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Best dividend stocks to buy as rate cuts make their yields more attractive
There’s a few high-dividend stocks with strong upside potential that investors can tap into as the widely anticipated rate-cutting cycle begins. The Federal Reserve is set to cut interest rates Wednesday for the first time in four years, which should make the yields for dividend stocks even more attractive, lifting the group. Investors can also look at these stocks — which include several names like Exxon Mobil and ConocoPhillips — as a reliable hedge against any economic slowdown in case central bankers end up being behind the curve on rate cuts. Using the CNBC Pro Stock Screener tool, we searched for stocks with a dividend yield above 3% and a low debt-to-equity ratio under 60%. So they have big payouts and are low debt loads, meaning they should be able to keep paying that dividend. The names below are also favorites among analysts, who, on average, forecast an upside of 10% or more for each of the names. Click here to view the results on CNBC Pro’s Stock Screener tool and to make your own screener. Energy giant Exxon Mobil is a highly favored stock that made the cut with a low debt-to-equity ratio of the group, at 16%. Exxon has a dividend yield of 3.37%, and analysts’ have a consensus price target that implies shares could gain more than 17% over the next year. This year, the stock is up 14%, faring well ahead of some of its energy peers. Morgan Stanley analyst Devin McDermott is one of the analysts that remains highly bullish on major energy names, particularly Exxon and Chevron , which also made the CNBC Pro screener with a debt-to-equity ratio of 14% and roughly 4.6% dividend yield. McDermott maintained his overweight rating and forecasted a 28% potential upside for Exxon in a Monday note. “The majors (XOM & CVX) offer more resiliency to lower commodity prices with strong balance sheets and integrated, global operations,” McDermott said, noting that the energy sector has also lagged the broader market by nearly 10% during the third quarter due to a weakening crude supply-demand outlook and worries over a possible economic slowdown. Devon Energy , meanwhile, has a 5.05% dividend yield — the highest of the list — with potential to gain more than 40%, according to analysts’ average price target. The oil and gas producer has lost roughly 11% year to date, however. Even with its strong capital return program, the company has struggled with “missteps around activity timing, asset integration and performance,” Evercore ISI said in a Monday note about the stock. Coterra Energy and ConocoPhillips are other energy names with strong dividends and attractive returns, according to the CNBC Pro screener. The stocks have a 3.33% and 3.66% dividend yield, respectively. Information tech company Hewlett Packard Enterprise is another favorite name that should provide steady returns via dividends . The company has a roughly 3% dividend yield, and analysts covering the stock think it can gain more than 20% over the next 12 months. Shares are up about 6.2% this year, and the computing stock rallied about 5.1% alone on Tuesday after Bank of America Wamsi Mohan upgraded the stock to buy from neutral, citing a compelling valuation for the stock at current trading levels. Mohan lifted his price target by $3 to $24, which implies roughly 39.3% potential upside. Other strong dividend stocks from the screen include Truist Financial and phosphate and potash mining company Mosaic .
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