Investors are no strangers to the unpredictable nature of the stock market, a sentiment particularly evident as September unfolded. The initial weeks witnessed tumultuous swings in the market, stirring unease among many participants. However, a viable strategy for navigating these choppy waters lies in investing in dividend-paying stocks. Such investments can not only bolster a portfolio’s resilience against market fluctuations but also optimize total returns over time through a combination of dividends and capital appreciation.
For investors committed to a long-term vision, the distractions of short-term volatility should ideally be relegated to the background. Instead, focusing on high-quality stocks with strong fundamentals can offer a robust pathway to growth and income. Dividend stocks, in particular, exemplify this strategy as they provide a steady stream of income through regular payouts. Engaging with reputable analysts who can identify strong dividend-paying stocks enhances the chances of successful investment decisions.
This article highlights three dividend stocks that have garnered attention from top analysts on platforms like TipRanks. Each stock exemplifies the potential to deliver reliable income and capital appreciation, given their strong underlying business models and market positions.
Highlight on MPLX: Midstream Energy’s Strong Foundations
The first stock under review is MPLX (MPLX), a notable player in the midstream energy sector. Notably, MPLX declared a quarterly cash distribution of 85 cents per common unit for Q2 of 2024, translating to an attractive annualized yield of nearly 8%. This robust return presents an appealing option for income-focused investors.
RBC Capital’s Elvira Scotto, who reaffirmed a buy rating on MPLX with a price target increase to $47, provided a bullish outlook based on the company’s impressive second-quarter results. The company not only surpassed Street expectations in its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) but also indicated strong growth propelled by its Logistics & Storage segment.
Scotto’s raised EBITDA estimates for the coming years reflect optimism regarding MPLX’s ability to enhance shareholder value through consistent distributions and share buybacks. The firm’s strategy to expand its natural gas and liquids assets, paired with a solid foundation for free cash flow generation, positions MPLX as a potent choice for yield-seeking investors. With both an attractive yield and a stable financial outlook, MPLX stands out among its competitors in the master limited partnership (MLP) landscape.
Next in line is Chord Energy (CHRD), an independent oil and gas company operating in the prolific Williston Basin. Chord Energy announced a base dividend of $1.25 per share coupled with a variable dividend of $1.27, showcasing its commitment to returning cash to shareholders.
Analyst Scott Hanold of RBC Capital recently reiterated a buy rating with a price target of $200. He also upwardly adjusted his EPS and cash flow expectations for the company, underscoring Chord’s potential for significant free cash flow generation—projected at $1.2 billion for 2024 and $1.4 billion the following year. Hanold remains optimistic about synergistic benefits stemming from Chord’s recent acquisition of Enerplus, envisioning operational efficiencies that could bolster profitability.
Furthermore, Hanold predicts a robust quarterly distribution range of $4.50 to $5.00 per share in 2024, with dividends constituting around 60% of these distributions. The strategic integration and operational enhancements position Chord Energy as a strong player in the energy sector, making it an enticing option for investors willing to navigate its cyclical nature.
Lastly, the fast-food giant McDonald’s (MCD) offers a different perspective on dividend investing. With a dividend yield of 2.3% and a track record of raising its dividends for an impressive 47 consecutive years, McDonald’s embodies the classic “dividend aristocrat” status.
Despite facing scrutiny in an ever-competitive marketplace, analyst Ivan Feinseth from Tigress Financial has maintained a buy rating with a price increase target reflecting confidence in McDonald’s adaptive strategies. The brand’s focus on technological enhancements and value-oriented initiatives, coupled with a robust loyalty program, foster a resilient business model poised for continued growth.
Feinseth anticipates that McDonald’s ongoing capital investments will enhance its service capabilities, ultimately translating to high shareholder returns through dividends and buybacks. The company’s substantial loyalty membership base of 166 million, with aspirations to hit 250 million by 2027, presents an additional layer of consumer engagement that could drive long-term profitability.
For investors keen on mitigating risks associated with market volatility, focusing on quality dividend stocks such as MPLX, Chord Energy, and McDonald’s provides a smart approach to achieving financial objectives. These companies not only offer attractive yields but also demonstrate strong growth prospects, making them worthy of consideration in a diversified portfolio. In a time characterized by uncertainty, the call for dividend-paying stocks resonates strongly as they fuse current income with the potential for future appreciation.