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Investors seeking a steady stream of income in these uncertain times can consider adding some attractive dividend stocks to their portfolios.
The selection of the right dividend stock involves a thorough analysis of the fundamentals of a company and its ability to sustain its dividend payments. Bearing that in mind, investors can follow the recommendations of Wall Street’s top analysts to pick dividend stocks that can boost their total returns.
Here are three lucrative dividend stocks, according to Wall Street’s top experts on TipRanks, a platform that ranks analysts based on their past performance.
Brookfield Infrastructure Partners
This week’s first dividend stock is Brookfield Infrastructure Partners (BIP), which operates a diversified portfolio of assets across the utilities, transport, midstream and data sectors.
Brookfield made a quarterly distribution of $0.3825 per unit on Dec. 29, 2023, which reflected a 6% year-over-year increase. On an annualized basis, BIP offers a dividend yield of 4.9%.
Earlier this month, BMO Capital analyst Devin Dodge reiterated a buy rating on BIP stock, calling it one of his top ideas for 2024. He raised the price target to $40 from $38 to reflect the impact of moderating long-term interest rates on his valuation methods. He finds BIP’s valuation compelling and predicts more than 6% growth in its annual distribution.
The analyst expects BIP to deliver an attractive rise in its funds from operations, as he thinks that key growth drivers could generate a low double-digit increase this year and possibly beyond. In fact, he thinks that there is room for an upside surprise compared to management’s outlook of FFO/unit growth of over 12% in the next one to three years.
Dodge also highlighted that Brookfield has a solid pipeline of new investment opportunities that are projected to generate returns above the company’s targeted range of 12% to 15%.
“In our view, BIP offers a compelling risk/reward underpinned by double-digit FFO/unit growth, attractive yield, and a robust acquisition pipeline, as well as a potential rerating opportunity,” he said.
Dodge ranks No. 576 among more than 8,600 analysts tracked by TipRanks. His ratings have been profitable 70% of the time, with each delivering an average return of 10.1%. (See BIP Insider Trading Activity on TipRanks)
KeyCorp
Next up is regional bank KeyCorp (KEY), which recently announced its results for the fourth quarter of 2023. The bank reported a significant drop in its Q4 earnings due to charges associated a special assessment from the Federal Deposit Insurance Corporation and other one-time items.
The bank declared a dividend of $0.205 per share for the first quarter of 2024, payable on March 15. This dividend reflects a yield of 5.6%.
Following the results, RBC Capital analyst Gerard Cassidy noted that excluding one-time charges, KeyCorp’s earnings per share exceeded his expectations and the consensus estimate as well. Cassidy reiterated a buy rating on KEY stock and increased the price target to $15 from $13.
The analyst stated that the bank’s net interest income guidance has been inconsistent, triggering volatility in the stock. That said, he thinks that as investors’ attention shifts to credit quality over the next 12 to 18 months, the bank will impress, due to its conservative management of credit in the past five years.
Cassidy also noted that KeyCorp’s capital remained strong in the fourth quarter of 2023, with its estimated common equity tier one ratio of 10%, increasing from 9.8% in Q3 2023 and 9.1% in the comparable quarter of 2022.
“Finally, KEY remains well capitalized, and we expect higher levels of capital return later this year and into 2025,” the analyst said.
Cassidy holds the 122nd position among more than 8,600 analysts tracked by TipRanks. His ratings have been successful 62% of the time, with each delivering an average return of 15.2%. (See KeyCorp Financial Statements on TipRanks)
OneMain Holdings
This week’s third dividend stock is OneMain Holdings (OMF), a financial services company that caters to the requirements of non-prime customers who may have limited access to traditional lines of credit. With a quarterly dividend payment of $1 per share, OMF offers an attractive yield exceeding 8%.
Recently, Deutsche Bank analyst Mark DeVries initiated a buy rating on OMF stock with a price target of $68, citing the company’s resilient business model.
The analyst thinks that the recent period of elevated inflation was like a “mini recession” for OMF’s target group of lower income borrowers. This implies that the company has already faced a round of credit deterioration and tighter underwriting. Per the analyst, this positions OneMain for an improving credit backdrop in the second half of 2024.
“While the multiple could get pressured if unemployment drifts higher, we think earnings power should hold up well, as should one of the richer dividend yields available,” said DeVries.
The analyst highlighted that despite paying out a high dividend yield, OneMain still generates excess cash and is contemplating the purchase of additional smaller companies (tuck-in acquisitions), like the recently announced Foursight Capital deal.
Given that OMF has penetrated the non-prime personal loan space, which has a total addressable market of $100 billion, DeVries thinks that the company’s expansion into its newer markets, like credit card (TAM of $550 billion) and auto (TAM of $600 billion), is vital for continued growth.
DeVries ranks No. 149 among more than 8,600 analysts tracked by TipRanks. His ratings have been profitable 62% of the time, with each delivering an average return of 15.9%. (See OneMain Holdings Hedge Fund Activity on TipRanks)