3 Top Dividend Stocks to Buy in October

Dividend stocks with a high yield often intrigue investors looking to earn a consistent income. While high yields appeal to investors, consistency in dividend payments and a healthy payout ratio speak more to the company's ability to return to shareholders regularly.

Here, we have three outstanding dividend stocks that do not pay a very high yield, but their forward payout ratio exceeds 50%. This implies that the company is distributing a significant portion of its net earnings to shareholders. Let’s find out more.

Rexford Industrial: Dividend Yield of 3.5%

Rexford Industrial Realty (REXR) is a real estate investment trust (REIT) that acquires, owns, and manages industrial properties, primarily in southern California. It invests in high-demand industrial spaces, including warehouses and distribution centers, located in infill markets of Southern California.

Rexford stock has dipped 17.2% year-to-date, compared to the S&P 500 Index’s ($SPX)gain of 21%.

Rexford Industrial’s income has consistently increased year-over-year, driven by rent increases, high occupancy rates, and acquisitions of additional properties. The company has benefited from e-commerce expansion and increased demand for industrial space. It owns 422 properties, totaling approximately 49.7 million rentable square feet.

For REITS, funds from operations (FFO) is a critical metric to understand its earnings to be paid out as dividends (similar to net income for non-REITs). In the second quarter, the company’s FFO increased by 11.1% per diluted share to $0.60.

Rexford pays a forward dividend yield of 3.5%, compared to the real estate sector average of 4.4%. As a REIT, Rexford is required to pay out 90% of its taxable income as dividends. Rexford’s forward FFO payout ratio stands at 70%, higher than the sector median of 63.9%. While this is appealing, a higher ratio may be difficult to maintain unless Rexford's FFO consistently increases. 

Management expects core FFO per diluted share to increase by 6.3% on average for the full year 2024. Analysts predict FFO to increase by 7.9%, followed by another 10.3% in 2025, respectively.

On Wall Street, Rexford stock is rated a “moderate buy” overall. Out of the 15 analysts who cover REXR stock, seven rate it a "strong buy," one recommends a “moderate buy,” six rate it a “hold,” and one suggests a “strong sell.” 

Its average price target of $54.93 suggests that the stock can increase by 18.3% over current levels. However, its high target price of $66 implies an upside potential of 42% over the next 12 months. 

Verizon Communications: Dividend Yield of 6%

Verizon Communications (VZ) is a telecommunications company and a major player in the domestic telecom market. Millions of customers benefit from its wireless, broadband, and fiber services.

VZ stock has gained 14.1% YTD, lagging the overall market.

Verizon is known for its 6.1% dividend yield, which is higher than the communications industry average of 2.6%. 

While earnings fell 5% in the second quarter, the company generated $8.5 billion in free cash flow during the first half of 2024. Verizon's strong free cash flow supports its generous dividend payouts, which currently stand at 57.6% and are sustainable. The company's ability to generate cash on a consistent basis enables it to maintain a stable dividend policy while investing in network enhancements. 

While analysts predict Verizon’s earnings to fall by 3.1% in 2024, in line with management’s guidance, the bottom line could increase by 3.2% in 2025. 

Verizon has increased its dividends for the past 20 years, making it an appealing dividend-paying stock for conservative investors looking for steady income and low volatility.

On Wall Street, Verizon stock is rated a “moderate buy” overall. Out of the 22 analysts who cover Verizon stock, eight rate it a "strong buy," two suggest it’s a “moderate buy,” 11 rate it a "hold,” and one says it’s a “strong sell.” 

Its average price target of $46.47 suggests that the stock can increase by 8.2% over current levels. However, its high target price of $55 implies an upside potential of 28% over the next 12 months.

NextEra Energy: Dividend Yield of 2.6%

NextEra Energy (NEE) is a prominent player in the energy sector, renowned for its expertise in renewable energy. NextEra Energy operates through two primary segments: Florida Power & Light Company (FPL) and NextEra Energy Resources (NEER). While FPL provides reliable electricity services in Florida, NEER is focused on the development, ownership, and operation of renewable energy projects across the United States and Canada.

Valued at $165.5 billion, NEE stock has gained 33.7% YTD, outpacing the broader market's gain.

NextEra is well-known for its strong dividend policy, which is backed up by strong cash flow generation.

NextEra’s adjusted earnings per share (EPS) rose 9.1% to $0.96 in the second quarter. The company generated $2.4 billion in free cash flow during the second quarter, which allowed it to continue to pay dividends. NEE has a history of increasing dividends for the past 30 years.

NextEra’s forward dividend yield of 2.56% is lower than the utility sector average of 3.7%. However, NextEra Energy's forward payout ratio of 55.9% implies the company’s earnings can sustain the dividend payments for now. 

The company expects adjusted 2024 EPS in the range of $3.23 and $3.43, a growth of 5% at the midpoint. Furthermore, management emphasized that the company continues to expect dividend per share growth of around 10% per year until at least 2026. 

NEE plans to achieve this by increasing earnings by an average of 7.3%, 14.4%, and 22.5% in 2025, 2026, and 2027, respectively. By comparison, analysts predict NextEra’s earnings to increase by 7.6% in 2024, and 7.8% in 2025, respectively.

For income-focused investors, NEE stock offers an attractive dividend yield with a reliable growth trajectory, along with exposure to renewable energy. 

Overall, analysts have an average rating of “moderate buy” for NEE stock. Its mean target price of $84.61 suggests the stock can climb by 4.5% from current levels. However, its high target price of $102 implies an upside potential of 25.9% over the next 12 months. Out of 19 analysts covering the stock, 10 have a “strong buy” rating, one has a “moderate buy” rating, seven have a “hold” rating, and one rates it a “strong sell.”

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On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.