Investing in undervalued S&P 500 dividend stocks today could lead to significant long-term gains.
Dividends have accounted for nearly 31% of the total returns for the S&P 500 (^GSPC -0.67%) since 1926. This statistic underscores the value of dividend stocks, especially those that pay reliable dividends and ideally increase them consistently.
The S&P 500 index hosts some of the best dividend stocks, many of which boast impressive histories of increasing dividends and providing substantial returns to investors. Capitalizing on these stocks while their prices are down may be a wise investment strategy. Here are three exceptional S&P 500 dividend stocks currently trading 20% to 33% below their peak prices that are worth considering for long-term holding.
This S&P 500 stock offers monthly dividends
Realty Income (O 0.63%) exemplifies a strong dividend stock. With a remarkable 30-year history of paying monthly dividends and increasing its payments for 110 consecutive quarters, it offers an attractive yield of 5.8%.
As a real estate investment trust (REIT), Realty Income prioritizes dividends and even brands itself as “the monthly dividend company.” Its dividend policy aims to “provide reliable monthly dividends that grow over time,” supported by cash flows from long-term net lease agreements.
Anticipate robust dividend growth from this S&P 500 stock
NextEra Energy‘s (NEE 1.42%) leadership recently expressed expectations for growth in adjusted earnings per share between 6% to 8% per year from 2024 to 2027. The company also forecasts accelerated growth in operating cash flow and plans to increase its annual dividend by around 10% through 2026.
This impressive dividend growth from a utility stock reflects NextEra Energy’s role as operator of Florida Power & Light (FPL), America’s largest electric utility, and its status as the top producer of renewable energy from wind and solar. The company anticipates robust asset growth, with an operational capacity exceeding 70 gigawatts by 2027, making it an excellent buy now, especially as its stock is currently trading nearly 30% below its peak and yielding 3.2%.
Decades of uninterrupted dividend increases
ExxonMobil (XOM 0.15%) stands out among oil dividend stocks within the S&P 500 due to its impressive record of raising dividends for 42 consecutive years, achieving a compound annual growth rate of 6%. This consistency is notable given the unpredictable nature of commodity prices.
ExxonMobil’s commitment to dividends is fortified by its focus on cash flow and prudent reinvestment in business ventures while maintaining a solid balance sheet. The company has strategies in place aiming for significant cash flow growth, which should translate into continued dividend increases for shareholders. With the stock currently about 20% lower than its all-time highs and a yield of 3.8%, it presents a favorable opportunity for investment in this S&P 500 dividend stock.
Neha Chamaria doesn’t hold any position in the stocks noted. The Motley Fool maintains investments in and recommends both NextEra Energy and Realty Income. The Motley Fool follows a disclosure policy.
