Top Wall Street analysts expect these dividend stocks to boost portfolio returns

A emblem of the Exxon Mobil Corp is seen on the Rio Oil and Gas Expo and Conference in Rio de Janeiro, Brazil September 24, 2018.

Sergio Moraes | Reuters

Dividend-paying stocks are wanting much more enticing as buyers grapple with a spike in bond yields and a tumultuous inventory market.

With that in thoughts, listed here are 5 enticing dividend stocks, in accordance to Wall Street’s high consultants on TipRanks, a platform that ranks analysts primarily based on their previous efficiency.

Exxon Mobil

First on this week’s listing is dividend aristocrat Exxon Mobil (XOM). The vitality big affords a yield of three.4%. The firm’s dividend hike of three.4% final yr marked the 40th consecutive yr of annual dividend progress. Exxon’s dividends are backed by stable earnings and money flows.

In the second quarter, the corporate distributed $8 billion to shareholders by way of share repurchases of $4.3 billion and dividends of $3.7 billion. It generated free money circulate of $5 billion within the June quarter.

Mizuho analyst Nitin Kumar reiterated a purchase score on Exxon with a value goal of $139 after attending the corporate’s Product Solutions Spotlight occasion. The analyst stated that the corporate is on observe to meet its goal of boosting its product options earnings by $10 billion by 2027 in contrast to $6 billion reported in 2019.

“With 1H23 annualized earnings at $11.5 billion, the corporate is midway by way of that concentrate on, with many of the profit to date from price reductions,” famous Kumar.

He expects key strategic initiatives which have just lately commenced, like Beaumont crude growth and chemical expansions at Baytown, and main initiatives deliberate for 2024 to 2027, such because the Singapore Resid upgrade project, to assist Exxon ship many of the focused enchancment in earnings by 2027.

Kumar ranks No.67 amongst greater than 8,500 analysts tracked by TipRanks. His rankings have been worthwhile 71% of the time, with every delivering a return of 19.8%, on common. (See Exxon Insider Trading Activity on TipRanks)

Coterra Energy

Kumar can be bullish on Coterra Energy (CTRA), an oil and fuel exploration and manufacturing firm with main operations within the Permian Basin, Marcellus Shale and Anadarko Basin. Earlier this yr, the corporate elevated its annual base dividend by 33% to 80 cents per share.

The firm’s shareholder return technique is to distribute 50% of its free cash flow by way of base dividends, share repurchases and variable dividends. CTRA realigned its return technique for 2023 to give significance to buybacks over variable dividends. In the primary six months of 2023, it paid $303 million by way of dividends and made share repurchases price $325 million, with the overall shareholder return representing 94% of free cash flow.

Last month, Kumar hosted investor conferences with CTRA’s administration and stated the important thing takeaway was that the corporate is assured about delivering stable returns on funding in most commodity value eventualities. In specific, administration highlighted the pliability and optionality of CTRA’s asset base and capital allocation technique.

“In our opinion, the frequent thread between their decisions is the potential to outperform the three-year (2023-25) plan that requires ~5%+ oil progress for ~$2.0-2.1bn of complete capex – both by way of much less capex or extra volumes – however and not using a degradation of capital efficiencies,” stated Kumar.

Calling CTRA his high decide, Kumar reiterated a purchase score on the inventory with a value goal of $42. (See Coterra Financial Statements on TipRanks)

Brookfield Infrastructure Partners

Next on this week’s dividend listing is Brookfield Infrastructure (BIP), which operates property within the utilities, transport, midstream, and information sectors. BIP paid a quarterly dividend of $0.3825 per unit on Sept. 29, which displays a 6% year-over-year enhance in its distribution. The firm affords a dividend yield of 5.5%.

At an investor day occasion held final month, administration mentioned its aim to ship greater than 12% progress in funds from its operations per unit as a part of its 1- to 3-year outlook.

RBC Capital analyst Robert Kwan, who ranks 194th out of over 8,500 analysts tracked on TipRanks, famous that the corporate’s focused FFO/unit progress is anticipated to be partially pushed by its vital natural capital backlog, primarily within the information heart enterprise.

The analyst additionally thinks that given the capital constraints within the present backdrop due to a slowdown in fundraising exercise, an entity like Brookfield has the potential to improve returns by investing capital above its 12% to 15% fairness inner fee of return (IRR) goal vary.   

“We imagine that the unit value weak spot is a gorgeous entry level primarily based on a 5% present distribution yield with potential for double-digit underlying FFO/unit progress,” stated Kwan.

Kwan reaffirmed a purchase score on BIP inventory with a value goal of $45. His rankings have been worthwhile 64% of the time, with every delivering a median return of 10.8%. (See BIP Stock Chart on TipRanks)

American Electric Power

Another RBC Capital analyst, Shelby Tucker, is bullish on utility inventory American Electric Power (AEP). On Oct. 2, the corporate named Charles E. Zebula as its new chief financial officer and reaffirmed its 2023 working earnings outlook of $5.19 to $5.39 per share and long-term working earnings progress fee of 6% to 7%.

AEP paid a quarterly dividend of 83 cents per share on Sept. 8, its 453rd consecutive quarterly money dividend. It affords a dividend yield of 4.6%.

Recently, Tucker lowered the value goal for AEP to $90 from $103 to replicate a excessive curiosity surroundings however reiterated a purchase score. The analyst stated that the inventory stays one of many agency’s high picks in 2023 and one of many best-in-class utilities.

The analyst thinks that AEP’s $40 billion regulated capital spending plan, specializing in transmission deployment, affords sturdy resiliency towards a difficult macro backdrop and value inflation. Tucker additionally expects the corporate to profit from the incentives underneath the Inflation Reduction Act.  

“We imagine AEP deserves a slight premium on valuations from speedy decarbonization of its technology fleet and strong investments in regulated renewable,” the analyst stated.

Tucker holds the 367th place amongst greater than 8,500 analysts on TipRanks. Moreover, 61% of his rankings have been worthwhile, with every producing a median return of 8.1%. (See AEP Blogger Opinions & Sentiment on TipRanks) 

Darden Restaurants

Darden Restaurants (DRI), the proprietor of Olive Garden and different in style manufacturers, delivered better-than-anticipated fiscal first-quarter results, regardless of the pullback in client spending affecting the corporate’s wonderful eating phase.   

The firm paid $159 million in dividends and deployed about $143 million towards share repurchases within the fiscal first quarter. With a quarterly dividend of $1.31 per share (annualized dividend of $5.24), DRI inventory’s dividend yield is 3.7%.       

Following the outcomes, JPMorgan analyst John Ivankoe reiterated a purchase score on DRI inventory however lowered the value goal to $174 from $176.

The analyst famous that the corporate’s same-store gross sales progress of 5% surpassed his estimate of 4.4%, with its Olive Garden and LongHorn Steakhouse chains offsetting the softness in wonderful eating. Also, DRI’s same-store gross sales progress outperformed the business common of 0.9%.       

“Finally, the ten%+ TSR [total shareholder return] (EPS + annual dividend yield) stays intact for F24/25,” stated Ivankoe.  

Ivankoe holds the 854th place amongst greater than 8,500 analysts tracked on TipRanks. Moreover, 60% of his rankings have been worthwhile, with every producing a median return of seven.1%. (See DRI Hedge Fund Trading Activity on TipRanks)

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