Top Wall Street analysts like these dividend stocks for solid returns

Many investors are keen on adding dividend stocks to their portfolios as they offer a regular source of income that can increase over time and provide protection against market volatility. The opinions of top analysts could help investors in picking the right dividend stocks.

Bearing that in mind, here are five attractive dividend stocks, according to Wall Street’s top experts, as rated by TipRanks, a platform that ranks analysts based on their past performance.

We will first look at Diamondback Energy (FANG), an independent oil and natural gas company focused on the exploration of onshore oil and natural gas reserves in the Permian Basin in West Texas. 

The company has a policy of returning at least 75% of its free cash flow to shareholders through fixed or base dividends, variable dividends, and share buybacks. In the second quarter of 2023, FANG returned $473 million, or about 86% of its free cash flow, through stock repurchases and base dividends.

Further, the company increased its base dividend by 5% to 84 cents per share. Considering just the base dividend, FANG offers a dividend yield of 2.3%.

Commenting on the dividend hike, RBC Capital analyst Scott Hanold said that Diamondback’s focus on stable operations drove consistent Q2 2023 results, which underpinned its solid free cash flow outlook and gave the company the confidence to raise its base dividend.

“FANG has one of the lowest cost structures in the basin and a corporate cash flow break-even (including dividend) that is among the best in the industry,” said Hanold. (See Diamondback’s Financial Statements on TipRanks) 

Hanold reaffirmed a buy rating on FANG with a price target of $170. Hanold ranks No. 17 among more than 8,500 analysts tracked on TipRanks. His ratings have been profitable 67% of the time, with each rating delivering an average return of 24.6%. 

DHT Holdings (DHT) is an independent crude oil tanker company. As of the end of the second quarter of 2023, DHT had a fleet of 23 very large crude carriers (VLCC). The company has a policy of returning 100% of its net income as quarterly cash dividends.

Reacting to DHT’s recently reported Q2 2023 results, Evercore analyst Jonathan Chappell said that earnings per share of 35 cents was exactly in line with his estimate, with the company’s 100% dividend payout ratio resulting in a 35 cents per share distribution for the period.

DHT has an attractive dividend yield of 14.4%. In addition to a cash dividend, the company returned capital to shareholders by repurchasing about 1.1 million shares for $8.9 million in the second quarter.

Chappell noted that DHT’s quarter-to-date VLCC spot rates for Q3 2023 have tracked slightly above his expectations, following typical seasonal patterns. With most of the other costs unchanged, the analyst slightly increased his Q3 2023 EPS estimate by a penny.

Chappell reiterated a buy rating on DHT with a price target of $13, saying, “The dividend yield we project for this year and next approximates 11%, and a seasonal uplift in VLCC rates entering the winter season should act as a catalyst to the shares.”

Chappell holds the 155th position among more than 8,500 analysts on TipRanks. His ratings have been profitable 66% of the time, delivering an average return of 20%. (See DHT Hedge Fund Trading Activity on TipRanks).

Canada-based integrated energy company Suncor Energy (SU) reported a sharp decline in its second-quarter earnings, as oil and gas prices retreated from the elevated levels seen last year.

Moreover, Suncor’s earnings were impacted by a C$275 million restructuring charge related to the company’s plans to eliminate 1,500 jobs. Nonetheless, Q2 2023 adjusted earnings surpassed Wall Street’s expectations. In the second quarter, the company returned $1.4 billion to shareholders, including $679 million in dividends and the remaining through share repurchases. With a quarterly dividend of 38 cents per share, SU’s dividend yield stands at 4.7%.

Following the Q2 2023 print, RBC Capital analyst Gregory Pardy reiterated a buy rating on the stock with a price target of $49, highlighting that Suncor is on his Global Energy Best Ideas list. Pardy, who ranks 43 out of 8,500 analysts tracked by TipRanks, said that he was encouraged by the ongoing improvements discussed by the management on the earnings call.

“With a recharged executive leadership team under the direction of new CEO Rich Kruger now in place, Suncor is poised to re-establish operating and financial momentum in the months to come, which should translate into relative share price appreciation over time,” said Pardy.

Pardy has a success rate of 66% and each of his ratings has returned 23.7%, on average. (See Suncor Insider Trading Activity on TipRanks)    

Next, we move to Sunoco (SUN), a master limited partnership that provides motor fuel to dealers and distributors in over 40 U.S. states and territories. For the second quarter of 2023, SUN declared a quarterly distribution of $0.842 per common unit ($3.37 annualized), reflecting a yield of 7.6%.  

The fuel distributor’s second-quarter revenue and earnings declined year-over-year due to lower motor fuel sales. Nevertheless, Mizuho analyst Gabriel Moreen reiterated a buy rating on SUN stock with a price target of $53 based on his 9.5x EV/EBITDA (enterprise value to earnings before interest tax, depreciation and amortization) multiple.

The analyst noted that SUN’s Q2 2023 adjusted EBITDA exceeded expectations and the management now anticipates full-year adjusted EBITDA at the high end of its guidance, with the potential to surpass it. He explained that a key driver of the EBITDA outperformance has been the recurrence of stronger-than-projected fuel margins and portfolio volume recovery.

“Our target multiple is roughly in line with Midstream peers, which we believe captures the resiliency of SUN’s business model, improving balance sheet, and the growing share of its Midstream business within the portfolio,” said Moreen.

Moreen ranks 436th among more than 8,500 analysts tracked by TipRanks. His ratings have been profitable 73% of the time, with each rating delivering an average return of 7.6%. (See Sunoco Stock Chart on TipRanks) 

This week’s last pick is dividend aristocrat Target (TGT). In June, the big-box retailer announced a 1.9% increase in its quarterly dividend per share to $1.10, payable September 10, 2023. This marks the 52^nd consecutive year in which the company hiked its annual dividend. TGT offers a dividend yield of 3.5%.

Target is a well-established retailer with a solid financial position to support its dividend payments. The company recently reported better-than-expected second-quarter earnings. However, sales missed expectations and the company lowered its full-year outlook, as macro pressures continue to impact customers’ spending on discretionary items.

Despite near-term headwinds, Guggenheim analyst Robert Drbul remains bullish on TGT. The analyst noted that the retailer’s Fiscal Q2 2023 sales deteriorated, with traffic impacted by the Pride assortment controversy. That said, Drbul highlighted that Target beat analysts’ earnings expectations, as the company’s inventory actions improved profitability.

The analyst reduced his fiscal 2023 and 2024 EPS estimates to reflect weak sales and continued pressure due to retail theft or shrink. Still, he reiterated a buy rating on TGT with a price target of $160.

“As Target appears to be executing its ongoing efficiency work and cost saving efforts, we believe that at current levels the shares offer an attractive risk reward ratio, and we continue to see potential for a return to 6% operating margins into 2024,” concluded Drbul.

Drbul holds the 702nd position among more than 8,500 analysts on TipRanks. Moreover, 58% of his ratings have been profitable, with each generating a return of 5.8%. (See Target Insider Trading Activity on TipRanks)