3 Starter Dividend Stocks Every New Investor Should Own
Sometimes, investing can be daunting, especially for new investors. They have many options to lose money, but they can make a fortune with sharp selections. Amidst the ongoing volatility, certain dividend stocks are similar to the pillars of stability and growth. Delve into three dividend stocks, each offering unique value propositions and opportunities to cement financial futures.
As markets fluctuate and the economic state shifts, the vitality of selecting reliable investments cannot be overstated. These dividend stocks provide steady income streams and hold promise for growth, making them ideal candidates for new investors looking to build a stealthy portfolio.
Here, from the burgeoning cannabis industry to the resilient consumer staples sector, each dividend stock represents a strategic entry point for new investors into diverse market segments. Read more to dissect these companies’ performance, growth prospects, and strategic moves for wealth accumulation and long-term financial leadership.
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Innovative Industrial Properties (IIPR)
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Innovative Industrial Properties (NYSE:IIPR) is attached with a forward dividend yield of 7.6% and a five-year growth rate of 43%. The dividend growth is continuing for six years. Under strategic investments and portfolio management, there was a capital commitment of $119.5 million in 2023. This substantial investment demonstrates the company’s intelligent approach to expanding its property portfolio and seizing growth leads in the cannabis industry. Fundamentally, strategic capital deployment is vital for deriving revenue growth and boosting valuation.
Additionally, the execution of new leases and letters of intent (LOIs) for five properties, representing over $140 million of invested capital, and the fundamental capability to secure new leases and LOIs highlights the company’s strong market presence and leasing capabilities. These new leases generate revenue and further diversify the company’s property portfolio, minimizing risk and boosting long-term stability.
Notably, the company has a conservative and flexible balance sheet. With a debt-to-total-gross-assets ratio of 12% and no variable-rate debt, Innovative Industrial Properties maintains a conservative leverage profile. A low debt burden reduces risk and gives the company the flexibility to pursue growth courses, withstand market downturns, and counter macro uncertainties.
Furthermore, liquidity is a solid boost with a new $45 million revolving credit facility. The introduction and subsequent upsizing of the revolving credit facility boosted the company’s liquidity, providing additional financial resources for investment and operational needs. Solid liquidity is the core of capital-intensive businesses like real estate investment trusts. Therefore, high liquidity enables them to capitalize on market leads and channel through adversity.
Walgreens Boots Alliance (WBA)
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Walgreens Boots Alliance (NASDAQ:WBA) provides a dividend yield (forward) of 4.6% attached to a dividend growth track of five decades (47 years). The company demonstrates strong performance and growth potential in its international segment, particularly in key markets such as the UK and Germany. For instance, total international sales increased by 4.4%, with Boots UK and Germany wholesale driving growth.
Similarly, Boots UK attained solid retail growth, increasing comp retail sales across all categories. Notably, the continued retail market share growth for Boots UK reflects the company’s competitive edge and customer appeal. This suggests its global growth potential and fundamental capability to leverage market opportunities.
Additionally, Walgreens Boots Alliance is on pace to hit $1 billion in cost savings in fiscal 2024. In line with this objective, there’s a planned reduction of about 20% in the workforce of the headquarters support office, demonstrating a clear emphasis on enhancing organizational efficiency.
Furthermore, CapEx was over $100 million lower year-over-year in Q1 fiscal 2024, with a targeted $600 million reduction for the full year. This reduction reflects efficient capital allocation strategies. Similarly, the company will deliver $500 million in working capital benefits in 2024, suggesting sharp liquidity management and breeding an operational edge.
Moreover, the company executed a 48% reduction in the quarterly dividend to $0.25 per share. This approach is to solidify the balance sheet and prioritize investments for growth. Furthermore, the company monetized a portion of the Cencora stake, generating nearly $700 million in proceeds. Walgreens Boots Alliance is evaluating its portfolio to sharpen its strategic focus and boost flexibility.
Hence, these initiatives reflect the company’s proactive approach to cost management and resource optimization, which can support profitability and cash flow generation, ultimately fueling growth opportunities.
British American Tobacco (BTI)
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British American Tobacco (NYSE:BTI) delivers a dividend yield (trailing twelve months) of 9.6%. To start, BTI’s constant improvement mindset has led to considerable efficiencies and cost savings. The company is on track to generate at least £1 billion in additional savings by 2025, with nearly £500 million in savings attained in 2023 alone. Hence, this serves as a support for dividend sustainability.
Fundamentally, British American Tobacco has a strong portfolio of brands across various categories. This includes Vuse, Velo, and Newport, which has led to the company’s topline resilience and growth. These brands have demonstrated volume and value share gains in core markets, driving revenue growth. The company’s exertion in brand advancement, portfolio optimization, and market-specific strategies has led to positive outcomes. Surprisingly, Lucky Strike is the fastest-growing cigarette brand in the US market.
Furthermore, British American Tobacco’s market strategies are focused on addressing specific adversities and leads in different regions. For instance, the company is implementing commercial plans in the US to drive volume and value share recovery in the premium segment, leveraging investments in brands like Newport and Natural American Spirit. In emerging markets, BTI is capitalizing on growth opportunities for smokeless products, with solid volume growth observed in markets like Pakistan and Kenya, reflecting the adaptability of its strategies to diverse market conditions.
Finally, British American Tobacco’s lead in product advancement can be observed through its focus on developing and launching new products across categories, such as Glo Hyper pro and veo. These innovations, supported by partnerships and boosted research capabilities, strengthen the company’s competitive edge and drive value growth.
As of this writing, Yiannis Zourmpanos held long positions in IIPR and BTI. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Yiannis Zourmpanos is the founder of Yiazou Capital Research, a stock-market research platform designed to elevate the due diligence process through in-depth business analysis.
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