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September had a bumpy start for investors as volatility jolted markets in the first week, but dividend-paying stocks can help smooth the ride.
Investors with a long-term investment horizon can ignore short-term noise to focus on stocks that have the potential to enhance their total portfolio returns through a mix of dividends and share price appreciation.
To that end, the recommendations of top Wall Street analysts can help investors choose stocks with strong fundamentals and the ability to pay consistent dividends.
Here are three dividend stocks, highlighted by Wall Street’s top pros on TipRanks, a platform that ranks analysts based on their past performance.
MPLX LP
We start this week with MPLX (MPLX), a midstream energy player. The company’s quarterly cash distribution was 85 cents per common unit ($3.40 on an annualized basis) for the second quarter of 2024. MPLX offers an attractive yield of nearly 8%.
Recently, RBC Capital analyst Elvira Scotto reiterated a buy rating on MPLX stock with a price target of $47. The analyst updated her model to reflect the company’s solid second-quarter results, with adjusted earnings before interest, taxes, depreciation and amortization surpassing the Street’s estimate by 3%.
Scotto raised her adjusted EBITDA estimates for 2024 and 2025 to reflect the strong performance of the Logistics & Storage segment in Q2 and some consolidation of joint venture interests. The analyst maintained her distribution per unit estimate of $3.57 for 2024 and $3.84 for 2025.
Scotto continues to view MPLX as “one of the most attractive income plays among large-cap MLP [master limited partnership],” thanks to its robust yield and rising free cash flow generation. The analyst thinks that MPLX’s solid free cash flow will help the company to continue to grow its business and enhance shareholder returns through buybacks.
The analyst also highlighted that MPLX is expanding its natural gas and natural gas liquids assets across its integrated network via organic projects, joint venture interests and bolt-on acquisitions.
Scotto ranks No. 18 among more than 9,000 analysts tracked by TipRanks. Her ratings have been profitable 69% of the time, delivering an average return of 20.8%. (See MPLX Options Trading on TipRanks)
Chord Energy
We move to another dividend-paying energy stock, Chord Energy (CHRD). It is an independent oil and gas company operating in the Williston Basin. The company recently paid a base dividend of $1.25 per share of common stock and a variable dividend of $1.27 per share.
On Sept. 4, RBC Capital analyst Scott Hanold reaffirmed a buy rating on CHRD stock with a price target of $200. The analyst increased his earnings per share and cash flow per share estimates for 2024 and 2025 by nearly 3% to reflect modestly higher production and lower cash operating costs.
Hanold expects free cash flow of $1.2 billion and $1.4 billion in 2024 and 2025, respectively. The analyst anticipates that FCF will increase in the second half of 2024 due to the combination of the assets of Chord Energy and Enerplus, which the company acquired earlier this year.
Commenting on the Enerplus integration, the analyst said, “We remain optimistic the company is well-positioned to not just meet but potentially exceed the synergy target as operations are fully integrated.”
Further, the analyst expects quarterly distribution of $4.50 to $5.00 per share in the second half of 2024, with dividends accounting for about 60% of the distributions and buybacks amounting to 40%.
Hanold ranks No. 27 among more than 9,000 analysts tracked by TipRanks. His ratings have been successful 63% of the time, delivering an average return of 25.4%. (See Chord Energy Stock Buybacks on TipRanks)
McDonald’s
This week’s third pick is fast-food chain McDonald’s (MCD). MCD stock offers a dividend yield of 2.3%. McDonald’s is a dividend aristocrat that has raised its dividends for 47 consecutive years.
On Sept. 3, Tigress Financial analyst Ivan Feinseth reiterated a buy rating on MCD stock and raised his price target to $360 from $355. Despite a challenging backdrop, the analyst continues to be bullish on McDonald’s due to its ongoing technology initiatives, innovation and value focus. These factors support its resilient business model and long-term growth potential.
Feinseth noted that the company is focused on enhancing its value offerings to regain its competitive edge. The analyst highlighted several recent value deals introduced by McDonald’s, including the $5 meal deal, which helped improve its image as a fast-food chain offering value and affordability.
Further, Feinseth pointed out MCD’s competitive advantage, which is backed by its solid brand equity, loyalty program and digital initiatives. The company boasts a loyalty membership base of 166 million members. It is targeting 250 million active loyalty members by 2027.
The analyst also noted that McDonald’s is making capital investments between $2 billion and $2.5 billion annually to expand its store footprint and improve its technology, including through enhancing its ordering capabilities through automated voice artificial intelligence. Overall, Feinseth is confident about MCD’s long-term growth potential and its ability to boost shareholder returns through dividends and share repurchases. In fact, he expects MCD to announce a dividend hike in October, similar to the 10% rise announced last year.
Feinseth ranks No. 210 among more than 9,000 analysts tracked by TipRanks. His ratings have been profitable 60% of the time, delivering an average return of 11.9%. (See McDonald’s Insider Trading Activity on TipRanks)