The market's recovery last year caused me to put the brakes on new investments to build up more cash in case the market took a breather. I sold a few losing positions while allowing my dividends and cash transfers to accumulate, so that my cash position now represents more than 5% of the value of my portfolio.
I plan to deploy some of this cash holdings in the coming weeks after the market cools off for the start of 2024. Chevron (CVX 0.30%), Kenvue (KVUE -1.10%), and VICI properties (VICI 0.99%) are among the first three stocks I want to buy. That's why they're at the top of my buying list.
The fuel to grow
Chevron has had a bad year. The oil giant's shares have fallen about 20% in the past 12 months, weighed down by oil prices and the impending takeover of its competitor Hess. However, this sell-off results in Chevron trading with an attractive dividend yield (4.2%) and value (given the growth the company can achieve at lower oil prices).
Chevron has been fully focused on improving its investment returns by focusing capital expenditures on the highest return opportunities. This positions the oil company to grow its cash flow at a healthy rate in the coming years, even in a downside scenario in which oil prices average $60 per barrel by 2027 (and $50 in the final years of its forecast US dollar falls). Even in this case, Chevron can achieve annual free cash flow growth of more than 10% over the next few years. This supports the company's view that it can continue to increase its dividend while repurchasing shares at the lower end of its annual target range of $10 billion to $20 billion.
Meanwhile, Chevron has significant upside potential if oil prices average $70 per barrel (around current price levels) and the company completes its landmark acquisition of Hess. These factors would give Chevron the fuel to more than double its free cash flow by 2027 while extending its production growth prospects into the 2030s. That would give the oil giant more money to return to shareholders and invest in expanding its lower-carbon energy business. It could also give it the fuel for strong total returns.
A healthy future
Kenvue stock stumbled after its IPO and separation from the healthcare giant Johnson & Johnson. Since the IPO, shares have fallen more than 20%, pushing the dividend yield to 3.8%. This is primarily due to fluctuation among shareholders.
Otherwise, the company has gotten off to a good start as an independent stock corporation. In the third quarter, the company reported revenue of $3.9 billion, up 3.3% year over year. Additionally, the company reported strong profitability. For the year as a whole, the company expects sales to increase by 4 to 4.5 percent.
Kenvue generates healthy cash flow, which allowed the company to pay a dividend and launch a share repurchase program. The company's increasing sales, profits, and cash flow should allow it to follow in the footsteps of its former parent company and steadily increase its dividend in the future. This growth should help boost its share price in the future, which should enable Kenvue to generate healthy total returns.
A fast growing REIT
VICI Properties' share price has fallen about 7% over the past year. This decline has pushed the real estate investment trust (REIT)'s dividend yield to 5.4%.
While the share price is falling, the experience property owner is growing strongly. Revenue rose 20% year-over-year in the third quarter, while adjusted funds from operations (FFO) rose nearly 11% per share. VICI benefits from rising rental prices and a constantly growing portfolio. As earnings rose while the share price fell, VICI has become significantly cheaper over the past year.
The REIT continues to make new investments to drive growth. In recent months, VICI has acquired 38 bowling entertainment centers Bowlero As part of a $432.9 million sale-leaseback transaction, the company agreed to provide up to $212 million in construction financing to Kalahari for the development of an indoor water park resort and has its investments with Chelsea Piers and Cabot expanded to nearly $550 million. These investments will increase its earnings in the future and provide the REIT with more cash flow to increase its dividend. This combination of growth and earnings should allow the company to deliver exciting total returns in the coming years.
You want to benefit from their strong total return potential
Chevron, Kenvue and VICI Properties have underperformed in recent months. However, they should generate attractive and growing dividend income in the future and have the potential to deliver high long-term total returns as they grow their earnings and their share prices rise. They seem like very attractive places where I can start using my cash stash.
Matthew DiLallo has held positions at Chevron, Johnson & Johnson, Kenvue and Vici Properties. The Motley Fool has positions in and recommends Kenvue. The Motley Fool recommends Chevron, Johnson & Johnson and Vici Properties and recommends the following options: Long January 2026 $13 calls on Kenvue. The Motley Fool has a disclosure policy.