Top Wall Street analysts pick these dividend stocks for solid returns

September had a rough beginning for investors as market volatility surged in the first week, but dividend-paying stocks can help make the journey smoother.

 

Long-term investors can ignore short-term fluctuations and focus on stocks that offer the potential to boost their overall portfolio returns through a combination of dividends and share price growth.

 

With this in mind, the advice of leading Wall Street analysts can guide investors in selecting stocks with solid fundamentals and the capability to consistently pay dividends.

 

Here are three dividend stocks, recommended by Wall Street's top experts on TipRanks, a platform that ranks analysts based on their historical performance.

 

Starting this week with MPLX (MPLX), a midstream energy company. The company declared a quarterly cash distribution of 85 cents per common unit ($3.40 annually) for the second quarter of 2024. MPLX provides an appealing yield of nearly 8%.

 

Recently, RBC Capital analyst Elvira Scotto reaffirmed a buy rating on MPLX stock with a price target of $47. The analyst updated her model to reflect the company’s strong second-quarter results, with adjusted earnings before interest, taxes, depreciation, and amortization exceeding the Street’s estimate by 3%.

 

Scotto increased her adjusted EBITDA estimates for 2024 and 2025 to account for the strong performance of the Logistics & Storage segment in Q2 and some consolidation of joint venture interests. She 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 partnerships]," thanks to its robust yield and rising free cash flow generation. She believes that MPLX's strong free cash flow will enable the company to continue growing its business and enhancing shareholder returns through buybacks.

 

Scotto also emphasized that MPLX is expanding its natural gas and natural gas liquids assets across its integrated network through 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%.

 

Our next dividend-paying energy stock is Chord Energy (CHRD), an independent oil and gas company active in the Williston Basin. The company recently distributed a base dividend of $1.25 per share of common stock and a variable dividend of $1.27 per share.

 

On September 4, RBC Capital analyst Scott Hanold reiterated 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 slightly higher production and lower cash operating costs.

 

Hanold projects free cash flow of $1.2 billion and $1.4 billion in 2024 and 2025, respectively. He expects free cash flow to rise in the second half of 2024 due to the assets of Chord Energy and Enerplus that were acquired earlier this year.

 

Commenting on the Enerplus integration, the analyst stated, "We remain optimistic that the company is well-positioned to not just meet but potentially exceed the synergy target as operations are fully integrated."

 

Additionally, Hanold anticipates quarterly distributions 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 making up 40%.

 

Hanold is ranked 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%.

 

This week’s third pick is fast-food giant McDonald's (MCD). MCD stock offers a dividend yield of 2.3%. McDonald's is a dividend aristocrat and has increased its dividends for 47 consecutive years.

 

On September 3, Tigress Financial analyst Ivan Feinseth reaffirmed a buy rating on MCD stock and raised his price target from $355 to $360. Despite a challenging environment, the analyst remains bullish on McDonald's due to its ongoing technology initiatives, innovation, and value focus, which support its robust business model and long-term growth potential.

 

Feinseth noted that the company is prioritizing enhancing its value offerings to regain its competitive edge. He highlighted several recent value deals introduced by McDonald's, including the $5 meal deal, which helped improve its image as an affordable fast-food chain.

 

Moreover, Feinseth underscored MCD's competitive advantage, which is bolstered by its strong brand equity, loyalty program, and digital initiatives. The company boasts a loyalty membership base of 166 million members, aiming for 250 million active loyalty members by 2027.

 

Feinseth also pointed out that McDonald's is making capital investments of $2 billion to $2.5 billion annually to expand its store network and enhance its technology, including advancements in ordering capabilities through automated voice artificial intelligence. Overall, Feinseth is optimistic 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% increase 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%.