As the Federal Reserve considers cutting interest rates in the coming months, dividend-paying stocks are becoming increasingly appealing to investors. This is due to the fact that the yield offered by dividend stocks will become more attractive compared to other income-generating assets like bonds. However, with a wide range of companies offering dividends, it can be challenging for investors to identify the right stocks to invest in. In such situations, turning to recommendations from top analysts can assist investors in selecting attractive dividend stocks with strong financials.
One of the dividend stocks that have caught the attention of Wall Street’s top professionals is EPR Properties (EPR), a real estate investment trust that focuses on experiential properties such as movie theaters, amusement parks, and ski resorts. With a dividend yield of 7.3%, EPR has shown resilience in the face of challenging operating conditions, including the Covid-19 pandemic and various strikes. RBC Capital analyst Michael Carroll recently upgraded his rating for EPR to buy from hold, citing the company’s ability to navigate through tough times and deliver favorable results. Carroll believes that the theatrical box office will see an uptick in the coming years, which will benefit EPR by driving higher percentage rents and strengthening its tenant base.
Moreover, concerns about EPR’s significant exposure to theaters are being addressed by the management, who are actively working to reduce this exposure over time. Additionally, worries about key tenant AMC seem to be easing, as the company takes measures such as capital raises and debt refinancing. Carroll pointed out that EPR’s high dividend yield is well-protected by its solid financials, including a 70% adjusted funds from operations payout ratio and a strong balance sheet with a 5.2-times net debt to earnings before interest, taxes, depreciation, and amortization ratio.
Energy Transfer (ET), a limited partnership focused on midstream energy, is another dividend stock that has been recommended by analysts. With a dividend yield of 8%, Energy Transfer recently reported better-than-expected earnings and highlighted several growth opportunities, particularly in its Permian to Gulf Coast value chain. Analysts like Stifel’s Selman Akyol are optimistic about ET’s growth prospects, especially in supplying natural gas to power data centers, which are expected to drive demand in the coming years.
ET’s management is confident in the company’s ability to provide the necessary natural gas to support the growing demand from data centers, as well as utilities in states like Texas and Florida. Akyol affirmed his buy rating on ET stock, with a price target of $19, emphasizing the company’s strong positioning in a market full of opportunities.
Retail giant Walmart (WMT) has also been a favorite among analysts for its impressive performance and shareholder-friendly policies. Following a successful second quarter, Walmart raised its full-year outlook and continued rewarding shareholders through dividends and share repurchases. The company’s consistent dividend hikes, including a recent 9% increase, reflect its commitment to shareholders over the years.
Baird analyst Peter Benedict reiterated a buy rating on Walmart, praising the company’s ability to gain market share in a challenging environment. Benedict highlighted Walmart’s strong digital growth and higher margin income streams as key drivers of its success. The company’s investments in areas like automation and generative AI have resulted in increased returns on investment, making it a compelling choice for investors.
Dividend-paying stocks like EPR Properties, Energy Transfer, and Walmart offer investors an attractive investment opportunity in a changing market environment. By focusing on companies with strong financials and growth prospects, investors can build a diversified portfolio that generates stable income and capital appreciation over the long term. With the support of top analysts’ recommendations, investors can navigate the complexities of the market and make informed decisions that will lead to long-term financial success.