Macro

Elite Dividend Stocks: Chevron, Coca-Cola, McDonald's, NextEra Shine in Q2

Elite Dividend Aristocrats like Chevron and McDonald's offer refuge amid Q2 market volatility, promising income and growth.

By Max Weldon

4/4, 07:39 EDT
S&P 500
iShares 20+ Year Treasury Bond ETF
iShares 7-10 Year Treasury Bond ETF
Chesapeake Energy Corporation
Chevron Corporation
East West Bancorp, Inc.
Coca-Cola Company
McDonald's Corporation
Mondelez International, Inc.
NextEra Energy, Inc.
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Key Takeaway

  • Chevron (CVX), Coca-Cola (KO), McDonald's (MCD), and NextEra Energy (NEE) identified as elite dividend stocks for Q2 amid market volatility.
  • Chevron boasts a 4.1% dividend yield with shares up over 7% in 2024; analysts see nearly 11% upside.
  • McDonald's offers a 2.4% dividend yield, despite a near 7% drop in shares this year, with an anticipated 17% upside from analysts.

Dividend Aristocrats in Focus

As the second quarter unfolds, market volatility has prompted investors to seek refuge in reliable dividend-paying stocks. The ProShares S&P 500 Dividend Aristocrats ETF (NOBL) highlights companies that have not only paid but also increased their dividends for at least 25 consecutive years. Among these, Chevron Corporation, Coca-Cola Company, McDonald’s Corporation, and NextEra Energy, Inc. stand out for their robust dividend yields and potential for price appreciation. Chevron, with a 4.1% dividend yield, has seen its shares rise over 7% in 2024, benefiting from both an 8% dividend increase and climbing oil prices. McDonald’s, despite a near 7% drop in stock price, maintains a 2.4% yield and plans to expand its menu offerings, potentially boosting its appeal.

Market Volatility and Dividend Strategy

The current market environment, characterized by uncertainty over Federal Reserve rate cuts, has heightened interest in dividend aristocrats. Fed Chair Jerome Powell's recent statements underscore the central bank's cautious stance on easing rates, emphasizing the need for clear signs of inflation moving towards the 2% target. This backdrop makes dividend-paying stocks, particularly those with a history of consistent increases, an attractive option for investors seeking income and potential capital appreciation. Analysts' endorsements and price target projections for selected dividend aristocrats suggest confidence in their ability to weather market turbulence.

Economic Recovery and Dividend Appeal

The ongoing economic recovery, despite high interest rates, positions dividend stocks favorably for both yield and price growth. Bank of America's analysis suggests a shift towards a total return world, where dividends could play a significant role in overall market returns. This perspective is supported by the selection of undervalued dividend stocks, such as Mondelez International and Chesapeake Energy, which offer compelling yields and growth prospects. These companies, alongside others like East West Bancorp, have demonstrated resilience and adaptability, enhancing their attractiveness to income-focused investors.

Street Views

  • Mizuho Analyst on Chevron (Bullish on Chevron):

    "In March, Mizuho raised its price target on Chevron to $200 and maintained its buy rating, as well as its “top pick” designation."

  • Gregory Francfort, Guggenheim (Bullish on McDonald's):

    "We see near-term sales upside driving McDonald’s to stand out in what could be a challenged 1Q restaurant earnings season given a slow start for the industry in 2024."