3 Cash Cow Dividend Stocks for Outsized Income & Upside

Stocks to buy

Following another shaky day in the market, investors may want to consider cash cow dividend stocks. They’re not sexy and they probably won’t make you rich. However, they get the job done when faced with challenging circumstances.

For football fans, cash cow dividend stocks symbolize the jumbo package of Wall Street. Basically, you grab your biggest, meanest players – Samuel L. Jackson’s favorite word applies here – to drive the ball for that extra yard or two that you need.

Just like in the investing arena, it’s not a play you run all the time. It’s predictable and it expends a lot of energy for minimal gain. But sometimes all you need is that one yard to move the sticks or to drive for six. In that case, these cash cow dividend stocks will do you just fine.

PepsiCo (PEP)

Source: FotograFFF / Shutterstock.com

As a soft drink and snack foods giant, PepsiCo (NASDAQ:PEP) really needs no introduction. If you do, just look in your refrigerator or your pantry. Chances are, you’ve got a PepsiCo-owned brand somewhere. Given its massive business and the predictability of its revenue streams, PEP makes a great case for cash cow dividend stocks.

Turning to the financials, the company is sitting on cash and cash equivalents of $9.71 billion (since the fourth quarter). It consistently generates positive free cash flow (FCF), with the latest print landing at $2.83 billion. Net income in Q4 clocked in at $1.3 billion, facilitating PepsiCo’s solid 3.01% forward dividend yield. Even better, it commands 52 years of consecutive annual payout increases.

For the full year 2023, the soft-drink stalwart posted revenue of $91.47 billion. Looking ahead, analysts on average anticipate current year revenue to land at $94.7 billion. One year later, they forecast sales to reach $99.16 billion.

Lastly, Wall Street’s experts rate PEP a moderate buy with a $189.44 average price target. That implies almost 13% upside potential, making PepsiCo one of the cash cow dividend stocks to consider.

Exxon Mobil (XOM)

Source: Jonathan Weiss / Shutterstock.com

A top-tier hydrocarbon stalwart, Exxon Mobil (NYSE:XOM) is another enterprise that doesn’t need an introduction. Fundamentally, though, XOM might seem a challenging idea for cash cow dividend stocks. With so much attention paid to green and renewable energy infrastructures, Exxon Mobil appears anachronistic. Nevertheless, the world still runs on oil, making XOM a cynically effective idea.

You can’t argue with the financials. As of Q4 2023, the company held $31.54 billion in cash and cash equivalents. As well, aside from an understandably rough year in 2020, Exxon has been robustly FCF positive. Last year, the metric stood at $33.45 billion. As for net income, the company’s Q4 print was $7.63 billion.

Naturally, the bottom line undergirds the oil giant’s forward dividend yield of 3.65%. While that’s a bit lower than the energy sector’s average yield of 4.24%, it also boasts 41 years of consecutive annual payout increases.

In closing, analysts peg shares a moderate buy with a $125.75 average price target, implying almost 21% upside potential.

Sanofi (SNY)

Source: nitpicker / Shutterstock.com

A French multinational pharmaceutical and healthcare company, Sanofi (NASDAQ:SNY) is a major component in medical innovations. Per its public profile, Sanofi covers seven major therapeutic areas: cardiovascular, central nervous system, diabetes, internal medicine, oncology, thrombosis, and vaccines. Despite its relevance, SNY is off to a soft start, losing about 4% since the January opener.

Also, over the past 52 weeks, SNY moved up less than 1%. That has longtime shareholders frustrated. However, the disappointing performance presents a contrarian opportunity for prospective investors. For one thing, Sanofi benefits from sound financials. Currently, the company is sitting on a cash and cash equivalents war chest of $9.5 billion. It also has marketable securities amounting to $294 million.

Last year, FCF landed at $7.89 billion while net income clocked in at $5.9 billion. While the company is going through a rough patch, it hasn’t forgotten to reward its shareholders. Right now, its forward yield stands at 3.94%, above the healthcare sector’s average yield of 1.58%.

Looking ahead, analysts rate SNY a moderate buy with a $59 average price target, implying over 22% upside potential.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.

Articles You May Like

The 3 Most Undervalued Flying Car Stocks to Buy in April 2024
Fisker Stock’s Downfall: A Cautionary Tale for EV Investors
If You Can Only Buy One Meme Stock in April, It Better Be One of These 3 Names 
Don’t Be Fooled! The Nvidia Stock Pullback Is a Gift.
Henrik Fisker’s Second Company Is at Risk of Imploding