The year 2024 was a remarkable one for investors, particularly those tracking the S&P 500 (SNPINDEX: ^GSPC). Megacap tech companies drove much of the benchmark index’s stellar performance, with their eye-popping double-digit and even triple-digit gains. These tech behemoths, renowned for their innovation and growth, stole the spotlight. However, beneath the glitz and glamour of the tech surge, dividend stocks and certain exchange-traded funds (ETFs) quietly delivered impressive returns, outperforming the index in several cases.
This article explores the dynamics of the S&P 500's 2024 gains, highlights the role of dividend stocks, and delves into why specific stocks and ETFs, including Kinder Morgan (NYSE: KMI), Delta Air Lines (NYSE: DAL), and the Global X MLP & Energy Infrastructure ETF (NYSEMKT: MLPX), continue to stand out as strong investment opportunities heading into 2025.
The Powerhouses of 2024: Megacap Tech Companies
2024 was a year defined by the dominance of megacap tech companies, which include household names like Apple, Microsoft, and Alphabet. These companies not only delivered exceptional returns but also demonstrated resilience in a challenging macroeconomic environment. Several key factors contributed to their performance:
- Innovation and Growth: Companies in this space introduced groundbreaking technologies, expanded into new markets, and capitalized on trends like artificial intelligence, cloud computing, and electric vehicles.
- Economic Tailwinds: While inflation and interest rates remained concerns, megacap tech firms managed to outpace the broader market by leveraging their scale, efficient operations, and substantial cash reserves.
- Investor Confidence: The tech sector’s historical ability to weather downturns and generate long-term returns made it an attractive choice for investors seeking growth.
Despite their outperformance, it’s essential to acknowledge that dividend-paying stocks and ETFs were not left behind. While their returns were less dramatic than those of megacap tech, they played a critical role in providing stability and consistent income to investors.
Dividend Stocks: Steady and Reliable Performers
Dividend-paying stocks often appeal to investors seeking income, stability, and lower volatility. In 2024, several dividend stocks not only matched the broader market's gains but surpassed them. This was particularly notable given the rising interest rate environment, which can dampen the appeal of dividend-yielding investments.
Why Dividend Stocks Thrived in 2024
- Attractive Yields: With interest rates hovering near historical norms, dividend-paying stocks remained a compelling choice for income-focused investors.
- Resilience in Uncertainty: Dividend stocks typically belong to established companies with predictable cash flows, making them appealing during market volatility.
- Sector Strengths: Key sectors like energy, utilities, and consumer staples—which often host high-dividend payers—benefited from favorable macroeconomic trends and robust consumer demand.
Let’s explore three standout dividend investments from 2024 that are poised for continued success in 2025: Kinder Morgan, Delta Air Lines, and the Global X MLP & Energy Infrastructure ETF.
Kinder Morgan (NYSE: KMI): A High-Yield Dividend Opportunity
Performance in 2024
Kinder Morgan, one of the largest natural gas midstream companies in the U.S., delivered an exceptional performance in 2024. The stock gained 55% for the year, fueled by strong demand for natural gas and a robust project pipeline. Despite its impressive run, Kinder Morgan remains attractively valued, with a forward dividend yield of 4.1%.
What Makes Kinder Morgan a Strong Pick for 2025?
- Extensive Infrastructure: The company operates approximately 66,000 miles of natural gas pipelines, transporting about 40% of the natural gas consumed in the U.S.
- Long-Term Contracts: Kinder Morgan’s reliance on long-term contracts provides predictable cash flows, enabling effective planning for capital expenditures and dividend payments.
- Debt Reduction: The company has strategically reduced its leverage by 26% since 2016, further strengthening its financial position.
- Growth Potential: With $5.1 billion in projects in its backlog, including $3.6 billion in natural gas projects, Kinder Morgan is well-positioned for continued growth.
For income-focused investors, Kinder Morgan represents a stable and high-yielding option in a market where income generation remains a priority.
Delta Air Lines (NYSE: DAL): Ready for New Heights
Performance in 2024
Delta Air Lines was another standout performer in 2024, benefiting from a robust recovery in the airline industry. The stock surged as travel demand soared, driven by strong consumer spending and a return to pre-pandemic travel patterns.
Why Delta Remains a Solid Bet for 2025
- Revenue Diversification: Delta’s partnership with American Express is a game-changer, boosting loyalty and creating a steady stream of revenue beyond ticket sales.
- Debt Reduction: The airline has significantly reduced its debt burden, cutting total debt nearly in half since 2022. This improves its financial stability and positions it for long-term growth.
- Valuation: Despite its strong performance, Delta’s stock remains undervalued, with a forward P/E ratio of just 8.2.
- Modest Dividend: While its 1% dividend yield is relatively low, Delta offers a compelling mix of growth potential and financial discipline.
Delta is an excellent choice for investors looking to capitalize on the ongoing travel boom and the airline’s ability to adapt to changing economic conditions.
Global X MLP & Energy Infrastructure ETF (NYSEMKT: MLPX): A Dividend ETF with Strong Momentum
Performance in 2024
The Global X MLP & Energy Infrastructure ETF outperformed the S&P 500 in 2024, delivering a total return of nearly 43%. This ETF invests in master limited partnerships (MLPs) and energy infrastructure companies, making it an attractive choice for investors seeking high yields and exposure to the energy sector.
Why It’s Poised for Success in 2025
- High-Yield Portfolio: The ETF boasts a dividend yield of 4.3%, making it a reliable income generator.
- Sector Strength: The energy sector remains robust, supported by growing demand for natural gas and oil exports.
- Fossil Fuel Resilience: While the energy transition is underway, the market has reassessed the role of natural gas as a transitional fuel, boosting the outlook for midstream companies.
- Top Holdings: The ETF’s largest positions include high-quality companies like Enbridge, Williams Companies, and Kinder Morgan, which are leaders in their respective niches.
The Global X MLP & Energy Infrastructure ETF offers a balanced approach to capturing income and growth in the energy sector, making it an excellent addition to any diversified portfolio.
Conclusion: Balancing Growth and Income in 2025
The S&P 500’s remarkable performance in 2024 was undoubtedly driven by the unparalleled gains of megacap tech companies. However, dividend-paying stocks and ETFs proved their mettle by delivering strong returns and providing a steady income stream. As we move into 2025, investors should consider balancing their portfolios with a mix of growth-oriented tech stocks and income-generating dividend investments.
Kinder Morgan, Delta Air Lines, and the Global X MLP & Energy Infrastructure ETF represent compelling opportunities for those seeking a combination of stability, income, and growth. Whether you’re an income-focused investor or a growth enthusiast, these investments offer the potential for strong performance in the year ahead.
By diversifying across sectors and asset classes, investors can position themselves to navigate market uncertainties while capitalizing on the opportunities that 2025 has to offer.