Macroeconomic woes and geopolitical tensions have been suppressing investor sentiment, shaking up major stock indexes over the past week. Dividend-paying stocks may provide shelter to investors seeking stability. Wall Street analysts also gave advice on this. These analysts will conduct a thorough analysis of the financial situation of dividend companies and evaluate their ability to increase dividends over the long term. According to top Wall Street experts on TipRanks, this article has selected three attractive dividend payout stocks.
Enterprise Products Partners (EPD.US)
The first dividend stock is midstream energy service provider Enterprise Products Partners (EPD). The limited partnership has increased cash allocations at a CAGR of 7% for 25 consecutive years. On April 5, EPD announced a quarterly cash allocation of US$0.515 per share, paid on May 14, an increase of 5.1% over the previous year. EPD shares have an attractive dividend yield of 7.1%.
Following the company's investor update call earlier this month, Royal Bank of Canada capital analyst Elvira Scotto reaffirmed a “buy” rating for EPD shares with a target price of $35. The analyst said the call supports her view that the company is well-positioned to benefit from its organic growth projects, which are expected to go live by 2026.
Scotto added that the company's organic projects, such as Delaware's Mentone West 2 gas processing plant, are mainly concentrated in the Permian basin, where production is expected to continue to grow for at least the next 10 years. Due to its strong operating base and balance sheet, the analyst is confident in EPD's ability to support its growth investments. Additionally, she expects the company's distribution business to achieve medium single-digit growth.
“EPD is still willing to return 55-60% of the adjusted CFO (operating cash flow) to investors through dividends and repurchases,” said Scotto.
Goldman Sachs (GS.US)
Driven by increased revenue from trading and investment banking businesses, Goldman Sachs, one of the leading investment banks in the US, recently reported better-than-expected first-quarter results. The rebound in capital market activity helped the company achieve solid results. In the first quarter, Goldman Sachs returned $2.43 billion in capital to shareholders through a $1.5 billion share repurchase and $929 million dividend. The bank declared a dividend of $2.75 per share, which was paid on June 27, and the shares had a dividend yield of 2.7%
Due to Goldman Sachs's impressive first-quarter results, Argus analyst Stephen Biggar raised Goldman Sachs's rating from “hold” to “buy,” with a target price of 465 US dollars, saying the results “showed Goldman Sachs's strong strength during a period of improvement in the investment banking industry.”
Despite some false rebound in the investment banking sector in 2023, the analyst believes the current recovery seems capable of continuing. His optimism was supported by encouraging continuous improvements in the stock and bond underwriting business. He was further encouraged by the fact that the value of mergers and acquisitions announced by the entire industry in the first quarter increased tenfold year over year.
Biggar expects these factors to drive revenue improvements in the second half of 2024. He highlighted data from the Securities Industry and Financial Markets Association, which showed a three-digit year-over-year increase in capital mergers and acquisitions in the first quarter of 2024. It is worth noting that the scale of IPO issuance increased by 239% in the first quarter, and the scale of secondary issuance increased by 110%.
Cisco (CSCO.US)
Finally, another dividend stock recommended by analysts is networking equipment manufacturer Cisco Systems. In the second quarter of fiscal year 2024, the company returned $2.8 billion to shareholders through share repurchases and a dividend of 39 cents per share. Cisco announced that it will increase its dividend by about 3% to 40 cents per share starting in April 2024, and the stock's dividend yield is 3.3%.
On April 15, Bank of America securities analyst Tal Liani upgraded Cisco's rating from “hold” to “buy” and raised the target share price from $55 to $60, citing the synergy between valuation and the three major catalysts: favorable factors related to artificial intelligence, the growth of security businesses, and the recently completed Splunk acquisition.
“We expect the network business to begin to normalize and see new growth driven by Cisco's growing share in the construction of Ethernet-based hyperscale artificial intelligence,” Liani said.
Although the analyst also believes that pressure may continue to be faced in the next two quarters, he believes that this downward trend is fully reflected in Wall Street expectations, and he believes that management's guidance is quite conservative. Meanwhile, Liani expects the company's security business to grow at an accelerated pace, driven by stability in the firewall security sector and recently launched products.