Dividend stocks shouldn’t be dismissed as boring investments that end up underperforming the top growth picks of Wall Street. Even in recent years, many dividend stocks ended up outperforming the S&P 500 and the Nasdaq, and they have the strength to repeat that performance in the coming years, too.
Since 1960, reinvested dividends have accounted for 85% of the S&P 500’s cumulative total return. There will be even more tailwinds as interest rate cuts start and investors rotate out of Treasuries into dividend stocks for yield. The compounding gains can exponentially boost your portfolio while giving you more protection during market drawdowns, as dividend payers generate plenty of profits.
Here are two dividend stocks that can outperform the S&P 500.
Canadian Natural Resources (CNQ)
Canadian Natural Resources (NYSE:CNQ | CNQ Price Prediction) is one of Canada’s biggest crude oil and natural gas producers. The stock is up 123.7% since the start of February 2020, even without counting reinvested dividends. This is better than both the SPY and the QQQ.
The bullish price action is mainly due to energy prices remaining elevated and increased demand from European and certain Asian countries post-2022. CNQ stock was soaring even before that, as OPEC+ kept adjusting supply to keep prices high. On top of that, the company itself has been ramping up production significantly. In Q1 2025, total production averaged at 1.582 million barrels of oil equivalent per day, up 19% from the year-ago quarter. Natural gas production also increased 14% year-over-year to 2.451 billion cubic feet per day.
The company has managed to scale up production while keeping costs down. Oil sands mining operating costs are at $21.88 per barrel in Q1 2025, down 12%. In the same quarter, operating cash flow was posted at $4.3 billion. Shareholder returns constituted $1.7 billion in total: $1.2 billion in dividends and the rest in repurchases.
Growth is expected to stay on track as the company plans to increase production, and energy demand has held steady. Oil and gas companies in the U.S. and Canada are benefiting greatly from volatility in the top two energy-producing regions outside of North America.
CNQ stock comes with a forward dividend yield of 5.48%, with 24 consecutive years of payout increases.
Analysts’ average price target of $37.35 implies 17.84% upside in the next 12 months.
Diamondback Energy (FANG)
Diamondback Energy (NASDAQ:FANG) is another oil and gas company with similarly stellar results over the past few years. The geopolitical shift that has taken place in the past two years makes it unlikely that these results are temporary. The E.U. is ditching Russia and turning to North America for its energy needs, and this demand is expected to stick around.
Like CNQ, the performance has been solid over the past few years. FANG stock is down 26.4% over the past year, but the stock has stabilized in the $140s range. It could deliver market-beating gains over the coming years as it recovers and grows more.
The company has high-quality Permian Basin acreage, which provides a deep inventory of drilling opportunities estimated at 18 years at $50 per barrel oil prices. This lets it grow profitably even in lower-price environments. The current break-even oil price is $36 per barrel, vs. $68.7 on the market (as of writing). Oil prices should stay comfortably above $36, as even during the worst of the Great Recession, oil futures held above $40.
The only recent example of oil prices going below is during COVID, when oil went negative. However, that’s an extremely special case, and you’re unlikely to see it happen again in your lifetime.
Analysts see full-year 2025 revenue growth at 29.3% to $14.3 billion. Q1 2025 revenue grew 80.8% to $3.86 billion, with net income increasing 82.94% to $1.4 billion.
The forward dividend yield is more modest at 2.66%, but the payout ratio of 30.19% leaves room for significant dividend increases. Moreover, Diamondback Energy has done routine buybacks. In Q1 alone, it repurchased 3.656 million shares for $575 million.
The 12-month price target of $182.63 implies 22.1% upside ahead.
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