4 Dividend Stocks I'm Most Thankful I Owned This Year | The Motley Fool (2024)

I have a lot to be thankful for this year. As an investor, I'm very grateful that 2023 has been a bounce-back year for the stock market. (The S&P 500 has delivered a 20% total return so far this year.)

Many of the stocks I own have done even better. Some of my best performances have come from dividend-paying stocks, which make up the bulk of my portfolio. That's no surprise since dividend stocks have historically outperformed the market over the long term. (Dividend payers have delivered a 9.2% average annual total return over the last 50 years, compared to 7.7% for an equal-weighed S&P 500 index, according to Ned Davis Research and Hartford Funds.)

Here are the four dividend stocks I'm most thankful I owned this year.

A perfectly timed purchase

I bought Broadcom (AVGO 3.56%) right near the end of last year. I'm so thankful I did. Shares of the semiconductor and software company have rallied 75% this year. Add in the dividend, and my total return is over 80%.

Broadcom's dividend was one of the reasons I bought its stock as its shares offered an attractive yield at the time. Further, the company has an excellent track record of increasing its dividend. Broadcom had just increased its dividend by 12% right before I bought shares, which was its 12th straight year of dividend growth since the company initiated the payout in fiscal 2011.

I expect Broadcom to continue increasing its dividend. It just closed its acquisition of VMWare, which will accelerate the growth of its software business. Meanwhile, the company's semiconductor business is capitalizing on the artificial intelligence (AI) megatrend.

These catalysts should grow Broadcom's cash flow, giving it more money to pay dividends, repurchase shares, and invest in the continued expansion of its business platforms.

Capitalizing on market conditions

I've been loading up on Blackstone (BX 1.04%) stock over the past 18 months. I took advantage of the sell-off in shares of the leading alternative-asset manager, which slumped last year due to concerns about its growth as investors pulled money from its non-traded real estate investment trust (REIT).

Those concerns have faded and lifted the pressure on Blackstone stock, which has rallied over 40% this year. Add in its dividend, and the total return is approaching 50%.

Blackstone has continued to grow its assets under management (AUM). They've risen 6% over the past year to exceed the $1 trillion milestone. That positions Blackstone to grow its fee-related earnings and, eventually, its performance revenue as it puts that capital to work and earns outsized returns for its clients.

The company ended the third quarter with over $200 billion in dry powder to deploy on attractive investment opportunities. That puts it in a strong position to go on the offensive in 2024 if there's an economic downturn.

Future earnings growth will give Blackstone more money to return to shareholders. The company typically returns nearly all its earnings to investors via dividends and share repurchases each quarter.

Adding more fuel to grow its payout

Units of Energy Transfer (ET 0.59%) have risen more than 15% this year. Add in the massive cash distribution of the master limited partnership (MLP), and the total return is over 25%.

Fueling the MLP's strong returns has been its value-enhancing acquisition strategy. Energy Transfer bought Lotus Midstream in a nearly $1.5 billion deal earlier this year. That transaction was immediately accretive to its free cash flow. Meanwhile, the MLP recently closed its $7.1 billion merger with Crestwood Equity Partners, which will also boost its free cash flow.

Those deals will give Energy Transfer more fuel to increase its distribution. Earlier this year, the MLP set a target of growing its already monster distribution (currently yielding 9.1%) by 3% to 5% per year. I'll collect more of that growing payout in the future because I also owned Crestwood (and received more Energy Transfer units in the deal).

A double dose of dividend growth

Shares of Equinix (EQIX -0.78%) have risen more than 20% this year. The data center REIT has benefited from the growing demand for space in its facilities from increased digitalization and the emergence of AI.

The company's growth drivers have given it the power to increase its dividend. The REIT has boosted its payout twice this year. It gave investors a 10% raise in February and another 25% increase in November. Its rapidly rising dividend has boosted its total return to more than 22% this year.

Equinix expects to continue growing its dividend briskly in the future. It has a lower dividend payout ratio, compared to its peers, giving it more room to grow. Meanwhile, it expects its growth catalysts to drive strong adjusted funds from operations (FFO) per-share growth of 7% to 10% annually through 2027. That should drive dividend growth of more than 10% per year.

Wealth-building machines

Broadcom, Blackstone, Energy Transfer, and Equinix have delivered market-beating total returns this year, which is why I'm so thankful to own them. I expect they will continue to produce attractive total returns over the long haul. That's why I plan to continue holding them and will consider adding to my positions whenever the market gives me the opportunity to buy more shares at a compelling price.