Positive results in April’s consumer price index have raised investors’ expectations for a rate cut by the U.S. Federal Reserve, and the environment could be favorable for high-dividend stocks. .
In a low interest rate environment, dividend payers become even more attractive to income investors, especially since dividend stocks offer competitive yields compared to U.S. Treasuries.
Recent results reported by several dividend-paying companies testify to their resilience and ability to pay dividends despite a challenging macro environment.
With that in mind, here are three attractive dividend stocks from top Wall Street pros on TipRanks, a platform that ranks analysts based on past performance.
ares capital
The first stock on this week’s list is ares capital (ARCC) is a company focused on financing solutions for small and medium-sized businesses. The company announced its first quarter results on May 1st and announced a quarterly dividend of 48 cents per share, to be paid on June 28th. ARCC stock has an attractive dividend yield of 9.1%.
Based on this result, RBC Capital analyst Kenneth Lee reaffirmed his buy rating on ARCC stock with a price target of $22. He said that while the company’s core earnings per share were slightly below analyst expectations, portfolio activity (including originations) in the generally observed seasonally weak period exceeded his expectations. He pointed out that it was much higher than that.
The analyst added that the credit performance of ARCC’s portfolio remains strong. Although the accrual rate increased slightly quarter-over-quarter, it remains low at 1.7% of the portfolio, compared to the industry average of about 3.8%.
“We maintain our Outperform rating because we recognize ARCC’s strong track record of managing risk through cycles, well-documented dividends, and scale advantages,” Lee said.
Overall, Mr. Lee leverages ARCC’s size and capital position, its access to the resources of the broader Ares Credit Group platform, its experienced management team, and the expectation that it will be able to achieve an annual return on equity above the peer average. Therefore, I am bullish on ARCC.
Mr. Lee is ranked #40 out of over 8,800 analysts tracked by TipRanks. His rating is that he is successful 71% of the time, and the average return for each is 17.2%. (See Ares Capital’s ownership structure on TipRanks)
Brookfield Infrastructure Partners
next brookfield infrastructure (BIP) is a leading global infrastructure company that owns and operates diverse, long-lived assets in the utilities, transportation, midstream and data sectors. The company recently announced its first quarter results and declared a quarterly distribution of $0.405 per unit.
This quarterly distribution is up 6% year over year and is due on June 28th. With an annual distribution of $1.62 per unit, BIP yields 5.3%.
Following the first quarter results, BMO Capital analyst Devin Dodge reaffirmed his buy rating on BIP stock, saying the first quarter results were broadly in line with expectations. However, analysts lowered their price target from $40 to $36, reflecting the impact of rising interest rates on stock valuation.
Dodge noted that Brookfield’s investment in container leasing company Triton International exceeded its base expectations. BIP’s shipping business benefits from the Triton acquisition as the Red Sea crisis extends some maritime trade routes and increases global demand for containers.
Meanwhile, analysts expect BIP’s capital deployment to focus on opportunities to incorporate existing business. He highlighted that the company’s acquisition pipeline also includes large-scale opportunities focused on Asia Pacific, North America and Europe. The analyst expects new investment activity to accelerate into 2024.
“We believe BIP’s portfolio companies are performing well, have attractive yields, and have moderate valuations,” Dodge said.
Dodge is ranked #582 out of over 8,800 analysts tracked by TipRanks. His rating is that he is profitable 68% of the time, and the average return for each is 10.6%. (See his Brookfield Infrastructure insider trading activity on TipRanks)
real estate income
This week’s final dividend is real estate income (oh). It is a real estate investment trust that invests in diverse commercial real estate and holds his portfolio of over 15,450 properties in the United States and seven European countries.
On May 15, the company paid a monthly dividend of $0.257 per share. Overall, the company has a dividend yield of 5.6%, based on an annual dividend of $3.08 per share.
Following Realty Income’s first-quarter results, RBC Capital analyst Brad Heffern reiterated his buy rating on Realty Income’s shares, with a price target of $58. The analyst noted that Q1 2024 results were slightly above his expectations and featured an impressive capitalization rate of 8.2% on acquisitions.
Heffern added that the majority of acquisitions in the first quarter were in Europe, with the region accounting for 95% of acquisition value. The company attributed the opportunity in Europe to improved confidence in the macroeconomic outlook and seller motivation. In contrast, rising US interest rates and macro uncertainty impacted volumes in the first quarter. That said, the company expects U.S. volumes to increase in the second half of the year as interest rates and the macro outlook become clearer.
“We believe Company O has one of the highest quality net lease portfolios in the sector, with above-average investment grade weightings, a strong industrial portfolio, and a high proportion of publicly reportable tenants. ,” Heffern said.
Mr. Heffern is ranked #505 out of over 8,800 analysts tracked by TipRanks. His rating is that he is profitable 48% of the time, and the average return on each is 12%. (See Real Estate Income Stock Repurchase on TipRanks)
