Dividend Stocks

The Dividend Dynamos: 7 Stocks That Will Energize Your Income Stream

The stock market continues making new highs seemingly almost every week. Investors are thrilled about new developments in fields such as semiconductors and artificial intelligence that could lead to tremendous earnings growth and resulting share price appreciation.

However, valuations have run up dramatically for many of the leading technology and growth companies. At this point, it might not be prudent to chase the move in these leading momentum stocks. For investor still wanting to put capital in this expensive market, however, there are other alternatives such as good income-generating dividend stocks.

These dividend stocks provide consistent income streams to investors. That, in turn, makes it easier to ride out market volatility. This stability could really come in handy if the market backs off its recent highs.

Not all dividend stocks are created equal. But these seven dividend dynamos have what it takes to deliver strong income both today and well into the future.

OneMain Financial (OMF)

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OneMain Financial (NYSE:OMF) is a specialty finance company which offers personal loans to consumers. These loans can be either unsecured loans or ones backed by collateral such as automobiles. Investors tend to think of this sort of lending as being subprime and steer clear. However, OneMain has an average higher credit rating within its loan portfolio and tends to lend to people with more sustainable financial positions.

The company was part of Citigroup (NYSE:C) and as such operated through several large economic downturns. Being part of a financial giant gave OneMain access to tons of data and historical operating records. This is a unique selling point, since much of the competition in the lending space is now from financial technology “FinTech” companies.

FinTech players rely more on algorithms and AI to make loans. These algorithmic systems can be quite powerful, but they also run the risk of running into unique problems during a recession as they have less real-world testing through prior economic downturns. By contrast, OneMain has proven its valor through various economic downturns and its large network of brick-and-mortar loan branches give it access to a more diverse client pool than an app-only digital lending service.

OMF shares are currently on sale, trading at 8.5 times forward earnings and an 8.6% dividend yield. That is an excessive discount, given the company’s proven track record and strong management team.

Duke Energy (DUK)

The logo for Duke Energy (DUK) is seen on a sign at one of the company's offices.

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For the past couple of years, utilities stocks had been out of favor. Investors were worried about higher interest rates, and the negative impact that would have on companies which take out lots of debt to grow their operations. In addition, investors have placed less value on lower-risk dividend companies, like Duke Energy (NYSE:DUK) as the yields on risk-free government bonds have increased.

But now, the narrative is changing. It appears utility demand is going to grow considerably due to the need for much more electricity to power data centers for artificial intelligence purposes. In addition, the electric vehicle revolution is adding another significant source of long-term electricity demand.

These factors could end the country’s roughly flat electricity demand and return the sector to significant secular growth.

Duke also has its own lever to pull. It is one of the largest players in the nuclear power space. Nuclear is white hot once again. People are looking for low carbon alternatives for more baseload generation. Duke’s fleet of low-cost reliable always-on nuclear power makes it a leader for the new emerging electricity marketplace.

Southern Co. (SO)

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Southern Co. (NYSE:SO) is another utility company that has seen its outlook dramatically improve over the past year.

Like Duke, Southern had been depressed due to higher interest rates and concerns over the economic outlook. However, with inflation being somewhat under control and the Federal Reserve looking at rate cuts this year, that negative is starting to turn into a positive.

Southern is an attractive electricity player because it operates primarily in states with increasing populations and booming economies, such as Georgia and Tennessee. These markets should enjoy strong economic growth and favorable regulatory outlook.

Additionally, Southern is investing heavily, putting $43 billion to work to modernize its fleet and reduce submissions.

There’s already been substantial progress on this front. The company used to generate as much as 80% of its power from coal. Within the past two decades, coal has fallen to less than 20% of its total. The combination of Southern’s ESG-friendly generation portfolio, favorable operating region and improving utility sector outlook make this dividend stock appealing today.

Gilead Sciences (GILD)

A Gilead Sciences (GILD) sign at the company headquarters in Silicon Valley, California.

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Gilead Sciences (NASDAQ:GILD) is a large and highly profitable biotechnology company. The company became a big name a decade ago thanks to its successful portfolio of HIV treatments. It then acquired a product which serves as a cure for hepatitis-C virus (HCV). This HCV product was an absolute blockbuster, generating tens of billions of dollars in revenues.

