Portfolio Strategy: Dividend Stocks in Focus

In a year in which the stock market has risen by 29% and the so-called "Magnificent Seven" make up about 30% of the S&P 500 Index, it is advisable for investors to diversify their portfolios more broadly. A proven long-term strategy is to invest in dividend stocks that offer security and returns, as management requires high discipline to maintain and ideally increase payouts. An interesting perspective is provided by three dividend stocks that together are available for $300. They seem either fairly valued or undervalued and have either recently begun distributing dividends or have a long tradition of paying and increasing them. Although airlines have historically often not been worthwhile investments, AerCap, an aircraft leasing company, is an exception. As a market leader, it has rewarded investors with a total return of over 30% in 2024. Furthermore, AerCap introduced a quarterly dividend of $0.25 per share this year for the first time, representing an annual yield of 1%. The payout ratio, a key factor for dividend stocks, is very healthy for AerCap at just 9% due to the adjusted earnings forecast for 2024, as it offers flexibility in capital allocation. In addition to the dividend, AerCap's management is aggressively buying back its own shares, increasing the investors' stake. This year, buybacks worth $1.5 billion, representing 6.3% of the outstanding shares, have already been approved. CEO Aengus Kelly recently emphasized that the measures in dividends and share buybacks demonstrate high confidence in the company's future earnings and cash flows. Despite the current peak price in relation to book value, the stock remains attractive due to the skilled capital policy. Another interesting dividend stock is Autoliv, a leading innovator in automotive safety systems such as airbags and seatbelts. Although the company may be less well-known, it recently increased its quarterly dividend by 3% to $0.70 per share, which corresponds to an annual yield of 2.8%.