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2 Excellent S&P 500 Dividend Stocks to Buy in January


The stock market continues to draw interest as the S&P 500 recorded a robust 23% gain over the last year. However, this surge has pushed the average dividend yield of the index to a mere 1.24%, its lowest level since 2000. This has left income-seeking investors scouring for high-yielding opportunities to bolster their passive income streams.

Fortunately, the market still offers gems for dividend-focused investors. Among the many choices, two S&P 500 stocks in retail and telecommunications stand out as excellent options this January: Target Corporation (NYSE: TGT) and Verizon Communications (NYSE: VZ). These companies combine solid fundamentals, reliable dividends, and attractive valuations, making them appealing for long-term income investors.

1. Target: Reliable Retailer with a Strong Dividend

Why Target Is an Attractive Buy

Rising inflation and higher interest rates have created a challenging environment for retailers. However, industry leaders like Walmart and Costco have thrived amid these headwinds, demonstrating resilience. Unfortunately, their premium valuations and relatively low dividend yields make them less attractive for yield-seeking investors. That’s where Target shines.

Target offers a compelling forward dividend yield of 3.24% and a modest price-to-earnings (P/E) ratio, creating an excellent opportunity for long-term investors. The company has consistently paid a dividend since 1967, underscoring its ability to navigate economic cycles and deliver steady returns to shareholders.

Key Financial Metrics

  • Revenue Generation: Target leverages its massive scale, generating $107 billion in trailing revenue from nearly 2,000 stores and e-commerce operations.
  • Dividend History: Target’s quarterly dividend recently increased from $1.10 to $1.12 per share, translating to an annual payout ratio of 52% of earnings. This ensures significant room for future dividend growth.

Resilience Amid Challenges

Even in a tough macroeconomic climate marked by weaker consumer spending, Target reported a 2.4% year-over-year increase in traffic in its latest quarter. Although comparable sales growth was muted at 0.3%, the company’s ability to maintain customer engagement bodes well for its long-term prospects.

Target’s forward P/E ratio of 16 is significantly lower than those of its competitors, providing an opportunity for value-conscious investors. As consumer spending improves, there’s potential for a re-rating of the stock to higher valuation multiples.

Growth Opportunities

  • Same-Day Delivery: Target’s investment in same-day delivery services, including Order Pickup, Drive Up, and Shipt, has resonated strongly with customers. These initiatives not only drive traffic but also enhance customer loyalty and sales.
  • E-Commerce Expansion: The company’s digital transformation continues to open new revenue streams, setting the stage for long-term growth.

For investors seeking both value and income, Target’s robust business model and commitment to rewarding shareholders make it a solid pick.

2. Verizon Communications: A Telecom Dividend Giant

Why Verizon Stands Out

Telecommunications companies may not deliver rapid growth, but their stable, cash-generating business models make them ideal for dividend investors. Verizon exemplifies this stability, offering a forward dividend yield of 6.99%, one of the highest among S&P 500 constituents.

Since its founding, Verizon and its subsidiaries have demonstrated a consistent commitment to dividend payments. In 2024, the company raised its quarterly dividend by 1.8% to $0.6775 per share, marking another milestone in its long history of shareholder rewards.

Current Challenges

Verizon’s stock has declined 28% over the last three years, reflecting investor concerns over higher interest rates and the impact of a potential recession on revenue growth. However, much of this pessimism appears priced into the stock, creating a favorable entry point for dividend-focused investors.

Encouraging Financial Performance

Despite headwinds, Verizon delivered a strong performance in its Q3 2024 earnings report:

  • Wireless Service Revenue Growth: Revenue increased by 2.7% year-over-year, driven by a net addition of 239,000 postpaid phone subscribers.
  • Broadband Subscriber Growth: The company recorded its ninth consecutive quarter of 375,000+ broadband additions, reflecting strong demand for its services.

Strategic Initiatives

Verizon has introduced innovative products like myPlan and myHome, which are resonating well with customers and helping the company retain its competitive edge. These offerings cater to evolving consumer preferences for flexibility and affordability, positioning Verizon for continued success in the telecommunications market.

Dividend Sustainability

With a dividend payout ratio of 58% of adjusted earnings, Verizon has ample room to maintain and grow its dividend. The company’s strong cash flow generation ensures that it can weather economic downturns while continuing to reward shareholders.

Long-Term Potential

Verizon’s reliable business model and attractive dividend yield make it an appealing choice for conservative investors. While revenue growth may slow, the stock’s high yield provides a steady income stream, even in uncertain economic conditions.

Why These Stocks Make Sense for January

Both Target and Verizon offer compelling reasons to be included in an income-focused portfolio. Here’s a quick comparison:


While Target offers a balanced mix of growth and income, Verizon provides an exceptionally high yield for those prioritizing passive income. Both companies have demonstrated resilience and adaptability, making them attractive options as we head into the new year.

Final Thoughts

Dividend stocks remain a cornerstone of long-term investment strategies, particularly for those seeking steady income. Target and Verizon stand out as excellent choices this January, offering robust yields, strong fundamentals, and reasonable valuations.

While these stocks may not deliver explosive growth, they provide the kind of reliability that income investors value. With their proven ability to weather economic cycles and commitment to shareholder returns, Target and Verizon could be staples in your portfolio for years to come.

Invest in them today, and you might just enjoy a lifetime of passive income rewards.

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