As 2023 passed with no recession materializing, many investors breathed a sigh of relief, which natively may not seem supportive of targeting high-yield dividend stocks growth. After all, with the economy booming and workers vigorously rejoining the labor market, equity sector participants may eschew passive income for outright capital gains.
However, high-yield dividend stocks growth arguably always deserves consideration. For one thing, focusing exclusively on capital gains prevents investors from attaining the beauty of passive income: the ability to generate money while they sleep. On a related note, even the best stock pickers won’t win all the time. At least with stable dividends, investors can reasonably expect net positive returns.
Also, should the Federal Reserve eventually reduce interest rates, high-yield dividend stocks growth should enjoy rising pertinence. Under a high-interest-rate environment, government bonds competed with the private sector. With more normal borrowing costs, the incentive for targeting dividends should rise. On that note, below are intriguing enterprises with high-yield dividend stocks growth.
Bank of Nova Scotia (BNS)
For investors that don’t mind a little adventure, Bank of Nova Scotia (NYSE:BNS) delivers a solid case for high-yield dividend stocks growth. First, you’re getting a nice discount on paper. Currently, BNS trades for 2.43X free cash flow (FCF), below the sector median 6.22X. As well, you’re looking at a operating cash flow multiple of 2.4X, below about 75% of the company’s peers.
Now, the main criticism centers on the Canadian economy’s viability. Indeed, analysts anticipate that real GDP growth in the nation could incur one or two quarters of negative growth this year. However, activity should improve in the second half. And that improvement hinges on the possibility of lower interest rates.
If rates end up fading, BNS offers an attractive deal with a 6.8% dividend yield. Further, the financial institution has seen four years of payout growth. In September, the bank’s dividend yield came in at 6.49%. Back in January of last year, the metric was at 6.15%. Therefore, the growth in yield should attract new investors.
Hess Midstream Partners (HESM)
Structured as a corporation, Hess Midstream Partners (NYSE:HESM) enjoys the advantage of a simpler tax process. Previously, Hess was structured as a master limited partnership (MLP). MLPs pass their income and deductions directly to investors, requiring the latter party to report their share on their personal tax return using a Schedule K-1. Now, investors receive a Form 1099-DIV, representing less of a headache.
As for the fundamentals, HESM comes alive as one of the high-yield dividend stocks growth opportunities. While shares only gained about 10% over the past one-year period, the bullish narrative could spike the value much higher. With the U.S. economic machinery running on full blast –as evidenced by the robust jobs report – resource consumption should accelerate. If so, Hess’ midstream business should benefit.
As for the passive income, Hess offers a dividend yield of 7.3%. Further, the company’s shareholders have enjoyed seven years of payout growth. Lastly, analysts peg HESM as a consensus moderate buy with a $36.33 price target, implying almost 13% upside.
British American Tobacco (BTI)
A controversial company, British American Tobacco (NYSE:BTI) nevertheless deserves consideration for high-yield dividend stocks growth. Fundamentally, much of the robustness in the industry’s payout centers on the underlying profitability. Essentially, tobacco companies generate substantial cash flows – cynically due to addictive products – which return to shareholders in the form of dividends.
Moreover, the tobacco industry will likely be relevant for years, if not decades if not centuries. Yes, global smoking precedence has faded considerably. But that’s not going to stop enterprises like British American thanks to the rise of e-cigarettes or vaporizers.
According to Grand View Research, the global e-cigarette market size reached a valuation of $28.17 billion last year. By 2030, the sector could print revenue of $182.84 billion. That would translate to a compound annual growth rate of 30.6%.
In terms of passive income, British American offers a dividend yield of 9.17%. The payout ratio is reasonable at 57.93%, implying that investors will have confidence in yield sustainability. As well, experts project that the yield range will jump to 11.32% to 12.15% this year.
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.