A McDonald's on Santa Monica Blvd in Los Angeles, California, April 1, 2024.
Robert Gauthier | Los Angeles Times | Getty Images
Investors looking for stable income amid ongoing geopolitical tensions in the Middle East and economic uncertainty may consider adding dividend stocks to their portfolio.
Choosing the right stocks from the vast universe of dividend-paying companies can be challenging. Recommendations from top Wall Street analysts could help investors select stocks with attractive dividends supported by strong financials.
Here are three dividend stocks highlighted by Wall Street's top pros on TipRanks, a platform that ranks analysts based on past performance.
AT&T
Our first dividend pick is AT&T (T), one of the world's leading telecommunications companies. Last month, the company declared a quarterly dividend of $0.2775 per common share, payable on November 1st. AT&T offers a dividend yield of 5.2%.
Recently, Ivan Feinseth, analyst at Tigress Financial, slightly increased his price target on AT&T shares from $29 to $30 and reiterated his Buy rating. He said that “the growth in mobile and fixed-line subscriptions continues to position the company as a leading provider of converged 5G and fiber fixed-line services.”
The analyst highlighted that AT&T reported 419,000 net additions to postpaid phones in the second quarter, with an industry-leading postpaid phone churn rate of 0.70%. Additionally, there were 239,000 AT&T Fiber additions, marking the 18th consecutive quarter of net additions exceeding 200,000.
Feinseth added that the company is on track to reach more than 30 million consumer and business locations with its fiber optic network by the end of next year. The analyst is optimistic about AT&T's future growth, which will be supported by further expansion of 5G and fiber networks as well as broadband. He also expects the company to benefit from the iPhone upgrade cycle.
In addition, Feinseth noted the company's efforts to reduce its costs and debt. Overall, the analyst believes AT&T offers an attractive investment opportunity given its compelling dividend yield and portfolio of robust businesses.
Feinseth ranks 202nd among more than 9,100 analysts tracked by TipRanks. Its valuations were profitable 61% of the time and delivered an average return of 13.2%. (See AT&T stock buybacks on TipRanks)
Real estate income
This week's second dividend stock is Real estate income (O), a real estate investment trust that invests in diversified commercial real estate with a portfolio of over 15,400 properties in the US, the UK and six other countries in Europe.
Realty Income is known for its monthly dividends. On October 8, the company declared a monthly dividend of $0.2635 per share, payable on November 15. The stock offers an attractive dividend yield of 5.1%.
Recently, RBC Capital analyst Brad Heffern updated his estimates and price targets for net-lease REITs to reflect the impact of a lower interest rate environment. Notably, the analyst increased the price target for Realty Income from $64 to $67 and reiterated a Buy rating on the stock. The higher price target represents significantly lower cost of debt/equity, which benefits the company and its competitors in the net-lease REIT group.
Heffern cited several reasons for his bullish stance on Realty Income, including that the company has one of the highest quality net lease portfolios and a high percentage of tenants with public reporting requirements. The analyst also expects the company to benefit from solid acquisition volumes.
“O's cost of capital is among the lowest in the peer group and, in our view, low cost of capital is critical to net lease operations,” he added.
Heffern is ranked #542 among more than 9,100 analysts tracked by TipRanks. Its ratings were profitable 48% of the time and delivered an average return of 12.1%. (See Realty Income Stock Charts on TipRanks)
McDonald's
Finally, let's look at the fast food chain McDonald's (MCD). Last month, the company announced a 6% increase in its quarterly dividend to $1.77 per share, payable on December 16. This increase marked the 48th consecutive year of dividend increases for MCD. The stock has a dividend yield of 2.3%.
Baird analyst David Tarantino reiterated a Buy rating on MCD shares and raised the price target to $320 from $280, citing signs of improving U.S. comparable sales growth. The analyst raised his third-quarter U.S. sales estimate to 0.5% compared to the previous estimate, a decline of 2%.
Tarantino also raised his EPS estimate, fueled by evidence of improving trends in August and September following weakness at the end of the second quarter and the beginning of the third quarter. The analyst believes the improvement in U.S. competitions may be due to increasing demand for the $5 Meal Deal, the Collector's Meal promotion, which launched on August 13 and is reportedly within one to two months was sold out in days, as well as could be due to an easier comparison with the previous year period.
While visibility outside of the domestic market remains low due to macroeconomic challenges, Tarantino remains bullish on the stock as he believes “MCD's enduring business model is capable of performing relatively well in a range of economic scenarios.”
Tarantino ranks No. 162 among more than 9,100 analysts tracked by TipRanks. His reviews were successful 66% of the time and delivered an average return of 13.7%. (See McDonald's hedge fund activity on TipRanks)