Prevalence of dividends has been widespread as ~80% of S&P 500 stocks continue to provide regular payouts on the quarterly basis. However, investors already now that not all the sectors give equal generosity while providing dividend yields. Some industries such as real estate and energy have been considered as the leaders in providing dividends, resulting in significant average yields around 4%. However, rapidly growing technology companies are more reserved because they provide significantly lower yields, with average coming out of even less than 1%. Some investors tend to prefer top non-REIT dividend stocks for long-term investments.
2023 has been a tough year for the dividend stocks. This is particularly true for S&P 500 Dividend Aristocrats, which is the collection of renowned companies know for their regular payouts and dividend increases. S&P 500 Dividend Aristocrats saw the marginal rise of ~2.57% YTD. This is nothing as compared to the strong ~21.4% return which was seen by S&P 500 index in the similar time frame. However, as a result of historically healthy performance of dividend stocks, Wall Street analysts continue to recommend to add these stocks to investors’ portfolios. Global market analysts have an optimistic view about the dividend-paying stocks as we enter 2024. They believe that such stocks continue to trade in a stronger position as compared to the prior year. Experts believe that top non-REIT dividend stocks should outperform the returns from S&P 500 Dividend Aristocrats because of healthy economy and favourable macro-economic data.
While there are several REITs which are renowned for dividends, numerous sectors in the market provide strong dividend payouts to the shareholders.
With this in mind, we will now have a look at top non-REIT dividend stocks to invest right now.
1. Edison International
It is the parent company of Southern California Edison, which is an electric utility supplying power to 5 million customers in 50,000-square-mile area of Southern California, except Los Angeles.
The company released its third-quarter results, with its net income coming at $155 million, or $0.40 per share in comparison to net loss of $128 million, or ($0.33) per share, in 3Q of prior year. If we adjust, its 3Q core earnings came in at $531 million, or $1.38 per share as compared to core earnings of $564 million, or $1.48 per share, in 3Q of previous year.
Southern California Edison’s 3Q core earnings per share (EPS) declined year over year mainly because of increased interest expense and true-up recorded in 3Q of last year associated to Customer Service Re-Platform (CSRP) decision.
The company’s performance on the YTD basis was favourable and, combined with outlook for 4Q, it is confident and it has reaffirmed its 2023 core EPS guidance range. The company is focused on ongoing commitment to deliver 5% – 7% core EPS growth through 2025 and 2028. It does not factor in numerous potential increases. It reaffirmed earnings guidance range for 2023, with EIX basic EPS coming in the range of $3.21-$3.51. It expects its core EPS in the range of $4.55- $4.85.
2. Clorox Company
The company operates in several categories throughout consumer products space, which consist of cleaning supplies, laundry care, trash bags, cat litter, charcoal, food dressings, water-filtration products, etc.
It has released the results for 1Q of fiscal year 2024, ending Sept. 30, 2023. Net sales of the company saw a decline of 20% to $1.4 billion in comparison to 4% net sales fall in year-ago quarter. Decrease was mainly because of lower volume due to cyberattack, partially offset by the positive price mix. Organic sales of the company fell by ~18%.
Gross margin of the company went up by 240 basis points to 38.4% from 36.0% in same quarter of the previous year because of benefits of pricing and cost-savings initiatives, partially mitigated by lower volume impact.
Diluted net EPS declined by 75% to 17 cents from 68 cents in the same period of the previous year. This decrease consists of current-period investments in long-term strategic digital capabilities and productivity enhancements (around 17 cents). It also consists of incremental expenses due to cyberattack (around 15 cents).
After entering fiscal year with strong momentum, the August cyberattack resulted in wide-scale disruptions which continue to impact short-term financial performance.
3. United Parcel Service, Inc.
The company is a package-delivery company and provider of global supply chain management solutions.
It has released its results for 3Q23, with consolidated revenues coming at $21.1 billion in comparison to $24.2 billion in last year. Consolidated operating profit of the company came in at $1.3 billion and its adjusted consolidated operating profit came in at $1.6 billion.
Even though tough macro-economic conditions adversely impacted global demand during 3Q, the company’s U.S. labor contract got fully ratified during early September and volume which was diverted during labor negotiations has been returning to its network.
The company is expecting full-year 2023 consolidated revenue in the range of $91.3 billion – $92.3 billion and its consolidated adjusted operating margin is expected between 10.8% – 11.3%. It maintains full-year planned capital expenditures target of ~$5.3 billion with dividend payment expectations coming at ~$5.4 billion. The company expects FY23 share repurchases of ~$2.25 billion.
Analysts at Susquehanna reduced its price objective on the company’s shares from $173.00 to $160.00, setting a “Neutral” rating on the stock in the report dated October 2nd.
RB Capital Management LLC increased its position in shares of the company by ~3.1% during 1Q. It now owns ~2,689 shares of the company’s stock valuing $577,000 after purchasing additional 81 shares during the last quarter.
Conclusion
While above are some of the top non-REIT dividend stocks to invest right now, there are several other stocks in this category which are expected to perform well.
Experts believe that high dividend-paying sectors including communications, utilities, and real estate continue to trade at levels which are significantly below the fair value estimates. Analysts expect that interest rates are expected to fall over course of 2024, which should offer tailwinds for the dividend stocks. These stocks are more interest-rate-sensitive.
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