Dividend stocks are a critical part of an investor's portfolio. They are also perfect for market volatility — because investors can reap returns even with choppy stock performance. However, knowing which dividend stocks to choose means taking note of both the company's dividend yield and payout, as well as checking whether the stock itself represents a compelling investing opportunity. This is important because a healthy company is less likely to slash, or even suspend, its dividend payments.
One way to find quality dividend stocks is to see which stocks the analysts with the strongest stock picking skills are betting on.
TipRanks analyst forecasting service attempts to pinpoint Wall Street's best-performing analysts. These are the analysts with the highest success rate and average return measured on a one-year basis — factoring in the number of ratings made by each analyst. This means you can pinpoint dividend stocks with the most bullish outlook, based on the latest recommendations from best-performing analysts.
Indeed, the dividend stocks covered below all score a 'Strong Buy' Street consensus based on ratings published over the last three months.
Here are the best-performing analysts' six favorite dividend stocks right now:
TC Energy's assets include natural gas pipelines, oil pipelines, power generation, and natural gas storage. The company has more than 92,600km of natural gas pipelines, 4,900km of oil pipelines, 650 Bcf of gas storage, and 4,000 MW of power generation.
TRP currently boasts a 5.02% dividend yield, with the next quarterly payout set for $0.604. Looking forward, TRP expects annual dividend growth of 8 to 10% in 2021 and 5 to 7% thereafter. That follows an 8% increase in February, equivalent to $3.24 per common share on an annualized basis.
"We expect TC Energy to outperform other energy infrastructure companies in our coverage universe", cheers RBC's Robert Kwan. Excluding larger growth initiatives (e.g., Keystone XL), TC Energy remains confident in its ability to grow its annual earnings in the 5-7% range based on investing roughly $5 billion per year of capital.
And that's with the stock trading at an approximate 20-25% discount on a P/E basis to premium-valued Canadian regulated utility stocks.
Plus Kwan sees upside optionality for growth from Keystone XL if the pipeline ultimately comes into service. "Alternatively, we see the potential for eventual upside in the stock if KXL is cancelled or mothballed as it would remove headline-risk associated with the project" he says.
In total, TC Energy has received 3 recent buy ratings from top analysts vs just 1 hold rating. The $56 average analyst stock price forecast translates into 23% upside potential, with Kwan reiterating his $61.52 price target on September 11.
Healthcare giant Johnson & Johnson is in the headlights right now thanks to its coronavirus vaccine trials. But the stock is also worth paying attention to for its attractive dividend. A 'dividend king', JNJ pays out a quarterly dividend of $1.01, with a 2.73% yield and 58 straight years of dividend increases.
Most recently, in April, JNJ declared a 6.3% increase in the quarterly dividend rate, with the CEO highlighting the company's strong financial position and the board's confidence in JNJ's future.
Credit Suisse analyst Matt Miksic has a buy rating on JNJ and $163 price target. According to the analyst, JNJ's Pharma franchises are less affected by the coronavirus than device businesses, which are more directly tied to elective procedures. This makes the stock attractive for investors concerned about the potential resurgence of the coronavirus infections and its impact on elective surgery trends.
"Based on our analysis of price-adjusted scrips and rebate-adjusted sales for JNJ's largest U.S. Pharma franchises in July, the business appears to be tracking roughly in-line with our estimates for Q3" he says. Meanwhile JNJ is enrolling patients for its coronavirus Phase 3 vaccine study, which could include up to 60,000 participants in nearly 180 sites across the US and other countries.
All five top analysts covering the stock rate JNJ a buy, adding up to a bullish Strong Buy consensus. Meanwhile the average analyst price target stands at $167, indicating further upside potential of 11%. Shares are currently trading up 3% YTD.
Semiconductor builder Broadcom is a top dividend stock poised to outperform. It pays its shareholders a quarterly dividend of $3.25 on a 3.61% dividend yield - adding up at a $13 annual dividend- and is currently tracking 9 years of consecutive dividend growth.
"We continue to see AVGO as well positioned, driven by 5G networking and wireless, software M&A, strong FCF, and dividends potentially moving to ~$14/share by year-end, with near-term COVID-19 headwinds subsiding" cheered Mizuho Securities analyst Vijay Rakesh.
He bumped up his price target on September 4 from $350 to $390 after Broadcom reported an earnings beat on strong demand from cloud datacenter and telecom service providers. Looking forward, AVGO is now guiding for a robust October quarter at $6.4B (vs consensus of $6.2B).
