STOCK MARKET: Wall Street analysts pick these 3 dividend stocks for enhanced returns

Dividend-paying stocks can give investors an opportunity to cushion their portfolios from market volatility — and they can also enhance returns.

Selecting the right dividend stocks is no easy feat for investors. Wall Street’s best analysts have insight into companies’ ability to provide attractive dividend yield and upside for the long term.

Here are three attractive dividend stocks, according to Wall Street’s top pros on TipRanks, a platform that ranks analysts based on their past performance.

Kimberly-Clark

Consumer products giant Kimberly-Clark (KMB) is this week’s first dividend pick. The owner of popular brands like Huggies and Kleenex is a dividend king, a term used for companies that have raised their dividends for at least 50 consecutive years.

In the first quarter of 2024, Kimberly-Clark returned $452 million to shareholders in the form of dividends and share repurchases. With a quarterly dividend of $1.22 per share ($4.88 on an annualized basis), KMB offers a dividend yield of 3.5%.

Earlier this month, RBC Capital analyst Nik Modi upgraded his rating for KMB stock to buy from hold and boosted the price target to $165 from $126. The upgrade followed a thorough assessment of the company following its analyst day event in March, which reflected that KMB has “shifted from a cost-focused company to a growth-oriented enterprise.”

Modi thinks that KMB is well-positioned for faster and more reliable growth. He is now confident about the company achieving its long-term targets, including a gross margin of 40% and a compound annual growth rate of more than 3% (local currency) in revenue by 2030.

The analyst attributed Kimberly-Clark’s transformation to the leadership of its CEO Mike Hsu. He acknowledged that the company’s decision to reorganize into three business units (North America, International Personal Care, and International Family and Professional) was a step in the right direction. It brought down KMB’s product costs and enhanced speed to market.

Modi ranks No. 593 among more than 8,800 analysts tracked by TipRanks. His ratings have been profitable 61% of the time, delivering an average return of 6.8%. (See Kimberly-Clark’s Stock Buybacks on TipRanks) 

Chord Energy

Next on the list is Chord Energy (CHRD), an oil and gas operator in the Williston Basin. In June, the company paid a base dividend of $1.25 per share and a variable dividend of $1.69 per share.

Chord Energy recently announced the completion of its acquisition of Enerplus. The company expects the deal to strengthen its position in the Williston Basin, with enhanced scale, low-cost inventory, and solid shareholder returns.

Following the announcement, Mizuho analyst William Janela reaffirmed a buy rating on CHRD stock with a price target of $214. The analyst highlighted that the company increased its estimate for annualized deal synergies by $50 million, or 33%, to more than $200 million.

Janela thinks that given the well productivity of both Chord Energy and Enerplus in the Williston Basin, the focus will now be on the combined company’s enhanced operational scale. Moreover, the deal will result in above-average cash returns, with about a 9% payout yield and below-average financial leverage.

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“Relative valuation remains attractive with shares trading at a discount to peers on FCF/EV [Free Cash Flow/ Enterprise Value],” said Janela. 

Janela ranks No. 333 among more than 8,800 analysts tracked by TipRanks. His ratings have been successful 57% of the time, delivering an average return of 29.9%. (See Chord Energy Stock Charts on TipRanks) 

Cisco Systems

Our third pick is dividend-paying technology stock Cisco Systems (CSCO). The networking giant paid $2.9 billion to shareholders in the third quarter of fiscal 2024, including dividends worth $1.6 billion and share repurchases of $1.3 billion. At a quarterly dividend of 40 cents per share, CSCO offers a dividend yield of 3.5%.

In reaction to the recently held investor and analyst day, Jefferies analyst George Notter reiterated a buy rating on Cisco stock with a price target of $56. The analyst said that he feels more positive about the company’s prospects after the event and has better clarity on its strategy with regard to Splunk. Cisco completed the acquisition of Splunk, a cybersecurity company, in March 2024.

At the event, the company maintained its Q4 fiscal 2024 guidance and continues to expect low-to-mid-single-digit revenue growth in fiscal 2025. Regarding the company’s fiscal 2026 and 2027 targets, Notter said, “We thought the 4-6% Y/Y revenue growth targets looked pretty good.” Cisco expects its earnings per share (EPS) to grow by 6% to 8% in Fiscal 2026-2027, with improved gross margins. 

The analyst explained that Cisco’s long-term growth targets look good, given that the company has been growing its revenue at a rate of 1% to 3% in a period spanning more than the past decade.   

Notter ranks No. 629 among more than 8,800 analysts tracked by TipRanks. His ratings have been profitable 62% of the time, delivering an average return of 10.1%. (See Cisco Hedge Fund Activity on TipRanks)