A Citibank sign outside one of the company’s offices in California.
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Ongoing market volatility continues to exacerbate investor concerns and make it difficult for them to choose the right stocks.
However, it is always better to have a longer-term investment horizon and look for names that can increase overall returns through safe dividends and capital appreciation.
To that end, here are five attractive dividend stocks, according to Wall Street’s top experts on TipRanks, a platform that ranks analysts based on past performance.
Ares Capital
This week we’ll first take a look at a stock with a high dividend yield Ares Capital (ARCC). Ares is a business development company that offers a range of financing solutions to the middle market. The company recently reported a third-quarter profit decline due to higher interest rates and continued stable credit quality.
The company also declared a fourth-quarter dividend of 48 cents per share, payable on Dec. 28. ARCC offers a dividend yield of 9.8%.
Commenting on the Q3 results, Kenneth Lee, analyst at RBC Capital, noted that loan performance was still good, with nonaccrual loans declining slightly quarter-on-quarter to a very low 1.2% of the portfolio ( based on amortized acquisition costs). Still, he expects non-provisions could rise sometime next year.
The analyst highlighted other positives for Ares Capital, including portfolio diversification. The analyst also believes that the company’s dividends are strongly supported by core earnings per share generation and potential net realized gains.
Lee reiterated his Buy rating on ARCC shares with a price target of $21, saying, “We continue to favor ARCC’s strong track record of managing risk throughout the cycle, well-supported dividends and economies of scale.”
Lee is ranked No. 251 among more than 8,500 analysts tracked by TipRanks. Its ratings were profitable 57% of the time and delivered an average return of 12.6% each time. (See ARCC stock charts on TipRanks)
Citigroup
Next on the list this week is the banking giant Citigroup (C). In October, the bank delivered better-than-expected third-quarter results, driven by strength in its institutional and retail banking divisions. Citi recently announced a major restructuring that would simplify its operating model and improve its business.
The bank declared a quarterly dividend of 53 cents per share, payable on November 22nd. Citi’s dividend yield is 5%.
BMO Capital analyst James Fotheringham pointed out that Citi’s Q3 results were driven by better-than-expected revenue (with net interest income coming in 5% above consensus), lower operating expenses and lower borrowing costs.
The analyst raised its core earnings per share estimates for 2023, 2024 and 2025 by 11%, 6% and 3%, respectively, to reflect lower-than-previously modeled borrowing costs and a slower-than-expected decline in net interest margin.
Fotheringham also increased his price target on the stock to $66 from $61 and reiterated his Buy rating, saying: “C is our top pick among large-cap banks; Shares are trading at (by far) the largest discount to TCE.” [total capital employed] among the money center banks.”
Fotheringham is ranked 372nd out of more than 8,500 analysts on TipRanks. Additionally, 56% of its ratings were profitable, with each one producing an average return of 9.4%. (See Citigroup blogger opinions and sentiment on TipRanks)
MC Donalds
Dividend Aristocrat MC Donalds (MCD) recently announced its third quarter results. The fast-food chain beat Wall Street expectations thanks to higher prices that helped offset weak traffic at U.S. restaurants.
In early October, MCD announced a 10% increase in its quarterly dividend to $1.67 per share, payable on December 15th. The company has increased its dividends for 47 consecutive years. The company pays a dividend yield of 2.5%.
BTIG analyst Peter Saleh, ranked 667th out of more than 8,500 analysts on TipRanks, emphasized that the sales and profit increase in MCD’s Q3 results came with more cautious comments on U.S. traffic. Traffic was down slightly, reflecting lower footfall from lower-income customers and “breakfast day” pressure.
Nevertheless, the analyst noted that MCD still has great geographical strength and remains better positioned than its competitors. Looking ahead, Saleh expects the company to accelerate its U.S. expansion next year. Its checks suggest MCD has about 250 units in the pipeline. He also expects the company to place a greater focus on value and digital engagement in 2024, as well as expanding its automated order taking technology.
“We view McDonald’s as one of the strongest restaurant concepts in the world that is in the middle stages of a multi-year sales recovery,” Saleh said.
Saleh reiterated his Buy rating on McDonald’s shares with a price target of $300. His reviews were successful 52% of the time, with each review delivering an average return of 7.9%. (See McDonald’s financial reports on TipRanks)
AT&T
We now switch to the telecommunications giant AT&T (T), which impressed investors by reporting robust third-quarter subscriber growth thanks to promotions and phone upgrades. Additionally, the company raised its full-year free cash flow forecast to about $16.5 billion from $16 billion. AT&T offers an attractive dividend yield of 7%.
On October 26, Tigress Financial Partners analyst Ivan Feinseth reiterated his Buy rating on AT&T stock with a price target of $28. The analyst emphasized that the increase in subscribers and cash flow in the third quarter represents a significant turnaround in AT&T’s business development trends.
He added that while 2022 is a transition year, the company’s revenue, cash flow and profitability will increase significantly in 2023 and beyond, with long-term growth driven by continued 5G and broadband adoption in business communications.
“AT&T will increasingly leverage its 5G high-speed fiber network to drive continued subscriber growth and further enhance its edge computing capabilities,” Feinseth said.
The analyst noted that AT&T reduced its debt by over $3 billion in the third quarter of 2023, which would lead to lower interest expenses and increased investments in its connectivity business. He believes the company will continue to optimize its dividend payout ratio to support ongoing investments while returning cash to shareholders.
Feinseth is ranked 453rd among more than 8,500 analysts on TipRanks. Additionally, 54% of its ratings were successful, each generating an average return of 8.2%. (See AT&T hedge fund trading activity on TipRanks)
Goal
Feinseth is also bullish on another dividend stock: the major retailer Goal (TGT). The analyst believes that the near-term pressure presents an attractive opportunity to buy the stock as the company is well positioned to drive long-term revenue growth and profitability and further increase shareholder value.
The analyst expects Target’s diverse strengths — including its loyal customer base, operational efficiencies and improved fulfillment capabilities — to help it weather ongoing consumer headwinds, marketing failures and inventory reduction issues.
Feinseth also highlighted that the retailer is expanding its product offerings by adding several new products to its core product lines. Additionally, the company is expanding its footprint by opening new stores and remodeling existing ones. (See Target insider trading activity on TipRanks)
He noted that TGT introduced its dividend in 1967 and has increased it annually since 1971. In June 2023, the company increased its quarterly dividend by about 2% to $1.10 per share, following a massive 20% increase in June 2022 to $1.08 per share. TGT’s dividend yield is 3.9%.
Feinseth lowered TGT’s price target to $180 from $215 due to near-term challenges, but maintained his Buy rating, saying: “Increasing value focus in consumer spending trends and moderating inflation pressures and input costs will lead to a renewed acceleration in the market.” Lead business performance trends.”