The Cisco logo is seen at the Mobile World Congress in Barcelona, Spain on February 26, 2024.
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Investors seeking stable income and diversification may appreciate adding dividend stocks to their portfolio.
Finding the right names requires some extra effort, and investors should consider the names highlighted by Wall Street analysts. These professionals make recommendations after thoroughly analyzing a company's financial strength and its ability to pay consistent dividends.
Here are three dividend stocks highlighted by Wall Street's top pros on TipRanks, a platform that ranks analysts based on past performance.
Energy transfer
This week's first dividend stock pick is Energy transfer (AND), a midstream energy company with over 130,000 miles of pipeline and related infrastructure in 44 states. ET is structured as a limited partnership and offers a dividend yield of 7.8%.
Energy Transfer is expected to report its quarterly results on November 6th. Ahead of third-quarter results, RBC Capital analyst Elvira Scotto adjusted her estimates for U.S. midstream companies. The analyst slightly increased the price target for ET shares from $19 to $20 and reiterated the buy rating.
Scotto is bullish on ET due to its exposure to the Permian Basin. Additionally, the analyst views the company as one of the potential beneficiaries of data centers/AI and believes that this positive impact is not reflected in the share price.
The analyst raised estimates for ET to reflect the impact of the acquisition of WTG Midstream Holdings, which was completed in July 2024. The revised estimates also reflect the positive impact of Sunoco's acquisition of NuStar Energy, as Energy Transfer owns approximately 21% of Sunoco's outstanding common units.
Overall, Scotto is optimistic about ET's extensive asset base and believes the company is “well positioned to generate meaningful cash flow growth, which, combined with its stronger balance sheet, should allow ET to return more cash to shareholders.” to give back, primarily through distribution increases.”
Scotto is ranked No. 25 among more than 9,100 analysts tracked by TipRanks. Their valuations were profitable 69% of the time and delivered an average return of 21.6%. See energy transfer ownership structure on TipRanks.
Diamondback energy
We are transitioning to an independent oil and natural gas company Diamondback energy (CATCH). The company is focused on reserves in the Permian Basin and strengthened its business with the acquisition of Endeavor Energy. For the second quarter, FANG paid a base cash dividend of 90 cents per share and a variable dividend of $1.44 per share.
Recently, JPMorgan analyst Arun Jayaram increased the price target on FANG stock from $182 to $205 and reiterated a Buy rating on the stock. He noted that the company is “hitting the ground running” toward integrating its Endeavor merger. He added that Diamondback appears to be moving quickly towards its synergy target of $550 million per year.
FANG is expected to report its third quarter results on November 4th. Jayaram believes that the possibility of Diamondback announcing a better-than-expected capital efficiency outlook for 2025 could serve as one of the catalysts for its stock. The analyst expects the company to provide improved guidance due to solid drilling productivity trends and notable efficiency improvements since the first quarter of the year.
The analyst believes FANG stock deserves a higher valuation due to superior capital efficiency compared to peers and improved inventory position since the closing of the Endeavor deal. He emphasized that Diamondback is well positioned at the lower end of the cost curve in the Midland Basin and remains focused on further improving its efficiency.
Overall, Jayaram believes Diamondback remains one of the best operators in the US shale sector and could deliver flat to low single-digit volume growth while returning 50% of free cash flow to shareholders on a quarterly basis.
Jayaram is ranked #893 among more than 9,100 analysts tracked by TipRanks. His reviews were successful 53% of the time and delivered an average return of 8.6%. See Diamondback Energy stock charts on TipRanks.
Cisco systems
This week's third dividend stock is a networking giant Cisco (CSCO). CSCO offers a dividend yield of 2.9%.
Ivan Feinseth, analyst at Tigress Financial, slightly raised the price target for CSCO shares from $76 to $78 and reiterated a buy rating for the stock. The analyst expects the company to benefit from the shift to intelligent, artificial intelligence-based networks and increasing cybersecurity integration as corporate spending on high-speed networks and network security increases.
Additionally, the analyst expects Cisco to benefit from shifting its focus from hardware to software and subscription-based services, primarily in cloud and security solutions. Feinseth expects this transition to result in higher margins and more consistent recurring revenue.
He expects the company's $28 billion acquisition of Splunk to support its AI and security software development, improve its go-to-market capabilities and customer service, and increase its subscriptions and recurring revenue.
Finally, Feinseth is confident in Cisco's ability to increase returns for shareholders, as the company is committed to returning 50% of its free cash flow to shareholders via dividends and share repurchases. The company has increased its dividend every year since it began paying dividends in 2011.
Feinseth ranks 185th among more than 9,100 analysts tracked by TipRanks. Its valuations were profitable 62% of the time and delivered an average return of 14%. See Cisco stock buybacks on TipRanks.