In this article, we present to you the 10 Extreme Dividend Stocks with Huge Upside. If you’re in a hurry, click to skip ahead and jump to the 5 Extreme Dividend Stocks with Huge Upside.
Many Americans believe that living off passive income is the ultimate goal and investing in dividend stocks may be the answer to that. We believe that dividend stocks should be integrated into any portfolio for asset growth and risk optimization. In this article, we will focus on extreme dividend stocks with huge upside. In our previous article, 15 Best Dividend Stocks with Upside Potential, we also analyzed dividend stocks with upside potential but those stocks had lower risk and lower yield.
Before we breakdown the list, let me give you a brief background on dividend stocks. Dividend stocks are passive investments where you will be able to collect payment on regular intervals through dividends; monthly, quarterly, annually. Historically when you invested in dividend stocks long enough, you were able to collect regular dividends and enjoyed large capital gains as well. Say for example, in early 2020 Apple’s (AAPL) dividend yield was 1.5%. If you invested during that time, you would have earned 1.5% in dividends annually, but also enjoyed capital gains of more than 100%.
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Choosing the right stock has become more challenging with the arrival of the global pandemic. Which is why it is important to choose a stock with long histories of dividend payments. Often, hedge funds invest in dividend stocks not because they need these dividends but because they think these dividend stocks are undervalued and more likely to outperform the market. Their main goal is to generate capital gains.
Companies that pay dividends are usually stable companies with good financial fundamentals that are committed to rewarding their shareholders even during these times. For example Johnson and Johnson (JNJ) has not only survived in its 133-year history, it has thrived. In April, the company announced a 6.3% hike to its payout in April, $1.01 per share quarterly.
Despite the economic downfall, companies in the S&P 500 paid out $58.28 per share in dividends in 2020, a 0.7% increase compared to last year’s record of $58.24. According to S&P Dow Jones Indices, nearly 84 percent of companies in the S&P 500 index pay dividends.
In line with this, the Federal Reserve is committed to keeping interest rates low for an extended period of time or nearly zero until 2023. We believe the 10-year Treasury bonds’ cumulative yield will be less than the potential average inflation rate for the next 10 years. That’s why we prefer investing in dividend stocks instead of fixed income securities.
In order to identify the 10 Extreme Dividend Stocks with Huge Upside, we started with the 25 holdings in the Global X SuperDividend ETF (SDIV) as of January 6, 2021, and we were able to narrow down our list to 10…
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