September has been a rocky start for investors, with markets rocked by volatility in the first week, but dividend-paying stocks can help smooth out the ride.
Investors with a long-term investment horizon can ignore short-term fluctuations and focus on stocks that have the potential to increase the total return of their portfolio through a combination of dividends and price appreciation.
To this end, recommendations from leading Wall Street analysts can help investors select stocks with strong fundamentals and the ability to pay regular dividends.
Here are three dividend stocks highlighted by Wall Street's top pros on TipRanks, a platform that ranks analysts based on their past performance.
MPLX LP
We start this week with MPLX (MPLX), a midstream energy company. The company's quarterly cash distribution was 85 cents per common share ($3.40 annualized) for the second quarter of 2024. MPLX offers an attractive yield of nearly 8%.
Recently, RBC Capital analyst Elvira Scotto reiterated her buy rating on MPLX shares with a price target of $47. The analyst updated her model to reflect the company's solid second-quarter results, with adjusted earnings before interest, taxes, depreciation and amortization beating Wall Street's estimate by 3%.
Scotto raised her adjusted EBITDA estimates for 2024 and 2025 to reflect the strong performance of the logistics and warehousing segment in the second quarter and some consolidation of joint venture holdings. The analyst maintained her per-unit payout estimate of $3.57 for 2024 and $3.84 for 2025.
Scotto continues to view MPLX as “one of the most attractive income opportunities among large-cap MLPs [master limited partnership],” thanks to its robust yield and increasing free cash flow generation. The analyst believes MPLX's solid free cash flow will help the company continue to grow its business and increase shareholder returns through buybacks.
The analyst also emphasized that MPLX is expanding its natural gas and LPG assets in its integrated network through its own projects, joint venture investments and bolt-on acquisitions.
Scotto ranks 18th among more than 9,000 analysts tracked by TipRanks. Their ratings have been profitable 69% of the time, generating an average return of 20.8%. (See MPLX Options Trading on TipRanks)
Chord Energy
We switch to another dividend-paying energy stock, Chord Energy (CHRD). It is an independent oil and gas company operating in the Williston Basin. The company recently paid a base dividend of $1.25 per common share and a variable dividend of $1.27 per share.
On September 4, RBC Capital analyst Scott Hanold reiterated a buy rating on CHRD stock with a price target of $200. The analyst raised his earnings per share and cash flow per share estimates for 2024 and 2025 by nearly 3% to account for slightly higher production and lower cash operating costs.
Hanold expects free cash flow of $1.2 billion and $1.4 billion in 2024 and 2025, respectively. The analyst expects FCF to increase in the second half of 2024 due to the combination of the assets of Chord Energy and Enerplus, which the company acquired earlier this year.
Regarding the integration of Enerplus, the analyst said: “We remain optimistic that the company is well positioned to not only achieve, but potentially exceed, its synergy targets with the full integration of the operations.”
In addition, the analyst expects a quarterly payout of $4.50 to $5.00 per share in the second half of 2024, with dividends accounting for about 60% of distributions and buybacks accounting for 40%.
Hanold ranks 27th among more than 9,000 analysts tracked by TipRanks. His ratings have been successful 63% of the time, generating an average return of 25.4%. (See Chord Energy share buybacks on TipRanks)
McDonald's
The third choice this week is the fast food chain McDonald's (MCD). MCD stock offers a dividend yield of 2.3%. McDonald's is a Dividend Aristocrat, having increased its dividends for 47 consecutive years.
On September 3, Tigress Financial analyst Ivan Feinseth reiterated his buy rating on MCD stock and raised his price target from $355 to $360. Despite a challenging environment, the analyst remains optimistic due to McDonald's ongoing technology initiatives, innovation and value focus. These factors support the company's robust business model and long-term growth potential.
Feinseth noted that the company is focused on improving its value-added offerings to regain its competitive advantage. The analyst highlighted several value-added offerings recently introduced by McDonald's, including the $5 meal deal, which has helped improve the company's image as a fast-food chain with inexpensive and affordable offerings.
In addition, Feinseth pointed out MCD's competitive advantage, backed by its solid brand equity, loyalty program and digital initiatives. The company has a loyalty program membership base of 166 million members and aims to have 250 million active loyalty program members by 2027.
The analyst also noted that McDonald's invests between $2 billion and $2.5 billion annually to expand its store footprint and improve its technology, including by improving its ordering capabilities through automated artificial language intelligence. Overall, Feinseth is confident about MCD's long-term growth potential and its ability to increase shareholder returns through dividends and share buybacks. In fact, he expects MCD to announce a dividend increase in October, similar to the 10% increase announced last year.
Feinseth is ranked 210th among more than 9,000 analysts tracked by TipRanks. His ratings have been profitable 60% of the time, generating an average return of 11.9%. (See McDonald's insider trading activity on TipRanks)