U.S. stock markets have been volatile recently as traders grapple with earnings season and the upcoming election, but dividend-paying stocks could help stabilize fluctuations in investors’ portfolios.
Investors looking for companies that pay stable dividends can rely on Wall Street’s top analysts, whose recommendations are based on thorough analysis of a company’s ability to deliver stable financial performance and generate strong profits.
Here are three dividend stocks that look attractive, according to top Wall Street pros at TipRanks, a platform that ranks stocks based on analysts’ past performance.
Western Midstream Partners
This week, we will first look at limited liability partnerships. Western Midstream Partners (WES). The company owns and operates midstream assets in Texas, New Mexico, Colorado, Utah and Wyoming.
It is worth noting that in the first quarter of 2024, WES’ base dividend increased by 52% compared to the previous quarter, to $0.8750 per unit. WES offers a high dividend yield of 8.8%.
Recently, Mizuho analyst Gabriel Moline raised his price target on WES to $45 from $39 and reaffirmed his buy recommendation, saying the stock is the second-best performing stock among his coverage based on year-to-date gains. The stock is expected to rise 36% in 2024.
Moline believes there’s room for WES to further moderately increase its dividend over the forecast period, which is encouraging for investors interested in this high-yield stock. “WES’s MLP structure takes full advantage of the tax benefits of its high yield, making the yield an even bigger differentiator,” he said.
Moline also highlighted the company’s strong first-quarter results and revised outlook, and stressed that its investment-grade balance sheet, modest capital expenditure requirements and constructive covenants that significantly improve the outlook for ongoing cash payouts allow the company to sustain a higher dividend.
Moline is ranked 90th among more than 8,900 analysts tracked by TipRanks, and his ratings have produced profits 81% of the time, with an average return of 12.8%. (See Western Midstream Financials on TipRanks)
Diamondback Energy
Moving on to another energy company. Diamondback Energy (FANG). The company is focused on the acquisition, development and exploration of onshore oil and natural gas reserves in the Permian Basin of West Texas. FANG has been in the spotlight due to its proposed acquisition of Endeavor Energy, which is expected to strengthen its position in the Permian Basin.
During the first quarter, the company paid shareholders a base cash dividend of 90 cents per share and a floating cash dividend of $1.07 per share. In addition, the company repurchased 279,266 shares for $42 million.
Ahead of the company’s second-quarter earnings release, RBC Capital analyst Scott Hanold reiterated his buy recommendation on FANG stocks with a $220 price target.
Analysts believe FANG’s second-quarter production improved due to faster cycle times and now expect 90 wells to be completed, improving from a previous forecast of 80. However, the analysts lowered their second-quarter 2024 EPS and cash flow per share forecasts to reflect final commodity price realizations and other adjustments.
Hanold expects shareholder returns in the second quarter of 2024 to consist of a fixed dividend of 90 cents per share and a floating dividend of $1.25 per share, with no share repurchases. “We believe FANG stocks should outperform their peers over the next 12 months,” he added.
Hannold is ranked 11th out of more than 8,900 analysts tracked by TipRanks, and his ratings have produced profits 70% of the time, with an average return of 27.6%. (See Diamondback Energy options activity on TipRanks)
coca cola
This week’s third pick is a beverage giant. coca cola KO recently reported better-than-expected second quarter financial results reflecting strong demand for its products. The company also raised its full-year organic revenue growth and comparable profit guidance.
KO raised its quarterly dividend by about 5.4% to 48.5 cents per share earlier this year, marking its 62nd consecutive year of dividend increases. KO’s dividend yield is about 2.9%.
RBC Capital analyst Nik Modi reaffirmed his buy recommendation on Coca-Cola shares and raised his price target to $68 from $65 following the company’s strong second-quarter results.
Modi noted that the company’s global case volume has exceeded expectations, including double-digit growth in markets such as the Philippines and India, and also highlighted KO’s improving gross margins and profitability.
Analysts remain bullish on the company’s prospects despite pressures from lower-income consumers in developed markets and a slowdown in the away-from-home channel. “KO’s fundamentals remain strong and we believe the company has the momentum and flexibility to achieve its targets this year,” Modi said.
Modi is ranked 858th out of more than 8,900 analysts tracked by TipRanks. His ratings produce profits 57% of the time and have delivered an average return of 6.1%. (See Coca-Cola insider trades on TipRanks)
