Michael Wirth, CEO of Chevron.
Adam Jeffery | CNBC
Dividend-paying stocks can help enhance portfolio returns, but investors will need to perform their due diligence as they sift through the names.
Investors should carefully assess these companies by paying attention to various factors, including the dividend growth rate and the ability to consistently generate sufficient cash flows to support payments.
Bearing that in mind, here are five attractive dividend stocks, according to Wall Street’s top experts on TipRanks, a platform that ranks analysts based on their past performance.
Public Service Enterprise Group
First on this week’s dividend list is Public Service Enterprise Group (PEG), one of the leading electric and gas companies in the U.S. Last month, PEG reaffirmed its full-year earnings guidance, as the company expects growth in regulated operations, the realization of higher average hedged prices and its cost control efforts to offset the impact of higher interest rates and lower pension income.
Earlier this year, PEG increased its quarterly dividend by 5.6% to 57 cents per share (annualized dividend of $2.28), marking the 19th annual increase for the company. PEG’s dividend yield is 3.8%.
RBC Capital analyst Shelby Tucker highlighted that PEG’s subsidiary Public Service Electric and Gas (PSE&G), which is a franchised public utility in New Jersey, enjoys solid cash flows from the nuclear assets in its power generation business.
While the company faces cost and pension expense headwinds this year, the analyst expects a 6% EPS compound annual growth rate through 2027 and 5.5% annual dividend growth.
“We believe the primary attraction to PEG is a strong pipeline of electric and gas investments in New Jersey with low equity dilution risk,” said Tucker.
Tucker reiterated a buy rating on PEG while slightly lowering the price target to $69 from $70. He is ranked No. TipRanks tracks more than 8,500 analysts. Tucker’s ratings are profitable 63% of time. Each rating has a return on average of 9%. (See PEG’s Insider Trading Activity on TipRanks)
Tucker is also bullish on Southern Company (SO), a gas and electric utility giant. Earlier this month, the analyst called SO a “quality utility operating in constructive regulatory environments.” He reiterated his buy rating and raised the price target from $78.0 to $80. The company anticipates that its Vogtle Unit 4 will be put into service in the late fourth quarter or first quarter 2023.1001010The analysts sees SO being able to command a premium over its peers by the end of the year and as we move towards 2024. Post-Vogtle, Tucker expects the company to accelerate its EPS growth and use the higher cash flows to boost dividends.
Note that in April, Southern announced a 2.9% increase in its quarterly dividend to $0.70. It is the 22nd year that SO has increased its dividend. SO has a 4% dividend yield. (See Southern Company Stock Chart on TipRanks)
Next up is dividend aristocrat
CVX). (See Southern Company Stock Chart on TipRanks)ChevronNext up is dividend aristocrat Chevron
). The oil and gas company increased its quarterly dividend in January by approximately 6%, to $1.51 a share. This will make 2023 the 36th consecutive year of a higher payment. CVX has a dividend yield of 3.6%. On Sept. 13, Goldman Sachs held roundtable discussions with Chevron senior management. Analyst Neil Mehta said that the firm remains bullish on CVX due to its peer-leading capital returns profile, inflecting upstream operations expected in 2025 supported by higher Tengiz/Permian volumes and relative valuation.
The analyst contends that near-term pressures like risks around the Tengiz project are largely reflected in CVX’s valuation. He emphasized management’s positive view of the upstream business and reaffirmed a nearly 3% CAGR for production forecast over the next five year. TipRanks has more than 8,500 analysts. The analyst expects a capital return yield of 9% in 2024/2025. This is higher than the U.S. major energy companies’ average capital return yield of 7%. Mehta reiterated his buy rating for Chevron, setting a $187.0 price target.1001010Mehta has been successful in 67% of cases, and each rating delivered an average return on investment of 13%. (See Chevron Hedge Fund Trading Activity on TipRanks)
Broadcom (AVGO) managed to beat the Street’s fiscal third-quarter estimates. However, investors seemed unsatisfied as the quarterly outlook was in line with the analysts’ expectations, unlike that of chip giant Nvidia (NVDA), which crushed estimates on artificial intelligence tailwinds.Broadcom generated $4.6 billion in free cash flow in the fiscal third quarter of 2023. It paid a cash dividend worth $1.9 billion in the quarter and repurchased 2.4 million shares.
Earlier, AVGO increased its quarterly dividend for fiscal 2023 by 12% to $4.60 per share (annualized $18.40). The company had increased its annual dividends for the 12th time in a row since they began in fiscal 2011. Dividend yield is 2.2%. The analyst noted that recent channel checks showed a surge of Broadcom’s ASIC custom business, with over 2 million units expected for the next year. This was 2.5 times more than his 2023 unit base expectations. He added that generative AI investments are accounting for nearly all the growth in Broadcom’s semiconductor business, with AI-related revenue now exceeding $1 billion.
Gerra holds the 514th position among more than 8,500 analysts tracked on TipRanks. The average return on each of his 54% profitable ratings was 8.7%. (See Broadcom’s Financial Statements on TipRanks)
We end this week’s list with biopharmaceutical company
BMY). The dividend yield for BMY is 3.9%. BMY’s dividend yield stands at 3.9%.Following the company’s Research and Development (R&D) Day held in New York on Sept. 14, Goldman Sachs analyst Chris Shibutani reaffirmed a buy rating on BMY stock with a price target of $81.At the event, management highlighted how new product launches and the acceleration of research and development productivity would drive future revenue growth, addressing concerns about the Inflation Reduction Act and loss of exclusivity of key drugs.Shibutani noted that management expressed continued confidence in the 2030 new product launch revenue goal of more than $25 billion (non-risk adjusted), based on currently visible late-stage and already commercializing opportunities.
Commenting on BMY’s capital allocation program, Shibutani said that management’s priority remains business development (BD). “Beyond BD, the company remains committed to growing its dividend and will continue to be opportunistic with share buybacks,” the analyst added.
Shibutani holds the 271th position among more than 8,500 analysts tracked on TipRanks. All in all, Shibutani’s ratings were profitable with an average return of 20,5%. (See BMY Options activity on TipRanks).