With the Federal Reserve expected to cut interest rates in September, dividend-paying stocks could be set to outperform.
That is because the dividend yields on these names will look more attractive compared to the returns offered by other income-generating assets, including bonds.
Given the vast universe of companies paying dividends, it could be difficult for investors to select the right stocks. Investors may want to consider top analysts’ recommendations as they select attractive dividend stocks with strong financials.
Here are three dividend stocks, highlighted by Wall Street’s top pros on TipRanks, a platform that ranks analysts based on their past performance.
EPR Properties
This week’s first dividend stock is EPR Properties (EPR), a real estate investment trust. It is focused on experiential properties such as movie theaters, amusement parks, eat-and-play centers and ski resorts. EPR offers a dividend yield of 7.3%.
RBC Capital analyst Michael Carroll recently upgraded his rating for EPR to buy from hold, and he raised the price target to $50 from $48. He thinks the company has successfully sailed through tough operating conditions, including the Covid-19 pandemic and the actors/writers strikes.
Carroll thinks EPR is in a better position to deliver favorable results, as the aforementioned headwinds are fading. “We expect the theatrical box office will reaccelerate in 2H24 and in 2025, driving higher percentage rents and strengthening the tenant base,” said the analyst.
Commenting on the concerns about EPR’s significant exposure to theaters, the analyst noted that management intends to bring down this exposure over time. He added that worries about AMC, one of the company’s key tenants, seem to be reducing to a certain extent, with AMC taking initiatives such as capital raises and debt refinancing.
Finally, Carroll highlighted that EPR’s high dividend yield is adequately protected by its nearly 70% adjusted funds from operations payout ratio and a solid balance sheet with a 5.2-times net debt to earnings before interest, taxes, depreciation and amortization ratio.
Carroll ranks No. 703 among more than 9,000 analysts tracked by TipRanks. His ratings have been profitable 63% of the time, delivering an average return of 7.7%. See EPR Properties Ownership Structure on TipRanks.
Energy Transfer
The next dividend pick is Energy Transfer (ET), a limited partnership. The midstream energy company made a quarterly cash distribution of 32 cents per unit on Aug. 19, reflecting year-over-year growth of 3.2%. Energy Transfer has a dividend yield of 8%.
Reacting to ET’s Q2 results, Stifel analyst Selman Akyol said the company reported better-than-anticipated EBITDA and called out several growth opportunities, mainly in the company’s Permian to Gulf Coast value chain.
The sentiment about natural gas is upbeat, as it is expected to supply a major portion of the energy requirement of artificial intelligence data centers. Akyol highlighted that ET’s management thinks the company’s solid footprint can provide the natural gas needed to supply continued power to data centers.
Akyol pointed out that ET is also gaining from a rise in demand from utilities, mainly in Texas and Florida. These two states offer ET attractive growth prospects, given their potential data centers and a solid rise in their population.
“Energy Transfer is never short opportunities, and, while run rate capex could creep up, we continue to favor its positioning,” said Akyol. He reaffirmed a buy rating on ET stock with a price target of $19.
Akyol ranks No. 137 among more than 9,000 analysts tracked by TipRanks. His ratings have been successful 71% of the time, delivering an average return of 10.3%. See Energy Transfer Stock Charts on TipRanks.
Walmart
Big-box retailer Walmart (WMT) recently impressed investors with its upbeat results for the second quarter of fiscal 2025. The company also raised its full-year outlook to reflect strong performance in the first half of the year.
Walmart continues to reward shareholders with dividends and share repurchases. In the first half of fiscal 2025, the company paid more than $3 billion in dividends and repurchased shares worth $2.1 billion. Earlier this year, Walmart increased its dividend by 9% to 83 cents a share. This marked the 51st consecutive year of dividend hikes for the company.
Following the Q2 print, Baird analyst Peter Benedict reiterated a buy rating on Walmart and raised the price target to $82 from $70. He highlighted that the retailer gained market share despite a choppy macro backdrop, thanks to its persistent focus on value and convenience.
The analyst stated that Walmart’s second-quarter results clearly reflected the effect of its transformation efforts, “with ~70% of U.S. comp growth digitally driven and >50% of enterprise-wide [earnings before interest and taxes] growth coming from higher margin advertising/membership income streams.”
Benedict also highlighted the 10-basis-point sequential increase in Walmart’s trailing 12-month return on investment to 15.1%. This improvement was fueled by the company’s investments in areas such as automation and generative AI.
Benedict ranks No. 35 among more than 9,000 analysts tracked by TipRanks. His ratings have been profitable 71% of the time, delivering an average return of 15.9%. See Walmart Stock Buybacks on TipRanks.