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Top Wall Street Analysts Expect These Dividend Stocks to Improve Total Returns

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A Home Depot location in Encinitas, California.

Mike Blake | Reuters

With the recovery underway in late 2023, investors can strengthen their portfolios by adding a select group of dividend payers to their portfolio.

Dividend-paying stocks offer investors a combination of potential price appreciation and income, which can enhance overall returns.

With that in mind, here are five attractive dividend stocks, according to top Wall Street experts on TipRanks, a platform that ranks analysts based on their past performance.

Energy transfer

First on this week’s list is Energy transfer (AND), a limited partnership that operates a diversified portfolio of energy assets in the United States, with nearly 125,000 miles of pipeline. ET recently completed its acquisition of Crestwood Equity Partners.

In October, ET declared a quarterly cash distribution of $0.3125 per common unit for the third quarter, which was paid on November 20. The stock has a dividend yield of 9%.

Commenting on the third quarter results, RBC Capital analyst Elvira Scotto said Energy Transfer delivered a strong performance, with adjusted earnings before interest, taxes, depreciation and amortization beating the consensus estimate by 7%. . The analyst also noted a $300 million increase in the mid-point adjusted EBITDA outlook for 2023.

Scotto expects the Crestwood acquisition to provide business synergies. Additionally, she highlighted that ET intends to maintain a strong balance sheet, targeting leverage of 4.0-4.5x debt/EBITDA. Additionally, ET aims to continue returning cash to unitholders through increased distribution and potential redemptions.

“With high-yield growth projects, accretive acquisitions and its integrated hydrocarbon and basin asset footprint, we believe ET can generate significant cash flow in the years to come,” Scotto said.

Scotto raised his price target on Energy Transfer from $18 to $19 and reiterated a buy rating, calling the stock an attractive investment opportunity. She ranks 54th among more than 8,700 analysts tracked by TipRanks. Its ratings have been profitable 65% of the time, each providing an average return of 18.1%. (See insider trading activity on energy transfer on TipRanks)

Sunoco LP

Scotto is also bullish on another limited partnership: Sunoco (SUN), one of the leading distributors of automotive fuels in the United States

For the third quarter, Sunoco announced a quarterly cash distribution of $0.8420 per unit, paid on November 20. The company’s dividend yield stands at 6.3%.

After Sunoco reported its quarterly results, Scotto raised SUN’s stock price target from $51 to $57 to reflect a higher earnings outlook. The analyst reiterated his buy rating, saying the company’s volumes and margins exceeded his estimates.

The analyst believes that the company’s size, supply capacity and lower-than-industry cost structure allow it to exceed the industry’s profitability margin.

“SUN continues to maintain a strong balance sheet at the end of 3Q23 with leverage of 3.9x and total liquidity of $1.1 billion, which gives SUN significant financial flexibility to pursue growth opportunities, including acquisitions.

Overall, Scotto remains bullish on Sunoco due to its strong cash flow and focus on breakeven margins and expense management. (See Sunoco hedge fund trading activity on TipRanks)

VICI Properties

Our next dividend stock is VICI Properties (VICI), a real estate investment company. VICI has a strong portfolio of gaming, hospitality and entertainment properties, including the iconic Caesars Palace Las Vegas and MGM Grand properties.

For the third quarter, the company declared a cash dividend of $0.415 per share, reflecting an increase of 6.4%. VICI offers a dividend yield of 5.4%.

In a recent research note, Stifel analyst Simon Yarmak, ranked 573rd out of more than 8,700 analysts tracked by TipRanks, reiterated his Buy rating on VICI stock and called it one of his best ideas in the North American triple net REIT sector.

Yarmak noted that VICI performed well in both gaming and non-gaming categories. He added that VICI tenants remain in a position of strength.

“VICI has negotiated favorable indexations in its leases, which ensure strong internal growth. Many of these escalations are linked to uncapped CPI growth (50.0% of rent) and, therefore, VICI should benefit from significant rent escalations in an above-average inflationary environment. “, Yarmak noted.

The analyst estimates that rent increases would generate approximately $71 million in additional rent in 2024, which was not reflected in the 2023 results. He expects VICI to post one of the best year-over-year growth in 2024 in the triple net sector, with nearly 4.5% to 5.0% of adjusted funds coming from operations growth.

Yarmak’s ratings were successful 54% of the time, each providing an average return of 8%. (See VICI’s options activity on TipRanks)

Home deposit

We visit a home improvement retailer Home deposit (HD). The company beat analysts’ fiscal third-quarter estimates despite falling sales due to pressure in some expensive discretionary categories. However, the company reduced its full-year outlook due to macroeconomic pressures.

For the third quarter, the company declared a cash dividend of $2.09 per share, payable on December 14. HD’s dividend yield stands at 2.6%.

Following fiscal third-quarter results, JPMorgan analyst Christopher Horvers lowered HD’s stock price target from $332 to $318, but maintained a buy rating, saying Home Depot is copes well in a difficult context.

The analyst believes that management’s tone was less optimistic than in the second quarter but no worse than in the first quarter. While the home improvement category is expected to remain under pressure in the first half of 2024, comparable sales are expected to recover in the second half.

“We believe HD remains one of the best long-term stories in retail, given company-specific sales and margin initiatives, the duopoly/resilient nature of the industry. AMZN and the significant financial and operating leverage that amplifies EPS growth in better sales environments,” says Horvers.

Horvers ranks 520th among more than 8,700 analysts on TipRanks. Its ratings have been profitable 61% of the time, each providing an average return of 8%. (See Home Depot technical analysis on TipRanks)

Walmart

We finally look at the big box retailer Walmart (WMT). Earlier this year, the company announced a 2% increase in its annual dividend per share, to $2.28. This was the 50th consecutive year of dividend increases for the company, giving Walmart the title of dividend king. The stock offers a dividend yield of 1.5%.

Recently, the retailer beat analysts’ expectations for third-quarter earnings and sales. However, he warns investors against weak consumer spending.

Following the release, Guggenheim analyst Robert Drbul reaffirmed a Buy rating on the stock with a price target of $180. The analyst noted that Walmart saw solid traffic growth in both physical stores and digital channels. It raised its full-year sales estimates to reflect upbeat third-quarter performance, but maintained its adjusted earnings per share estimates for fiscal 2024 and 2025 due to additional spending pressures.

“We continue to believe Walmart is well positioned in an uncertain macroeconomic environment with its pricing and value proposition as well as increased convenience and assortment,” Drbul said.

The analyst added that given the stock’s 1.5% dividend yield and the fact that it trades at 22.3 times its FY2025 EPS estimate of $7, the WMT stock offers something to investors in terms of income, value and growth.

Drbul ranks 652nd among more than 8,700 analysts on TipRanks. Its ratings were successful 59% of the time, each delivering an average return of 5.9%. (See Walmart’s financial statements on TipRanks).

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