Grow a Profitable Portfolio With These 3 Dividend Kings in 2024

Stocks to buy

It’s a myth that making money comes easy in stock markets. This is important to note for all new investors. It takes time to screen businesses and build a portfolio that can navigate bad times and deliver big rewards in good times. There is also no doubt that potential millionaire makers in a portfolio are growth stocks. However, portfolio stability and steady returns come from high quality dividend stocks to buy.

Further, if investors can spot attractively valued dividend kings, there is a strong case for beating index returns consistently with a portfolio of dividend stocks. With the markets in the last quarter of the year, I would spend time in planning and creating a portfolio for 2024.

Of course, I don’t imply complete revamp. However, there are dividend stocks to buy that can boost portfolio returns in the next 12 to 18 months. This column focuses on these dividend stocks and the factors that make them attractive.

Chevron Corporation (CVX)

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Chevron Corporation (NYSE:CVX) recently announced an agreement to acquire Hess Corporation (NYSE:HES) for a consideration of $53 billion. CVX stock has corrected after the announcement and I believe that it’s a good opportunity to accumulate. The stock trades at an attractive valuation and offers a dividend yield of 3.88%.

Considering the factors of geopolitical tensions and production cuts, I believe that oil is unlikely to trade below $80. Once the acquisition is completed, Chevron will be positioned to deliver robust free cash flows.

It’s worth noting that even prior to this announcement, Chevron was attractive. The Company has low break-even assets and an investment grade balance sheet. Further, Chevron reported operating cash flow of $47.5 billion in 2022 when Brent oil averaged $100.9. This is an indication of the potential the assets hold.

I must add there that Chevron has guided for annual capital expenditure of $19 to $22 billion after the acquisition is completed. These investments will ensure steady production upside and robust reserve replacement.

Newmont Corporation (NEM)

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With gold trading near $2,000 an ounce, I believe that it’s a good time to consider exposure to gold mining stocks. I also believe that gold is poised for a breakout rally in 2024 after an extended period of consolidation. With rising geopolitical tensions and the prospects of rate cuts next year, the bull case seems strong.

Newmont Corporation (NYSE:NEM) is among the best dividend stocks to buy from the gold mining sector. Besides trading at an attractive forward price-earnings ratio of 19, NEM stock offers a dividend yield of 4.35%.

From a fundamental perspective, there are two important points to note. First, Newmont has a leading portfolio of tier one assets with stable production visibility into the 2040s. As gold trends higher, the Company will be positioned to report robust free cash flows, which will boost dividends.

Further, Newmont has an investment grade balance sheet. Currently, the Company has a liquidity buffer of $6.2 billion and a net-debt-to-adjusted-EBITDA of 0.7. With strong financial flexibility, Newmont is positioned to invest aggressively to ensure high reserve replacement.

Lockheed Martin (LMT)

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I would remain invested in some of the top defense stocks considering the rise in geopolitical tensions. Lockheed Martin (NYSE:LMT) is among the dividend kings to buy at an attractive valuation. LMT stock has remained sideways in the last 12 months and seems poised for a breakout. Further, a dividend yield of 2.8% is attractive and I expect steady dividend growth.

As of Q3 2023, Lockheed reported an order backlog of $156 billion. A strong order backlog provides clear cash flow visibility. For the year, Lockheed has guided for free cash flow of $6 billion. I also believe that the order intake will remain strong and cash flow upside is likely in the coming years.

From a growth perspective, it’s important to note that Lockheed is focused on innovation and expansion of international collaboration. The Company was awarded a “transformational AIR6500 integrated air and missile defense program by the Australian Defence Force.” With orders from the allies of the United States, the Company is likely to accelerate revenue growth.

On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

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