Dividend investing requires a different approach than investing in the growth stocks that attract significant investor attention. Instead of seeking the highest returns, dividend investors focus on steady, growing income from a company's payouts.
Despite this focus, some stocks are in a position to pay a dividend far above the S&P 500's average dividend yield of 1.1% and possibly benefit shareholders from a rising stock price. Knowing that, if an investor has $5,000 to buy shares, they can likely earn significant returns from these consumer names. Here's a look at two of them.
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Clorox
Investors know Clorox (CLX +1.82%) best for its bleach. However, the company owns other well-known consumer brands such as Pine-Sol, Hidden Valley, and Burt's Bees.
It benefited during the COVID-19 pandemic when consumers obsessed over cleanliness. Since that time, inflation, a cyberattack, and steps to transition to new enterprise resource planning (ERP) software weighed on the stock, leading it to lose around half of its value over the last five years.
NYSE: CLX
Key Data Points
Still, the lower stock price has taken its dividend yield to 4.4%. Also, the annual payout of $4.96 per share has risen for 49 straight years. Companies tend to maintain such streaks if possible, making it unlikely the annual dividend hikes will stop.
Fortunately, Clorox's well-known brands should bolster the company. Moreover, the investment in the ERP software should improve efficiency. At the current price, an investor can pick up 22 shares for around $2,450.
Ultimately, between that high dividend yield and its P/E ratio of 17, Clorox appears poised to offer its shareholders dividend growth and after a long wait, possibly a rising stock price as well.
Target
Like Clorox, multiple missteps have hurt omnichannel retailer Target (TGT +1.37%). Target is one of America's more prominent retailers by virtue of its approximately 2,000 stores across the 50 states and its significant online presence.
Nonetheless, since just after the pandemic, rising inventories, falling sales, and unpopular political stances prompted investors to sell Target shares. Also, trying to solve this issue with a new CEO led to renewed selling when investors learned an internal candidate, COO Michael Fiddelke, would become the new CEO.
NYSE: TGT
Key Data Points
But the stock has begun to recover from its November low. Moreover, its depressed stock price has boosted its dividend yield to 4.1%, and it is a Dividend King by virtue of its 54 years of payout hikes. With the latest increase, the annual dividend is now $4.56 per share.
Additionally, the stock sells at a 13 P/E ratio, far below its retail industry peers, Walmart and Costco, which trade at 42 times and 51 times earnings, respectively.
At today's prices, one can buy 23 shares for about $2,525. Now that Target stock has begun to recover, its low valuation could foster a stock price recovery as it delivers rising dividend payments.
