Generally, investment in quality growth stocks translates into returns that beat the index by a big margin. It’s a bonus to find growth stocks with dividends.
Also, for blue-chip stocks, dividend growth is steady and can be around 3% to 5% annually. For growth stocks that offer dividends, growth is likely to be aggressive. It would not be unrealistic to believe that some growth stocks with dividends become future dividend aristocrats.
In uncertain macroeconomic conditions, it’s not a challenge to spot undervalued stocks. These growth stocks with dividends are undervalued, and total returns can be robust considering a three-to-five-year investment horizon.
I focus on the commodity and energy sectors because these segments have ample value. Further, with the likelihood of renewed expansionary policies, these stocks might be poised for a breakout rally.
Let’s discuss the reasons that make these growth stocks worth considering.
Hecla Mining (HL)
With precious metals trending higher, there is a strong reason to be bullish on mining stocks. Hecla Mining (NYSE:HL) stock looks attractive among growth stocks with dividends. For year-to-date 2022, HL stock has trended higher by 17%. However, I believe the best part of the rally and dividend growth is still to come.
To elaborate, Hecla Mining reported silver production growth of 10% in 2022. The company expects to clock production growth of 18% for the current year. Furthermore, by 2025, production growth is expected to accelerate to 35%.
Besides being the largest silver producer in the United States, Hecla Mining is also into gold mining. With gold above $2,000 an ounce, it’s likely that the company’s cash flows will swell. This will translate into healthy dividend growth.
It’s also worth noting that Hecla recently acquired ATAC Resources. This gives Hecla access to additional tier-one mining jurisdictions. Acquisitions can potentially boost the company’s revenue and cash flows in the next few years.
Aker BP (AKRBF)
In the oil and gas sector, Aker BP (OTCMKTS:AKRBF) is an undervalued stock and provides a dividend yield of 7.9%. Oil has corrected in the recent past. However, production cuts and the possibility of expansionary policies is likely to stabilize crude at higher levels.
In terms of growth, Aker BP has guided for production of 445mboepd in 2023. From existing projects, the company targets production of 525mboepd by 2028. I must mention that Aker BP has been aggressive on the acquisition/merger front in the past. Further acquisitions will boost the growth outlook.
It’s also worth noting that exploration programs have delivered proven reserve growth results. Last year, the company’s discoveries added 113mmboe to reserves.
An important point to note is that Aker has a break-even oil price of $35 to $40 per barrel. If crude trades around $100 per barrel in the coming years, the company will be positioned to deliver robust free cash flows. Last year, the company delivered a free cash flow of $7.7 per share.
Albemarle Corporation (ALB)
Albemarle Corporation (NYSE:ALB) stock has been sideways over a 12-month period. However, the company is reporting healthy growth, and the stock seems deeply undervalued at a forward price-to-earnings ratio of 6.8x. Further, ALB stock offers a dividend yield of 0.79%, and I expect healthy dividend growth in the coming years.
For 2022, Albemarle reported revenue growth of 120% on a year-on-year basis. For the current year, the company expects top-line growth in the range of 55% to 75%. Of course, a correction in lithium price is a near-term concern. However, it’s worth noting that the demand for lithium is likely to remain strong with rising electric vehicle adoption.
Albemarle also has ambitious growth plans. The company ended 2022 with a lithium conversion capacity of 200ktpa. The guidance is to boost capacity to 500 to 600ktpa by 2027. Therefore, with capacity expansion, sustained cash flow upside is on the cards.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Battery, Consumer Staples, Commodities, Consumer Discretionary, Automotive, Electric Vehicles, Energy, Lithium, Oil, Industrial, Precious Metals, Renewable Energy