The stock market has been a gift that keeps on giving in 2024. With the S&P 500 reaching new all-time highs on 57 trading days this year, many investors are celebrating their portfolios' performance. As the holiday season approaches, it might be the perfect time to give yourself a valuable gift—an investment in your financial future. What better way to do that than with dividend stocks, which can serve as a gift that keeps on giving?
Whether you've come into some extra cash through a year-end bonus, matured bonds, or a seasonal windfall, allocating $10,000 into reliable dividend stocks is a smart move. For investors seeking a mix of growth potential and steady income, these two dividend stocks stand out as excellent choices for 2025 and beyond: Dell Technologies and Vici Properties. Let's explore why these companies deserve a spot in your portfolio.
1. Dell Technologies: Riding the Wave of AI and Data Centers
The AI and Data Center Boom
Artificial intelligence (AI) has become the defining technology trend of this era, fueling an explosive demand for hyperscale data centers—massive facilities that house computer servers and networking equipment to power the AI revolution. Major tech players like xAI (founded by Elon Musk), Microsoft, and Meta Platforms are pouring billions into building and expanding these data centers. For instance:
- xAI's Memphis data center already has 100,000 GPUs and plans a tenfold expansion.
- Microsoft's new server center in Wisconsin spans more than two square miles.
At the heart of this surge is Dell Technologies (NYSE: DELL), the market leader in data center infrastructure. Dell supplies essential components such as servers, racks, and cabling, which are indispensable for these hyperscale facilities.
Dell's Financial Performance
Dell’s Infrastructure Solutions Group (ISG), which caters to data center clients, has been a standout performer. In its most recent quarter:
- ISG revenue surged 34% year over year to $11.4 billion.
- Sales of servers and networking equipment soared 58% to $7.4 billion.
Overall, Dell's total quarterly revenue grew 10% to $24.4 billion. While its PC and consumer products division faced a slight revenue dip (down 1%), the company anticipates a new AI-driven upgrade cycle that could reignite this segment.
Shareholder-Friendly Policies
Dell is committed to returning 80% of its adjusted free cash flow to shareholders through dividends and stock buybacks. The company has also pledged to increase its dividend by at least 10% annually through fiscal 2028. This year, the dividend grew 20%, and Dell currently offers a forward yield of 1.26%. While this yield aligns with the S&P 500 average, Dell's growth prospects are the real draw.
Valuation and Analyst Confidence
Dell's stock is a bargain compared to its potential:
- Of the 25 analysts covering Dell, 21 rate it a "Buy" or "Strong Buy."
- The average price target of $151 per share represents a 27% upside from its current price.
With the hyperscale data center market expected to add 120-130 new centers annually in the coming years, Dell is poised for robust long-term growth. For investors seeking a mix of modest income and significant capital appreciation, Dell is a compelling choice.
2. Vici Properties: A High-Yield Income Play
A Unique REIT with Trophy Properties
For investors focused on income, Vici Properties (NYSE: VICI) offers a high-yield dividend stock backed by some of the most iconic real estate assets in the world. Vici is a real estate investment trust (REIT) specializing in "trophy properties," including high-profile entertainment venues and casinos. Its portfolio includes marquee properties occupied by industry giants like MGM Resorts International and Caesars Entertainment.
High Barriers to Entry
Vici's properties are irreplaceable, creating high barriers to entry for competitors. This exclusivity, combined with long-term lease agreements with financially robust tenants, ensures a steady and reliable rental income stream. Remarkably, Vici collected 100% of its rents during the COVID-19 pandemic, even when many of its tenants' operations were shuttered.
Dividend Growth and Yield
Since its inception, Vici has consistently raised its dividend. The company’s growing funds from operations (FFO)—a key metric for REITs—support the sustainability of these payouts. Currently, Vici offers a forward yield of 5.5%, significantly higher than Dell’s yield and the broader market average.
Steady Income Over Price Appreciation
Unlike Dell, Vici is not a growth stock. Investors should not expect significant share price appreciation; instead, Vici shines as a reliable income generator. For those looking to maximize dividend yield while preserving capital, Vici is an excellent choice.
Dell vs. Vici: Choosing the Right Stock for Your Goals
When considering these two stocks, it’s essential to align your investment with your financial objectives:
Why Invest Now?
- Market Timing: The ongoing bull market offers a favorable backdrop for both growth and income stocks. Investing now allows you to capitalize on current momentum.
- Compound Growth: Reinvesting dividends from these stocks can significantly boost your returns over time, especially with Vici's higher yield.
- Sector Tailwinds: Both Dell and Vici benefit from strong industry trends—Dell from AI and data centers, and Vici from the resilience of experiential real estate.
Other Dividend Stocks to Consider
While Dell and Vici stand out, there are other dividend stocks worth exploring if you have $10,000 to invest:
1. Broadcom (NASDAQ: AVGO)
- Dividend Yield: 2.3%
- Why It’s Smart: Broadcom is a semiconductor powerhouse benefiting from the AI boom, making it a complementary pick alongside Dell.
2. Procter & Gamble (NYSE: PG)
- Dividend Yield: 2.5%
- Why It’s Smart: This consumer staples giant offers stability and reliable dividend growth, ideal for risk-averse investors.
3. Realty Income (NYSE: O)
- Dividend Yield: 5.6%
- Why It’s Smart: Known as "The Monthly Dividend Company," Realty Income provides consistent income with a diversified real estate portfolio.
Conclusion: Building a Balanced Dividend Portfolio
Investing $10,000 in dividend stocks can be a transformative step toward financial security. By choosing Dell Technologies, you tap into the high-growth potential of the AI and data center revolution. Meanwhile, Vici Properties offers a steady, high-yield income stream from some of the world’s most iconic real estate assets. Together, they provide a balanced approach to dividend investing, combining growth and income.
Whether you're a growth-seeking investor, an income-focused retiree, or someone in between, these stocks can help you achieve your financial goals. As you enjoy the holiday season, consider giving yourself the gift of smart investing. With the right dividend stocks, you can set the stage for a prosperous 2025 and beyond.
