For many investors, dividend stocks are attractive options for an investment portfolio. A guaranteed income stream, especially for those nearing or in retirement, is compelling. But while this makes perfect sense, not all dividend stocks are equal. It's important to look at the business and consider more than just the dividend yield when weighing potential investments.
For some companies, there's the potential for both a modest dividend payout and stock price appreciation. Considering all this, here are three companies that are smart buys right now for an investor with as little as $400.
General Motors
General Motors (GM 5.06%) might feel like an odd choice, considering it had to suspend its dividend as recently as April 2020. However, it's worth noting this was due to the pandemic and that it has since been reinstated. With a yield of only 0.82%, the dividend isn't much to write home about, but that's not why it's a smart buy right now.
When considering electric vehicles (EVs), a company like Tesla is most likely to come to mind. However, when it comes to autonomous driving, GM is actually leading the pack. There are six levels of autonomous driving, and GM is the only automaker that is building vehicles at scale with partial driving automation and high driving automation (levels 2 and 4, respectively).
Level 2 automation will be available on 22 GM models by the end of 2023, and there are self-driving cars using level 4 automation operating in three major cities already.
GM's EV sales are currently second in the U.S. market, and its market share at the end of first-quarter 2023 was 8% higher than the previous year. The company is also targeting more than $50 billion in EV sales in 2025. If EVs become the majority of the cars on the road, there's a good case to be made that it will be GM at the head of that pack.
Microsoft
Microsoft (MSFT 1.68%) recently reported its third-quarter 2023 earnings, and the results were impressive. Revenue grew by 7% over Q3 2022, led by the intelligent cloud segment, which increased by 16%. Gross margin and operating margin both increased by 1%, and net income grew by 9%. For a company the size of Microsoft, this is strong growth.
Of particular interest is Microsoft's intelligent cloud segment. Revenue for Q3 2023 grew by 16% year over year (YOY). This continued a trend of slowing growth that the company expected. However, operating income grew by 13% YOY, which was an improvement over the 7% growth seen in the previous quarter.
Importantly for current or prospective shareholders, Microsoft has been buying back shares and increasing its dividend for a long time.
MSFT Dividend data by YCharts
As this chart shows, Microsoft has been a very shareholder-friendly company for the past decade. Over that time, its stock has also returned 940%, compared to the S&P 500's 211%.
Ryman Hospitality Properties
When the pandemic began, hotel and conference space operators like Ryman Hospitality Properties (RHP 1.75%) were hit hard as their businesses were essentially shut down. Ryman's full-year 2022 results demonstrated its ability to bounce back and the strength of its portfolio of hospitality and entertainment spaces.
Revenue for 2022 grew 51% to $569 million, led by the hospitality segment, which accounts for approximately 85% of total revenue. This hospitality segment includes the well-known Gaylord resort properties, which are hotels that feature large indoor spaces for conferences, dining, and entertainment.
Digging into the hospitality segment's results, the extent of the post-pandemic recovery is clear. Full-year operating income increased by 909% over the previous year, and revenue per available room (RevPAR) grew by 79%.
While it only accounts for approximately 15% of revenue, Ryman's entertainment segment also put up strong results. Revenue grew by 75% in 2022, with operating income increasing by 197%. This segment continues to expand beyond its core properties, which include Nashville's Grand Old Opry. The company has broken ground on a new entertainment venue on the Las Vegas Strip.
Ryman also had to suspend its dividend during the pandemic's height, but it had been growing it consistently prior to that point. And this past September, the company reinstated its dividend. With the strong results the company has put up recently, it's reasonable to expect a return to dividend increases moving forward.
