With the U.S. Federal Reserve expected to cut interest rates in September, dividend-paying stocks could outperform.
This is because the dividend yield of these names appears more attractive compared to the yields of other income-producing assets, including bonds.
With so many dividend-paying companies, it can be difficult for investors to choose the right stocks. Investors should consider the recommendations of leading analysts when selecting attractive dividend stocks with strong financial metrics.
Here are three dividend stocks highlighted by Wall Street's top pros on TipRanks, a platform that ranks analysts based on their past performance.
EPR properties
The first dividend stock this week is EPR properties (EPR), a real estate investment trust. It focuses on experience properties such as cinemas, amusement parks, dining and leisure centers, and ski resorts. EPR offers a dividend yield of 7.3%.
RBC Capital analyst Michael Carroll recently upgraded his rating on EPR to “buy” from “hold” and raised the price target to $50 from $48. He believes the company has successfully navigated difficult operating conditions, including the Covid-19 pandemic and actor/writer strikes.
Carroll believes EPR is in a better position to deliver positive results as the above-mentioned headwinds subside. “We expect box office to rebound in the second half of 2024 and into 2025, driving higher percentage rents and strengthening the tenant base,” the analyst said.
The analyst commented on concerns about EPR's heavy presence in movie theaters, noting that management intends to reduce that presence over time. He added that concerns about AMC, one of the company's major tenants, appear to be easing to some extent as AMC undertakes initiatives such as capital raises and debt refinancings.
In conclusion, Carroll stressed that EPR's high dividend yield is adequately protected by a payout ratio of almost 70% from adjusted funds from operations and a solid balance sheet with a net debt to earnings before interest, taxes, depreciation and amortization ratio of 5.2 times.
Carroll is ranked 703rd among more than 9,000 analysts tracked by TipRanks. His ratings have been profitable 63% of the time, generating an average return of 7.7%. See EPR Properties' ownership structure on TipRanks.
Energy transfer
The next dividend pick is Energy transfer (ET), a limited partnership. The midstream energy company paid a quarterly cash distribution of 32 cents per share on August 19, representing year-over-year growth of 3.2%. Energy Transfer has a dividend yield of 8%.
Responding to ET's Q2 results, Stifel analyst Selman Akyol said the company reported better-than-expected EBITDA and cited several growth opportunities, particularly across the company's value chain from the Permian to the Gulf Coast.
Sentiment is positive towards natural gas as it is expected to meet a large part of the energy needs of artificial intelligence data centers. Akyol stressed that ET's management believes that with its solid presence, the company can supply the natural gas needed to continuously power the data centers.
Akyol noted that ET is also benefiting from increasing demand from utilities, particularly in Texas and Florida. These two states offer attractive growth prospects for ET as they have potential data centers and their populations are growing significantly.
“Energy Transfer always has good opportunities and although capital expenditures could increase, we continue to favor positioning,” Akyol said. He reiterated a buy rating on ET shares with a price target of $19.
Akyol is ranked 137th among more than 9,000 analysts tracked by TipRanks. His ratings have been successful 71% of the time and have produced an average return of 10.3%. View Energy Transfer stock charts on TipRanks.
Walmart
Wholesaler Walmart (WMT) recently impressed investors with its upbeat results for the second quarter of fiscal 2025. The company also raised its full-year outlook to reflect strong performance in the first half of the year.
Walmart continues to reward shareholders with dividends and share buybacks. In the first half of fiscal 2025, the company paid more than $3 billion in dividends and repurchased $2.1 billion worth of stock. Earlier this year, Walmart increased its dividend 9% to 83 cents per share. This marked the 51st consecutive year of dividend increases for the company.
Following the second-quarter earnings release, Baird analyst Peter Benedict reiterated his buy rating on Walmart and raised the price target from $70 to $82, stressing that the retailer has been able to gain market share despite a turbulent macroeconomic environment thanks to its continued focus on value and convenience.
The analyst explained that Walmart’s second quarter results clearly reflected the impact of its transformation efforts, “with ~70% of U.S. sales growth driven by digital and >50% of companywide [earnings before interest and taxes] The growth comes from higher margin advertising and membership revenue streams.”
Benedict also highlighted Walmart's return on capital increased 10 basis points to 15.1% over the past 12 months, an improvement driven by the company's investments in areas such as automation and generative AI.
Benedict is ranked 35th among more than 9,000 analysts tracked by TipRanks. His ratings have been profitable 71% of the time, generating an average return of 15.9%. See Walmart Stock Buybacks on TipRanks.