Income investors are primarily focused on a company’s dividends. But dividend yield should not be the only consideration for income investors. Buying stocks that have high total return potential can provide shareholders with capital gains from a rising share price, in addition to dividend income.

These 3 stocks not only pay dividends to shareholders, but also could generate high total returns over the next five years due to their growth and low valuations.

Bristol-Myers Squibb (BMY)

Bristol-Myers Squibb is a leading drug maker of cardiovascular and anti-cancer therapeutics, with annual revenues of about $47 billion. The company’s competitive advantage is its ability to either create (through research & development) or acquire patents for pharmaceuticals with high potential revenue. Bristol-Myers top three selling pharmaceuticals, Revlimid, Opdivo and Eliquis, have shown solid growth rates and are expected to see high peak annual sales.

In the 2023 third quarter, revenue declined 2.2% to $10.97 billion, which was in-line estimates. Adjusted earnings-per-share of $2.00 grew slightly from $1.99 in the prior year and was $0.23 more than expected. Adjusting for unfavorable currency exchange, revenue was down 3% for the quarter. U.S. revenues declined 4% to $7.6 billion while International was higher by 2% to $3.3 billion. When adjusting for currency exchange, International markets grew 1%.

Eliquis, which prevents blood clots, grew 2% to $1.8 billion, despite generic pressures outside of the U.S. Eliquis has become the top oral anticoagulant in several international markets since 2019 and had nearly $12 billion in revenue for 2022, which was a 10% increase from the prior year.

Opdivo, which treats cancers such as advanced renal carcinoma, grew 4% to $1.2 billion due to demand across newer indications. Revenue for Orencia, which treats rheumatoid arthritis, improved 5% to $925 million. Adjusted gross margins contracted 250 basis points to 77.3% due to product mix. Bristol-Myers updated guidance for 2023 as well. The company now expects adjusted earnings-per-share to be in a range of $7.50 to $7.65 for 2023

The stock also has a dividend yield of 4.6%. The stock has a low dividend payout ratio of 30%, which indicates a safe dividend. Total returns could exceed 12% per year based on the current valuation.

National Fuel Gas (NFG)

National Fuel Gas Co. is a diversified energy company that operates in five business segments: Exploration & Production, Pipeline & Storage, Gathering, Utility, and Energy Marketing. The largest segment of the company is Exploration & Production. With 53 years of consecutive dividend increases, National Fuel Gas qualifies to be a Dividend King.

In early November, National Fuel Gas reported (11/1/23) financial results for the fourth quarter of fiscal 2023. The company grew its production 7% over the prior year’s quarter thanks to the development of core acreage positions in Appalachia. However, the average realized price of natural gas fell -18%, from $2.84 to $2.33.

As a result, adjusted earnings-per-share declined -34%, from $1.19 to $0.78, and missed the analysts’ consensus by $0.07. The company has beaten the analysts’ estimates in 15 of the last 18 quarters.

National Fuel Gas pursues growth by growing its natural gas production and expanding its pipeline network. The company has grown its earnings-per-share at a 4.4% average annual rate over the last decade. Moreover, the company grew its proved reserves 8% in 2022 and 9% in 2023. This certainly bodes well for future growth prospects.

National Fuel Gas is trading at a price-to-earnings ratio of 9.0, which is lower than its historical 5-year average of 13.0. If the stock reverts to this valuation level over the next 5 years, it will enjoy a 7.6% annualized gain in its returns. Total returns could reach 12% per year.

Comcast Corp. (CMCSA)

Comcast is a media, entertainment and communications company. Its business units include Cable Communications (High-Speed Internet, Video, Business Services, Voice, Advertising, Wireless), NBCUniversal (Cable Networks, Theme Parks, Broadcast TV, Filmed Entertainment), and Sky, a leading entertainment company in Europe that provides Video, High-speed internet, Voice, and Wireless Phone Services directly to consumers.

Comcast reported its Q3 2023 results on 10/26/23. For the quarter, the company’s revenues climbed 0.9% to $30.12 billion, adjusted EBITDA (a cash flow proxy) rose 5.1% to $9.96 billion, adjusted earnings-per-share (EPS) climbed 12.5% to $1.08. And it generated free cash flow (FCF) of $4.03 billion. The Connectivity & Platforms segment’s revenues rose by 1.1% to $20.27 billion and adjusted EBITDA growth was 3.0% to $8.22 billion.

Future growth is likely for the company. Management sees organic growth opportunities across its businesses, including increasing the capacity of its U.S. broadband network, and producing more premium content that can increase engagement at its Peacock streaming service. From 2012 to 2021, its EPS increased at a compound annual growth rate (CAGR) of 12.3%.

Shares currently yield 2.6%. The stock trades for a 2022 price-to-earnings ratio of ~10, below our fair value P/E of 14. Lastly, we expect the company to grow its EPS by 9% per year over the next five years. Total returns are expected to reach just above 10% per year over the next five years.

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Bob Ciura has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Bob received a Bachelor’s degree in Finance from DePaul University, and an MBA with a concentration in Investments from the University of Notre Dame.