Leading Wall Street Analysts Recommend These Dividend Stocks for Better Returns

As traders deal with earnings season and upcoming elections, the U.S. stock market has been experiencing volatility. However, dividend-paying stocks may offer investors a smoother ride in their portfolios.

 

For those looking for dependable dividend stocks, top-rated Wall Street analysts, who thoroughly examine a company's financial strength and potential returns, can be a valuable resource.

 

Here are three promising dividend stocks, based on recommendations from top Wall Street analysts on TipRanks, a platform that evaluates analysts based on their historical performance.

 

First, we will examine Western Midstream Partners (WES), a limited partnership that owns and operates midstream assets across Texas, New Mexico, Colorado, Utah, and Wyoming.

 

Notably, for Q1 2024, WES increased its base distribution by 52% from the previous quarter, reaching $0.8750 per unit. WES offers a robust dividend yield of 8.8%.

 

Recently, Mizuho analyst Gabriel Moreen raised his price target for WES to $45 from $39 and reaffirmed a buy rating. He noted that the stock is the second-best performer in his coverage this year, with shares up 36% in 2024.

 

Moreen sees potential for further modest distribution increases by WES, which could serve as a catalyst for investors attracted to this high-yield stock. "Yield is even more of a differentiator given WES' MLP structure that optimizes the tax benefits of a higher yield," he said.

 

He also praised the company's solid Q1 results and revised outlook, highlighting its ability to support higher distributions due to an investment-grade balance sheet, modest capital expenditure needs, and favorable contracts providing significant visibility into ongoing cash payouts.

 

Moreen ranks No. 90 among over 8,900 analysts tracked by TipRanks, with his ratings being profitable 81% of the time, delivering an average return of 12.8%. 

 

Next, we consider Diamondback Energy (FANG), focusing on the acquisition, development, and exploration of onshore oil and natural gas reserves in the Permian Basin of West Texas. FANG recently proposed acquiring Endeavor Energy, strengthening its position in the Permian Basin.

 

For the first quarter, FANG paid a base cash dividend of 90 cents per share and a variable cash dividend of $1.07 per share. Additionally, it repurchased 279,266 shares for $42 million.

 

Prior to the company's second-quarter results, RBC Capital analyst Scott Hanold reaffirmed a buy rating on FANG stock with a price target of $220.

 

Hanold anticipates that FANG's Q2 production benefitted from faster cycle times and expects 90 well completions, up from his previous forecast of 80 wells. However, he lowered his Q2 2024 EPS and cash flow per share estimates to reflect final commodity price realizations and other adjustments.

 

Hanold expects Q2 2024 shareholder returns to include a fixed dividend of 90 cents per share and a variable dividend of $1.25 per share, with no stock buybacks. He added, "We believe FANG shares should outperform its peer group over the next 12 months."

 

Scott Hanold ranks No. 11 among over 8,900 analysts tracked by TipRanks, with his ratings being profitable 70% of the time, delivering an average return of 27.6%. 

 

The third pick this week is beverage giant Coca-Cola (KO), which recently reported better-than-expected second-quarter results, reflecting strong demand for its products. The company also raised its full-year organic revenue growth and comparable earnings outlook.

 

Earlier this year, KO increased its quarterly dividend by around 5.4% to 48.5 cents per share, marking the 62nd consecutive year of dividend hikes. KO offers a dividend yield of approximately 2.9%.

 

In response to the positive Q2 results, RBC Capital analyst Nik Modi reiterated a buy rating on Coca-Cola stock and raised the price target to $68 from $65.

 

Modi highlighted the company's better-than-expected global case volumes, including double-digit growth in markets like the Philippines and India. He also noted improvements in KO's gross margin and earnings strength.

 

Despite challenges in the low-income consumer segment in developed markets and a slowdown in the away-from-home channel, Modi remains confident in the company's prospects. "We still believe KO's fundamentals are strong, and the company has the momentum and flexibility to deliver against its targets for the year," said Modi.