lot less vulnerable to industry conditions, as Target is, while not having the high research and development costs that a company involved in healthcare, like ResMed, might have to endure.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Target Corporation Stock Quote
Target Corporation
TGT
$240.39 (-1.42%) $-3.45
S&P Global Inc. Stock Quote
S&P Global Inc.
SPGI
$449.06 (-1.46%) $-6.67
ResMed Inc. Stock Quote
ResMed Inc.
RMD
$253.29 (-0.61%) $-1.56

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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