While many growth stocks have rebounded this year, investors continue to look for attractive dividend options that can offer steady income and the potential for long-term capital appreciation.
Top Wall Street experts on TipRanks, a platform that ranks analysts based on past performance, have five dividend stocks worth considering.
A technology giant IBM (IBM) recently reported mixed results for the second quarter. While revenue fell short of expectations, the company’s profit beat estimates due to an improvement in gross margin.
IBM is transforming its business and focusing on growth areas such as hybrid cloud computing and artificial intelligence. It generated more than $3.4 billion in free cash flow in the first six months of 2023 and paid out $3 billion in dividends. IBM expects to generate free cash flow of $10.5 billion for the full year.
Earlier this year, IBM raised its quarterly dividend by a modest 0.6% to $1.66, marking its 28th year.c consecutive year dividend growth. IBM’s dividend yield is about 4.6%.
Following the results, Stifel analyst David Grossman raised his price target on IBM shares to $144 from $140 and reiterated his buy rating. The analyst raised his estimates for 2023 and 2024 slightly, based on organic and inorganic growth in the company’s software business.
“IBM has been a source of funds YTD and remains the best fit for the dividend-sensitive investor looking for a defensive market hedge,” Grossman said.
Grossman is ranked #389 out of more than 8,500 analysts tracked by TipRanks. His ratings were profitable 64% of the time, with an average return of 14.4% each. (See IBM Blogger Opinions & Sentiment on TipRanks)
The next one Chord Energy (CHRD), an oil and gas operator with assets in the Williston Basin. The company rewards shareholders through a quarterly principal dividend, a variable dividend and share buybacks.
For the first quarter, Chord declared a total cash dividend of $3.22 per share, including a variable dividend of $1.97 per share.
RBC Capital analyst Scott Hanold sees the company exceeding the minimum shareholder payout by 75% if excess cash is raised and no other asset acquisition opportunities arise. Hanold expects Chord to declare a variable dividend of $0.15 per share for the second quarter, along with a basic dividend of $1.25 per share and share repurchases of $25 million to $30 million.
Ahead of the upcoming results, Hanold lowered its Q2 2023 earnings per share and cash flow per share estimates due to lower benchmark commodity prices, wider price spreads and lower production. He also lowered his price target for CHRD to $180 from $185 to reflect the new commodity price outlook.
Nevertheless, Hanold is bullish on CHRD and reiterates a buy rating on the stock, saying, “The company’s balance sheet is strong and leverage is de-minimis, allowing a significant portion of FCF to be allocated to shareholder returns.”
Ranked #43 out of over 8,500 people on Tipranks, Hanold has a 63% success rate and an average return of 21.4% per rating. (See Chord Energy Hedge Fund Trading Performance on TipRanks)
Energy Transfer LP
Elvira Scotto, another RBC Capital analyst, is bullish on dividend stocks Energy Transfer (ET), is a publicly traded limited partnership that operates an extensive pipeline network spanning 41 US states.
On July 25, Energy Transfer announced a quarterly cash distribution of $0.31 per common unit for the second quarter, an increase of 0.8% compared to the first quarter of 2023. This makes the dividend yield above 9%. The company is targeting 3% to 5% growth in its annual distribution.
Focusing on second-quarter results, Scotto expects the performance of mid-cap companies to be affected by low commodity prices. Nevertheless, the analyst reiterated a buy rating on Energy Transfer shares with a price target of $17.
“We believe ET has one of the most attractive integrated asset bases in our midstream coverage and view ET as an attractive investment opportunity trading at a substantial discount to its peers in EV/EBITDA and FCF (free cash flow) yield. ~ 14%,” said Scotto.
The analyst believes that ET is well-positioned to generate significant growth in cash flow, which coupled with a strong balance sheet could lead to higher cash returns through increased distributions to unitholders.
Scotto is ranked #53 out of over 8,500 analysts on TipRanks. Additionally, 65% of its ratings have been profitable, with an average return of 19.6%. (See Energy Transfer Stock Chart on TipRanks)
Another energy name this week EOG Resources (EOG), crude oil and natural gas exploration and production company. Last year, the company returned $5.1 billion in regular and special dividends, or 67% of its free cash flow.
For the first quarter of 2023, EOG declared a regular quarterly dividend of $0.825 per share, payable on July 31. In addition, the company repurchased shares worth $310 million in the first quarter. EOG offers a forward dividend yield of about 2.6%.
Mizuho analyst Nitin Kumar recently revised his estimates for EOG ahead of the upcoming results to reflect actual prices and improved productivity of the Delaware well, based on data from his firm’s proprietary database. Kumar’s Q2 2023 volume estimates are biased towards the higher end of the forecast range.
The analyst expects EOG to generate free cash flow of $753 million in the second quarter, despite expecting a 10% decline in total prices compared to the first quarter.
“Compared to a core dividend load of ~484mm and cash of over $5bn as of March 31, the company should have excess cash to opportunistically pursue buybacks,” said Kumar, who reiterated a buy rating on EOG with a price target . 146 dollars.
Kumar is ranked #111 out of over 8,500 analysts on TipRanks. Its ratings were profitable 69% of the time, and the average return was 22.5%. (See EOG Insider Trading Activity on TipRanks)
Finally, we’ll look at dividend stocks in the financial sector: Morgan Stanley (Mrs.). The global financial services giant recently reported market-beating second-quarter results as strength in its wealth management division offset lower trading revenues.
Last month, Morgan Stanley announced it would raise its quarterly dividend per share from $0.775 to $0.85, starting with a dividend to be announced in the third quarter of 2023. With this increase, Morgan Stanley’s forward dividend yield is about 3.6%. The bank’s board also reapproved a $20 billion multi-year share buyback program beginning in the third quarter of 2023.
The bank’s positive second-quarter results prompted BMO Capital analyst James Fotheringham to raise his forward estimate by 1% to 2% and raise his price target for MS shares to $103 from $100. The analyst reiterated a buy rating on the stock, noting that the wealth management division remains a “bright spot.”
“After two lackluster quarters for capital markets, MS noted the emergence of ‘green shoots’ across its businesses, supporting a near-term improvement in deal activity,” Fotheringham said.
Fotheringham is ranked #215 out of over 8,500 analysts on TipRanks. Additionally, 65% of its ratings have been profitable, with an average return of 12.4%. (See Morgan Stanley Financial Reports on TipRanks)