Indeed, as Charter Equity's Edward Snyder notes, the pushout of the 5G iPhone ramp and additional RF and WiFi content should deliver 50% sequential growth in Wireless revenue in October.
"We believe the launch of next generation switching, routing and WiFi 6 products have kicked off a multi-quarter upgrade cycle at both cloud and service providers" says Snyder.
Out of 24 best-performing analysts covering AVGO in the last three months, 21 call the stock a buy, with just three analysts staying sidelined. That gives the stock a 'Strong Buy' consensus. Their average stock price forecast of $405 translates into 10% upside potential, with shares already up 17% YTD.
Home Depot offers shareholders a lucrative yield of 2.17% with a quarterly cash dividend of $1.50 per share. Most recently, HD paid its dividend on September 17 to shareholders of record on September 3, marking the 134th consecutive quarter the company has paid a cash dividend.
Top Wells Fargo analyst Zachary Fadem recently reiterated his HD buy rating and $310 price target after the company exceeded heightened Q2 expectations. HD delivered record breaking results driven by heightened category demand and a new stay-at-home lifestyle. Most impressively, online sales growth accelerated to +100% y/y.
Following the results, the analyst noted that a robust start to Q3 bodes well and 2H consensus likely proves conservative (Q3/Q4 comps +6%/+4%). With strong 3QTD trends and favorable category tailwinds, he raised his FY20/21 EPS estimate by +8c/+7c to $11.33/$11.77 on August 18.
"All in, HD is proving out the power and sustainability of its model, and in a market that remains supportive of long-term winners, we see few reasons to shy away from HD's accelerating share gains, offensive/defensive characteristics, and strong balance sheet" applauds Fadem.
Shares in the home improvement retailer have surged 30% so far this year, but analysts see further upside potential ahead. With 15 recent top analyst buy ratings vs 4 hold ratings, HD boasts a Strong Buy Street consensus and $310 average price target.
Drug store chain and health care services company CVS is worth keeping an eye on right now. It coughs up a quarterly dividend of $0.50, with a generous 3.48% dividend yield. And while it hasn't increased its dividend recently, CVS does have a relatively low P/E ratio of 9.06%.
"CVS continues to deliver solid results across the diversified portfolio of businesses that position it well as a leader in transforming the delivery of care" says RBC Capital analyst Anton Hie. With the core earnings trajectory still on track, he reaffirmed his buy rating saying: "the company will become a core holding for healthcare investors."
Shares are currently down 22% YTD, and Hie sees this as an attractive opportunity, arguing that the market is undervaluing the growth that should become more evident in the coming years.
Similarly Bank of America Merrill Lynch analyst Michael Cherny reiterated his buy rating post-print, explaining: "Sticking with the guidance should be enough for the stock at a time when the company is also dedicating extra resources to manage the COVID-19 pandemic." He praised the company's improving enterprise profitability, "incredibly healthy" free cash flow and discounted valuation.
The U.S. healthcare giant has scored 5 recent buy ratings from best-performing analysts. Just one top analyst is staying on the sidelines. Meanwhile the $91 average analyst stock price forecast indicates significant upside potential of 56%.
Last but not least we have Medical Properties Trust, a real estate investment trust (REIT) that acquires and develops health-care facilities. MPW has a unique investment strategy as it is the only public healthcare REIT that solely focuses on investing in traditional and specialty hospitals.
As of 1Q20, the company has ~$16.5 billion of total pro forma gross assets with general acute care hospitals accounting for 84.6% of revenue. It pays out a quarterly dividend of $0.27, on a high 5.93% yield, with 5 consecutive years of dividend growth.
Stifel Nicolaus analyst Stephen Manaker has just resumed coverage of MPW with a buy rating and $21 price target, telling investors that he expects a growing dividend over the next few years "without undue risk."
As RBC Capital's Michael Carroll writes: "The portfolio should deliver stable, healthy organic growth as the in-place rents are well protected by solid underlying lease coverage ratios."
Indeed, the company has held up well during the pandemic, and expects to collect 98% of contractual rent in 2020 with 2% collected at a later date with interest. This stability has helped the company maintain its superior cost of capital, allowing management to continue to pursue new investments, says Carroll.
He sees solid high-single digit earnings growth over the next few years, and bumped up his price target from $21 to $22 on August 14.
Overall, six top analysts have recently rated MPW a buy, with just one hold rating in the last three months. The average analyst price forecast from these best-performing analysts works out at $21.29 (16% upside potential).