Top Wall Street analysts favor these 3 dividend stocks for the long haul

Several dividend stocks had a tough yr because of elevated rates of interest. With the Federal Reserve signaling fee cuts in 2024, dividend stocks are anticipated to regain their shine.

Keeping a long-term funding horizon in thoughts, listed below are three enticing dividend stocks, in line with Wall Street’s top experts on TipRanks, a platform that ranks analysts based mostly on their previous efficiency.

This week’s first dividend decide is OneMain Holdings (OMF), a monetary providers firm that gives non-prime prospects entry to credit score. Last month, the firm paid a quarterly dividend of $1 per share. OMF gives a beautiful dividend yield of about 9%.

Following the firm’s latest Investor Day, RBC Capital analyst Kenneth Lee reiterated a purchase ranking on OMF inventory with a worth goal of $50. The analyst acknowledged that following the occasion, he’s extra assured about the firm’s underwriting and analytics, and has gained further insights into the advantages of its omnichannel presence.

In explicit, OMF’s administration indicated that the firm’s underwriting fashions, which leverage machine studying, various knowledge, and money movement knowledge, have two occasions extra predictive energy than bureau credit score scores. Lee additionally highlighted that the firm’s latest entry into auto financing has considerably expanded its complete addressable market to about $1.3 trillion.

The firm expects its annual capital era per share to be about $12.50 in the medium time period, with practically 5% capital era return on receivables. “Importantly, after factoring in capital retained for natural progress and paying dividends, there could possibly be ~$6/share in extra capital era yearly,” stated Lee.

Lee ranks No. 115 amongst greater than 8,600 analysts tracked by TipRanks. His scores have been worthwhile 65% of the time, with every delivering a mean return of 14.3%. (See OneMain Financial Statements on TipRanks) 

We transfer to the retail pharmacy chain CVS Health (CVS), which introduced an round 10% hike in its quarterly dividend to 66.5 cents earlier this month. With this hike, the firm’s ahead dividend yield stands at about 3.5%.

CVS hosted its Investor Day on Dec. 5. Following the occasion, Mizuho analyst Ann Hynes famous that the firm’s long-term adjusted EPS progress ground of over 6% was beneath her high-single-digit forecast.

That stated, Hynes sees the risk of an upside to the firm’s steering if it positive aspects market share by way of the execution of its progress methods and the success of the new pharmacy reimbursement mannequin. The analyst additionally expects CVS’ give attention to well being care supply to spice up its progress, as the firm continues to reinforce its Signify and Oak Street companies.     

“CVS stays dedicated to a balanced capital deployment technique with rising dividend,” added Hynes.

Notably, the firm expects to have $40 billion to $50 billion of deployable money from 2024 to 2026, with an anticipated annual common free money movement of $7 billion. It intends to allocate 35% in the direction of capital expenditures and 25% in the direction of dividends, with the remaining 40% out there for versatile deployment, together with share repurchases.

Overall, Hynes stays bullish on CVS and reaffirmed a purchase ranking on the inventory with a worth goal of $86. Hynes holds the 489th place amongst greater than 8,600 analysts on TipRanks. Her scores have been profitable 61% of the time, with every delivering a return of seven.2%, on common. (See CVS Insider Trading Activity on TipRanks).

Last month, oil and fuel producer Devon Energy (DVN) declared a set plus variable dividend of 77 cents per share, payable on December 29. This dividend cost marked a 57% improve from the second quarter of 2023. Considering complete dividends of $2.87 declared over the previous 12 months, DVN gives a beautiful yield of 6.5%.

Recently, Goldman Sachs analysts, led by Neil Mehta, hosted conferences with Devon’s administration. Importantly, administration acknowledged that 2023 has been a difficult yr for the firm with unfavorable revisions to manufacturing, partly because of underperformance in the Bakken area and nicely choice and appraisal exercise in the Delaware basin (together with weather-related points) and Eagle Ford.

That stated, Mehta highlighted that administration sees the alternative to regain its capital effectivity relative to friends in 2024, by allocating extra capital to the Delaware basin than to Bakken.

DVN reiterated plans to allocate 70% of its 2024 free money movement in the direction of money returns, with the intention of rising the fastened dividend and deploying extra FCF in the direction of share repurchases and variable dividends. The analyst famous that administration plans to prioritize share repurchases over variable dividends, provided that DVN inventory has underperformed its large-cap friends year-to-date.

Mehta reiterated his ranking on Devon inventory with a worth goal of $52, saying, “We are Buy-rated on the shares and see potential for imply reversion with favorable manufacturing/price execution.”

Mehta ranks No. 346 amongst greater than 8,600 analysts tracked by TipRanks. His scores have been worthwhile 61% of the time, with every delivering a return of 10.6%, on common (See Devon Energy Technical Analysis on TipRanks)