Unfortunately for Gilead (but not for patients), due to the product being a cure rather than a treatment for HCV, revenues fell quickly from their peak once the initial patient population was cured of the disease.

Gilead has spent the last ten years trying to come up with new products and pipeline developments that could replace the lost HCV revenues. It appears to be finally having some success. Gilead is set to return to revenue and profit growth in 2025. And the recent acquisition of CymaBay Therapeutics will add to Gilead’s presence in the liver treatments category.

It’s understandable why Wall Street has been frustrated with lack of topline growth in recent years. However, the company’s current product portfolio remains highly profitable and cash flow generative.

Gilead offers a strong dividend yield at 4.9%. And due to developments in the Gilead’s drug pipeline, there’s the possibility for a return to real earning growth going forward as well.

National Storage Affiliates (NSA)

A photo of a storage facility hallway.

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Real estate investment trusts (REITs) are another promising area of the market for dividend investors right now.

Like with utilities, REITs have been out of favor over the past couple of years. Higher interest rates tend to be a significant negative for REITs. Additionally, fears of a downturn in the commercial real estate market in categories such as offices have caused further selling.

Not all REITs are in trouble, however. National Storage Affiliates (NYSE:NSA) is a compelling dividend stock option.

National Storage Affiliates was founded about a decade ago with the merger of several smaller self-storage companies. It has proven to be a fast-growing operator rolling up self-storage assets in dynamic large U.S. metropolitan areas, particularly Sunbelt markets with rapid population and economic growth.

NSA’s strategy has been highly successful. Since 2018, National Storage Affiliates has grown its revenues from $329 million to $866 million last year. The company’s funds from operations (FFO) have surged, and as a result, its dividend has also soared. Despite that, NSA stock has lost nearly half its value since its 2021 peak.

Investors are worried about higher interest rates and economic uncertainty. But self-storage tends to be resilient during recessions as people still need extra space. That’s especially true if they switch housing situations due to unemployment, foreclosure or other such economic setbacks. This makes NSA stock a recession-safe income option with a current yield of 6.2%.

Realty Income (O)

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Realty Income (NYSE:O) is a triple-net REIT. Analysts use the phrase triple net lease to refer to real estate contracts where the tenant instead of the landlord pays for major costs like maintenance and taxes for a property. This gives Realty Income considerable advantages when inflation is surging, as it is insulated from some of the operating cost of real estate properties.

Realty Income has other advantages as well. For example, the company has shrewd capital allocation, as it spun off its office properties back in 2021. That allowed Realty Income to avoid the subsequent big plunge in the office market. Today, the REIT’s portfolio is more concentrated in recession-resilient categories such as grocery, pharmacy, dollar stores and industrial tenants.

Realty Income is also a go-to income name. It nicknamed itself, “The Monthly Dividend Company” many years ago. Not only is the dividend paid monthly, the company also increases the payout frequently. It now has a 26-year streak of annual dividend increases, making it one of the few Dividend Aristocrats in its sector.

Banco de Chile (BCH)

Illustration of the inside of a bank. Bank stocks.

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Banco de Chile (NYSE:BCH) is one of Chile’s large publicly traded banks. It has all the usual retail banking and lending that you would expect for an emerging market bank. It also operates an investment bank and related brokerage and asset management functions.

The bullish case for Banco de Chile today is based on commodity prices and inflation. This is because Chile is a leading exporter of gold, silver, copper and lithium along with fresh fruit and other agricultural products. The price of many of these goods has surged as geopolitical conflicts in places such as Ukraine have limited supply in many commodity markets.

In addition, Chile’s massive lithium reserves make it a leading player in the global battery and electrification wave. Chile isn’t just an export player, either. The country’s central bank has recently slashed interest rates. This should provide a boost for the domestic economy, powering loan growth and rising bank earnings.

Speaking of earnings, BCH stock is selling for about 11 times forward earning while offering a compelling 6.8% dividend.

On the date of publication, Ian Bezek held a long position in BCH, NSA and GILD stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.

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