Top Wall Street analysts are bullish on these dividend stocks
The U.S. stock market has been under pressure recently due to fears of an economic slowdown, but dividend-paying names can help smooth the ride for investors.
Investors can consider the recommendations of top Wall Street analysts as they search for stocks that are backed by strong financials and the ability to pay dividends consistently.
Here are three attractive dividend stocks, according to Wall Street’s top pros on TipRanks, a platform that ranks analysts based on their past performance.
Pfizer
Health-care giant Pfizer (PFE) is this week’s first dividend stock. The company announced better-than-expected second-quarter results, driven by its cost-cutting initiatives and solid sales of non-Covid products. Pfizer raised its full-year guidance, reflecting strong demand for its non-Covid business, which is gaining from several acquired drugs and recently launched products.
In the first six months of 2024, Pfizer returned $4.8 billion to shareholders through dividends. The stock has a dividend yield of 5.9%.
In reaction to the upbeat Q2 results, Goldman Sachs analyst Chris Shibutani reiterated a buy rating on PFE stock and increased the price target to $34 from $31. The analyst said that while he anticipated that Pfizer will raise its outlook, the magnitude of the increase surpassed his expectations.
The analyst increased his revenue estimates to reflect the strength in PFE’s heart disease drug, Vyndaqel, and cancer treatment Padcev. He also raised his EPS estimates, thanks to improved top-line expectations and enhanced gross margin.
Shibutani said that while management didn’t provide any significant updates related to the company’s obesity programs, he does see the “scope for further beat and raise quarters during the balance of the year.” He also noted that the company’s capital allocation priorities, mainly dividends and debt reduction, remain intact.
Shibutani ranks No. 462 among more than 8,900 analysts tracked by TipRanks. His ratings have been profitable 46% of the time, delivering an average return of 13%. (See Pfizer Stock Charts on TipRanks)
Civitas Resources
We move to oil and natural gas producer Civitas Resources (CIVI). On Aug. 1, the company announced its second-quarter results and declared a quarterly dividend of $1.52 per share, payable on Sept. 26.
The amount included a base dividend of 50 cents per share and a variable dividend of $1.02 per share.
CIVI’s shareholder return policy involves the payment of at least 50% of its free cash flow (after the payment of its base dividend) as a variable component. Interestingly, the company has now revised its shareholder-return program to enhance the flexibility in the way it rewards shareholders with variable returns. Effective Q3 2024, CIVI’s variable component will include a combination of buybacks and dividends, with management and the board deciding the allocation. CIVI also announced a new share buyback plan of up to $500 million.
Following the Q2 results, Mizuho analyst William Janela reaffirmed a buy rating on CIVI stock with a price target of $98, calling the company a top pick. The analyst stated that Civitas delivered another quarter of solid execution across the Permian assets acquired in 2023.
Commenting on the revised shareholder-return program, Janela said that it gives the company “flexibility to lean more heavily into buybacks, which should resonate with investors and sets up positively into the meaningful FCF [free cash flow] expansion ahead in 2H24.”
The analyst highlighted that Civitas lowered its capital expenditure budget for the year by about 3%, fueled by reductions in well costs as the company integrates its Permian acquisitions. Additional well-cost savings in the DJ Basin also helped the company lower its 2024 capex estimate.
Janela ranks No. 406 among more than 8,900 analysts tracked by TipRanks. His ratings have been successful 52% of the time, delivering an average return of 25.6%. (See Civitas Resources Stock Buybacks on TipRanks)
IBM
Finally, there is tech giant IBM (IBM), which recently impressed investors with better-than-expected results for the second quarter. The company, which is seeing solid generative artificial intelligence business, now expects full-year free cash flow to be more than $12 billion compared to its previous forecast of about $12 billion.
IBM returned $1.5 billion to shareholders in dividends in the second quarter. The stock offers a dividend yield of 3.5%. IBM’s dividends are supported by strong cash flows. The company is confident about its growth potential, bolstered by the strength of its diversified business model and the hybrid cloud and AI strategy.
Following the print, Evercore analyst Amit Daryanani reiterated a buy rating on IBM stock with a price target of $215. He noted that the growth in the company’s software and infrastructure businesses was partially offset by the pressures in the consulting business due to weak discretionary spending by enterprise customers. The analyst added that the overall Q2 results were better than feared.
Commenting on shareholder returns, Daryanani noted the company did not make any share repurchases in the second quarter but remains “committed to a stable and growing dividend.” He expects IBM to allocate more capital to mergers and acquisitions compared to share repurchases.
Daryanani ranks No. 429 among more than 8,900 analysts tracked by TipRanks. His ratings have been profitable 54% of the time, delivering an average return of 10.4%. (See IBM Ownership Structure on TipRanks)
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