As macro uncertainty hangs over the stock market, investors are searching for sources of income, which can help cushion their portfolios in volatile times.
Those who wish to add stocks that pay dividends consistently can follow the recommendations of Wall Street experts. These analysts can guide investors toward the best stocks from a large universe of dividend-paying companies.
Here are three attractive dividend stocks, according to Wall Street’s top pros on TipRanks, a platform that ranks analysts based on their past performance.
Chord Energy
First up is Chord Energy (CHRD), an oil and gas operator in the Williston Basin. Earlier this year, Chord declared a base-plus-variable cash dividend of $3.25 per share.
Recently, Siebert Williams Shank analyst Gabriele Sorbara initiated coverage of Chord Energy stock with a buy rating and a price target of $262, citing its attractive valuation and capital returns. The analyst highlighted the company’s peer‐leading capital returns framework, under which it aims to return more than 75% of free cash flow (FCF) to shareholders through dividends and opportunistic buybacks.
The analyst expects capital returns of $778.8 million and $1.15 billion in 2024 and 2025, respectively. These estimates for 2024 and 2025 reflect capital return yields of 6.6% and 9.7%, respectively, which are above the peer average yields of 6.3% and 7.8%.
Citing CHRD’s solid track record in the Williston basin and an impressive inventory runway of oil locations, Sorbara said, “With improving capital efficiencies from wider spacing, longer laterals and acquisition synergies, we view CHRD as the name to own for the greatest exposure and leverage to the basin.”
The analyst also sees an upside to the Street’s consensus estimates for certain key metrics, including production, EBITDA and free cash flow, driven by the recently announced Enerplus acquisition, enhanced capital efficiencies and higher oil prices.
Sorbara ranks No. 391 among 8,800 analysts tracked by TipRanks. His ratings have been profitable 52% of the time, with each delivering an average return of 12.4%. (See Chord Energy Stock Buybacks on TipRanks)
Energy Transfer
Next on the list is Energy Transfer (ET), a master limited partnership or MLP. ET is a midstream energy company operating over 125,000 miles of pipeline and related infrastructure. On April 24, the company announced an increase in its quarterly cash distribution to $0.3175 per common unit for the first quarter of 2024, payable on May 20.
The new cash distribution marks a 3.3% year-over-year increase and reflects a dividend yield of about 8% on an annualized basis.
Recently, Mizuho analyst Gabriel Moreen slightly raised the price target for ET to $19 from $18 and reiterated a buy rating, calling the stock his firm’s new midstream top pick. The analyst pointed out that the stock has outperformed its midstream peers so far this year, but to a lesser extent compared to some other operators. That’s despite the company’s solid free cash flow outlook and leverage in the Permian basin.
“We believe ET could capitalize on its improved credibility by providing a more detailed capital allocation framework,” said Moreen.
The analyst thinks that a clear message about capital allocation could serve as a major company-specific catalyst to help investors capitalize on the company’s healthy free cash flow yield.
He added that the stock’s discounted valuation and upside potential on equity return are the key drivers that make it his firm’s top midstream pick.
Moreen ranks No. 183 among 8,800 analysts tracked by TipRanks. His ratings have been successful 79% of the time, with each delivering an average return of 10.3%. (See Energy Transfer Technical Analysis on TipRanks)
Coca-Cola
This week’s final pick is dividend king Coca-Cola (KO). Earlier this year, the beverage giant increased its quarterly dividend by about 5.4% to $0.485 per share. This marked the 62nd consecutive year in which the company hiked its dividend. KO stock offers a dividend yield of 3.1%.
On April 30, Coca-Cola reported better-than-expected first-quarter results and raised its organic revenue growth forecast. However, the company expects a higher impact of currency headwinds than previously estimated.
Reacting to the Q1 print, RBC Capital analyst Nik Modi reiterated a buy rating on KO stock with a price target of $65. The analyst noted that KO significantly outperformed organic growth expectations. He thinks that the company’s underlying fundamentals continue to be robust despite the impact of a strong dollar on the bottom line.
“We believe the company’s latest restructuring and organizational design changes will facilitate better allocation of resources, which will ultimately lead to better share gains and white space expansion,” said Modi.
The analyst expects the momentum in Coca-Cola’s revenue and earnings to continue this year and sees further upside if the U.S. dollar weakens, given the company’s significant exposure to international markets.
Modi ranks No. 620 among 8,800 analysts tracked by TipRanks. His ratings have been profitable 60% of the time, with each delivering an average return of 6.5%. (See Coca-Cola Hedge Fund Activity on TipRanks)
