Top Wall Street analysts select these dividend stocks to enhance returns

When markets get choppy, dividends offer investors’ portfolios some cushioning in the form of income.

Dividends provide a great opportunity to enhance investors’ total returns over a long-term horizon. Investors shouldn’t base their stock purchases on dividend yields alone, however: They ought to assess the strength of a company’s fundamentals and analyze the consistency of those payments first. Analysts have insight into those details.

To that effect, 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.

Let us first look at telecommunication giant Verizon (VZ). The stock offers a dividend yield of 8%. Last week, the company declared a quarterly dividend of 66.50 cents per outstanding share, an increase of 1.25 cents from the previous quarter. This marked the 17th consecutive year the company’s board approved a quarterly dividend increase.

Recently, Citi analyst Michael Rollins upgraded Verizon and its rival AT&T (T) to buy from hold. The analyst increased his price target for Verizon stock by $1 to $40, while maintaining AT&T’s price target at $17.

Rollins noted that several headwinds like competition, industry structure, higher rates and concerns about lead-covered cables have affected investor sentiment on telecom companies. That said, he has a more constructive outlook for large cap telecom stocks.

“The wireless competitive environment is showing positive signs of stabilization that should help operating performance,” said Rollins, who ranks No. 298 out of more than 8,500 analysts on TipRanks.

The analyst contended that the recently announced price hikes by Verizon and AT&T indicate a stabilizing competitive backdrop for wireless. He further noted that customers continue to hold onto their phones for longer, which is reducing device upgrade costs and stabilizing churn.

Overall, the analyst sees the possibility of some of the ongoing market concerns fading over the next 12 months. Also, he expects the prospects for improved free cash flow to lower net debt leverage and support the dividend payments. 

Rollins has a success rate of 65% and each of his ratings has returned 13.3%, on average. (See Verizon Hedge Fund Trading Activity on TipRanks)

Medical device company Medtronic (MDT) recently announced a quarterly dividend of $0.69 per share for the second quarter of fiscal 2024, payable on Oct. 13. MDT has increased its annual dividend for 46 consecutive years and has a dividend yield of 3.5%. 

Reacting to MDT’s upbeat fiscal first-quarter results and improved earnings outlook, Stifel analyst Rick Wise explained that continued recovery in elective procedure volumes, supply chain improvements and product launches helped drive revenue outperformance across multiple business units.

The analyst thinks that Medtronic’s guidance indicates that it is now well positioned to more consistently deliver better-than-expected growth and margins. He also expressed optimism about the company’s transformation initiatives under the leadership of CEO Geoff Martha.

“We view Medtronic as a core healthcare holding and total return vehicle in any market environment for investors looking for safety and stability,” said Wise, while raising his price target to $95 from $92 and reaffirming a buy rating.

Wise holds the 729th position among more than 8,500 analysts on TipRanks. Moreover, 58% of his ratings have been profitable, with each generating a return of 6.3%, on average. (See Medtronic Insider Trading Activity on TipRanks)   

Another Stifel analyst, Drew Crum, is bullish on toymaker Hasbro (HAS). He increased the price target for Hasbro to $94 from $79 while maintaining a buy rating, and moved the stock to the Stifel Select List.

Crum acknowledged that HAS stock has been a relative laggard over the past several years due to many fundamental issues that resulted in unhappy investors.

Nevertheless, the analyst is optimistic about the stock and expects higher earnings power and cash flow generation, driven by multiple catalysts like portfolio adjustments, further cost discipline, greater focus on gaming and licensing, as well as a new senior leadership team.

Crum noted that Hasbro grew its dividend for 10 consecutive years (2010-2020) at a compound annual growth rate of over 13%, with the annual payout representing more than 50% of free cash flow, on average. However, any upward adjustments were limited following the Entertainment One acquisition, with only one increase during 2021 to 2023.

The analyst thinks that given the current dividend yield of around 4%, Hasbro’s board might be less inclined to approve an aggressive raise from here. That said, with expectations of higher cash flow generation, Crum said that “the company should have more flexibility around growing its dividend going forward.”

Crum ranks 322nd among more than 8,500 analysts tracked by TipRanks. His ratings have been profitable 59% of the time, with each rating delivering an average return of 12.9%. (See Hasbro Stock Chart on TipRanks)

Next up is Dell (DELL), a maker of IT hardware and infrastructure technology, which rallied after its fiscal second-quarter results far exceeded Wall Street’s estimates. The company returned $525 million to shareholders through share repurchases and dividends in that quarter. DELL offers a dividend yield of 2.1%.

Evercore analyst Amit Daryanani maintained a buy rating following the results and raised his price target for DELL stock to $70 from $60. Daryanani ranks No. 249 among more than 8,500 analysts tracked by TipRanks.

The analyst highlighted that Dell delivered impressive upside to July quarter revenue and earnings per share (EPS), driven by broad-based strength across both infrastructure and client segments. Specifically, the notable upside in the infrastructure segment was fueled by GPU-enabled servers.

The analyst also noted that Dell generated $3.2 billion of free cash flow in the quarter and is currently running at over $8 billion free cash flow on a trailing twelve-month basis. This implies that the company has “plenty of dry powder” to significantly enhance its capital allocation program, he added.

“We think the catalysts at DELL are starting to add up in a notable manner ranging from – cap allocation update during their upcoming analyst day, AI centric revenue acceleration and potential S&P 500 inclusion,” said Daryanani.

In all, 60% of his ratings have been profitable, with each generating an average return of 11.5%. (See Dell’s Financial Statements on TipRanks)

We finally come to big-box retailer Walmart (WMT), which is a dividend aristocrat. Earlier this year, the company raised its annual dividend for fiscal 2024 by about 2% to $2.28 per share. This marked the 50^th consecutive year of dividend increases for the company. WMT’s dividend yield stands at 1.4%.

Following WMT’s upbeat fiscal second-quarter results and upgraded full-year outlook, Baird analyst Peter Benedict highlighted that traffic gains in stores and online channels reflect that consumers are choosing Walmart for a blend of value and convenience.

Benedict also noted that the company’s efforts to drive improved productivity and profitability are gaining traction.

The analyst reiterated a buy rating on WMT and raised the price target to $180 from $165, saying that the new price target “assumes ~23x FY25E EPS, slightly above the stock’s five-year average of ~22x given the company’s defensive sales mix, market share gains, and an improved long-term profit/ROI profile as alternative revenue streams scale.” 

Benedict ranks 94th among more than 8,500 analysts tracked by TipRanks. His ratings have been profitable 68% of the time, with each rating delivering an average return of 13.7%. (See Walmart’s Technical Analysis on TipRanks)