A Home Depot location in Encinitas, California.
Mike Blake | Reuters
With the late 2023 rally underway, investors can add to their portfolios by adding a select group of dividend payers to the mix.
Dividend-paying stocks offer investors a combination of potential price appreciation and income, which can increase overall returns.
With that in mind, here are five attractive dividend stocks, according to Wall Street’s top experts on TipRanks, a platform that ranks analysts based on past performance.
Energy transfer
First on this week’s list is Energy transfer (AND), a limited partnership that operates a diversified portfolio of energy assets across the United States with nearly 125,000 miles of pipelines. ET recently completed its acquisition of Crestwood Equity Partners.
In October, ET declared a quarterly cash distribution of $0.3125 per common unit for the third quarter, paid on November 20. The stock has a dividend yield of 9%.
Commenting on the third quarter results, RBC Capital analyst Elvira Scotto said Energy Transfer delivered a solid performance, with adjusted earnings before interest, taxes, depreciation and amortization beating the consensus estimate by 7%. The analyst also noted the $300 million increase in medium-term adjusted EBITDA guidance for 2023.
Scotto expects the Crestwood acquisition to provide commercial synergies. Additionally, she noted that ET intends to maintain a strong balance sheet and target a leverage ratio of 4.0-4.5x debt/EBITDA. Additionally, ET is committed to continuing to return cash to shareholders through increased distributions and possible buybacks.
“We believe ET can generate significant cash flow in the coming years with its high-yield growth projects, accretive acquisitions and integrated asset footprint across hydrocarbons and basins,” Scotto said.
Scotto raised her price target on Energy Transfer to $19 from $18, reiterated her Buy rating and called the stock a compelling investment opportunity. She ranks 54th among more than 8,700 analysts tracked by TipRanks. Their ratings were profitable 65% of the time and delivered an average return of 18.1% each. (See Energy Transfer insider trading activity on TipRanks)
Sunoco LP
Scotto is also optimistic about another limited partnership: Sunoco (SUN), one of the leading fuel retailers in the USA
For the third quarter, Sunoco announced a quarterly cash distribution of $0.8420 per unit, to be paid on November 20. The company’s dividend yield is 6.3%.
After Sunoco reported its quarterly results, Scotto raised the price target on SUN shares from $51 to $57 to reflect a higher earnings outlook. The analyst reiterated her Buy rating and said the company’s volumes and margins exceeded her estimates.
The analyst believes that the company is able to deliver beyond the industry’s break-even point due to its size, sourcing capability and lower cost structure compared to the industry.
“SUN also maintains a strong balance sheet at the end of 3Q23 with a leverage ratio of 3.9x and total liquidity of $1.1 billion, providing SUN with significant financial flexibility to pursue growth opportunities, including acquisitions. “
Overall, Scotto remains bullish on Sunoco due to its solid cash flows and focus on breakeven margins and cost management. (See Sunoco hedge fund trading activity on TipRanks)
VICI properties
Our next dividend stock is VICI properties (VICI), a real estate investment fund. VICI owns a robust portfolio of gaming, hospitality and entertainment properties, including the legendary Caesars Palace Las Vegas and MGM Grand properties.
For the third quarter, the company declared a cash dividend of $0.415 per share, an increase of 6.4%. VICI offers a dividend yield of 5.4%.
In a recent research note, Stifel analyst Simon Yarmak, ranked #573 out of more than 8,700 analysts tracked by TipRanks, reiterated his Buy rating on VICI stock, calling it one of his top ideas in the North American triple-net REIT space. Sector.
Yarmak noted that VICI performed well in both gaming and non-gaming categories. He added that VICI’s tenants remain in a strong position.
“VICI has negotiated favorable tiers in its leases that ensure strong internal growth. Many of these tiers come with unlimited CPI growth (50.0% of rent), and therefore VICI should benefit from significant rent increases in the above-average inflationary environment,” noted Yarmak.
The analyst estimates that rent increases in 2024 would result in approximately $71 million in additional rent, which was not reflected in the 2023 results. He expects VICI to post the best year-over-year growth in the triple-net sector in 2024, with adjusted funds from operations growth of nearly 4.5% to 5.0%.
Yarmak’s reviews were successful 54% of the time, with each one delivering an average return of 8%. (See VICI’s options activity on TipRanks)
Home Depot
We move to the hardware store Home Depot (HD). The company beat analysts’ estimates for the fiscal third quarter despite a decline in sales due to pressure in certain high-priced, discretionary categories. However, the company limited its full-year outlook due to macroeconomic pressures.
For the third quarter, the company declared a cash dividend of $2.09 per share, payable on December 14. HD’s dividend yield is 2.6%.
After fiscal third-quarter results, JPMorgan analyst Christopher Horvers lowered the price target on HD shares to $318 from $332, but maintained a buy rating and said Home Depot is doing well in a difficult environment.
The analyst believes management’s tone was less optimistic compared to the second quarter, but no worse than the first quarter. While the home improvement category is expected to remain under pressure in the first half of 2024, comparable sales are expected to recover in the second half.
“We believe HD remains one of retail’s best long-term success stories given its company-specific sales and margin initiatives, the industry’s duopoly/AMZN resilience, and significant financial and operating leverage that amplify EPS growth in better selling environments. “,” Horvers said.
Horvers is ranked #520 among more than 8,700 analysts on TipRanks. Its ratings were profitable 61% of the time and delivered an average return of 8% each time. (See Home Depot’s technical analysis on TipRanks)
Walmart
We finally take a look at the wholesaler Walmart (WMT). Earlier this year, the company announced a 2% increase in its annual dividend per share to $2.28. This was the 50th consecutive year of dividend increases for the company, earning Walmart the reputation of a dividend king. The stock offers a dividend yield of 1.5%.
The retailer recently beat analysts’ fiscal third-quarter earnings and sales expectations. However, it warned investors of subdued consumer spending.
Following the release, Guggenheim analyst Robert Drbul reiterated a Buy rating on the stock with a price target of $180. The analyst noted that Walmart experienced solid traffic growth across physical stores and digital channels. It increased its full-year revenue estimates to reflect the positive performance in the third quarter, but maintained its adjusted earnings per share estimates for fiscal 2024 and 2025 due to additional cost pressures.
“We continue to believe that Walmart is well positioned with its value proposition, convenience and assortment in an uncertain macroeconomic environment,” Drbul said.
The analyst added that WMT stock has some value given the stock’s 1.5% dividend yield and the fact that it trades at 22.3 times its fiscal 2025 EPS estimate of $7 for income, value and growth investors.
Drbul is ranked 652nd among more than 8,700 analysts on TipRanks. Its ratings were successful 59% of the time, delivering an average return of 5.9% each. (See Walmart’s financial reports on TipRanks).