Although major averages have hit new records recently, there are numerous catalysts that could cause a stir, including geopolitical tensions and the upcoming US presidential election.
Investors seeking some stability in their portfolios should consider high-quality dividend stocks, particularly those with a track record of consistent income payments.
Analysts conduct an in-depth study of companies' fundamentals and their ability to pay and grow dividends over the long term.
Here are three attractive dividend stocks, according to Wall Street's top experts on TipRanks, a platform that ranks analysts based on past performance.
Enbridge
Energy infrastructure company Enbridge (ENB) is this week's first dividend pick. The company transports nearly 30% of North America's crude oil production and approximately 20% of the natural gas consumed in the United States
Enbridge has increased its dividend for 29 years. The dividend yield is 7.7%.
Following the recent Investor Day event, RBC Capital analyst Robert Kwan reiterated his Buy rating on ENB stock. The analyst believes that recent developments, including regulatory approval of the acquisition of East Ohio Gas Company, would increase market confidence in the company's ability to grow profits.
It's worth noting that East Ohio Gas is the largest of the three utilities (the other two are Questar Gas and Public Service Company of North Carolina) that Enbridge wanted to acquire from Dominion Energy.
“Dominion Utilities represent the next installment in Enbridge’s suite of growth platforms,” Kwan said.
The analyst highlighted that the company has extended its growth targets to 2026 and now expects earnings before interest, taxes, depreciation and amortization growth in the range of 7% to 9% from 2023 to 2026. In comparison, the previous growth forecast was 4%-6% from 2022 to 2025. Additionally, the company expects this forecast will allow it to increase its annual dividend.
Kwan is ranked #191 among more than 8,700 analysts tracked by TipRanks. Its ratings were successful 67% of the time, with an average return of 10.2% each. (See Enbridge Hedge Funds activity on TipRanks)
Bank of America
Next comes Bank of America (BAC), one of the leading banking institutions in the world. In 2023, the bank returned $12 billion to shareholders through dividends and share buybacks.
The bank announced a dividend of 24 cents per share for the first quarter of 2024, payable on March 29. BAC stock offers a dividend yield of 2.6%.
Recently, RBC Capital analyst Gerard Cassidy reiterated a Buy rating on Bank of America with a price target of $39. The analyst is optimistic about the leadership of Chairman and CEO Brian Moynihan, who is helping the bank consistently deliver improved profitability through a focus on costs and sound lending principles.
Cassidy also noted that BAC has a solid balance sheet, with a common equity Tier 1 capital ratio of 11.8% and an incremental leverage ratio of 6.1% as of December 31, 2023.
“In addition, given its strong capital position and PPNR (sales before taxes and provisions), the company should be able to pay and increase its dividend even during a downturn,” Cassidy said.
The analyst highlighted the bank's growing share of the deposit market, its dominant position in global capital markets and the attractive valuation of the stock. He expects BAC's profitability to increase as the adoption of its mobile offerings increases.
Cassidy is ranked #143 among more than 8,700 analysts tracked by TipRanks. Its ratings were successful 62% of the time, with an average return of 14.9% each. (See BAC technical analysis on TipRanks)
PepsiCo
This week's third dividend pick is the snack food and beverage giant PepsiCo (PEP). Last month, the company reported better-than-expected fourth-quarter profit, even as sales fell and fell short of analysts' expectations due to demand pressure in its North American business.
Still, PepsiCo announced a 7% increase in its annual dividend to $5.42 per share, effective with the June 2024 dividend payment. This increase marked the 52nd consecutive year the company increased its dividend payment. PepsiCo currently has a dividend yield of 2.9%.
Overall, PepsiCo is targeting a cash return to shareholders of about $8.2 billion in 2024, including $7.2 billion in dividends and $1 billion in share repurchases.
On March 18, Morgan Stanley analyst Dara Mohsenian upgraded PepsiCo shares to “buy” from “hold” and gave a price target of $190. The analyst cited two reasons for an earlier downgrade on the stock: valuation concerns and his opinion that the consensus organic sales growth (OSG) forecast appeared too high.
However, Mohsenian noted: “Both issues have now resolved and we would be aggressive buyers here ahead of a significant reversal in the second half of the year after PEP hit a fundamental bottom in the first quarter and is back above consensus and the.” OSG of its competitors, with PEP's valuation compression being exaggerated.”
The analyst called PepsiCo a top pick, arguing that the market isn't fully pricing in the growth prospects of the company's international business.
Mohsenian is ranked #383 among more than 8,700 analysts tracked by TipRanks. The analyst's ratings were profitable 68% of the time, each yielding an average return of 9.2%. (See PepsiCo stock buybacks on TipRanks)