These energy stocks are recommended by top Wall Street analysts for their appealing dividends.
Investing in dividend-paying stocks can improve portfolio returns, provide regular income, and promote diversification. The attractiveness of dividend stocks grows as interest rates decrease, which is currently happening.
Investors can choose profitable dividend stocks by following the advice of top Wall Street analysts, who examine a company's financials to determine its ability to pay and increase dividends.
Three dividend-paying stocks recommended by Wall Street's top pros, as ranked by TipRanks, a platform that evaluates analysts' past performance.
Chevron
This week, oil and gas producer CVX reported better-than-expected results for the third quarter of 2024. The company returned $7.7 billion to shareholders in the third quarter, including $4.7 billion in share buybacks and $2.9 billion in dividends. With a quarterly dividend of $1.63 per share (or an annualized $6.52), CVX offers a dividend yield of 4.1%.
Goldman Sachs analyst Neil Mehta has reaffirmed his buy rating on CVX and slightly increased the price target from $167 to $170, based on his revised earnings estimates. The analyst remains optimistic about Chevron's prospects, citing "expectations for volume and free cash flow inflection driven by Tengiz in Kazakhstan, where the company continues to demonstrate strong execution progress."
Chevron's attractive capital returns profile, including dividends and buybacks, and its differentiated capital allocation, which supports consistent shareholder returns despite a volatile macroeconomic backdrop, are the reasons why Mehta is optimistic about the company's future.
Chevron's Gulf of Mexico projects are expected to increase production to 300 Mb/d by 2026, and the company is also making significant cost reduction efforts to generate up to $3 billion in structural cost savings by the end of 2026, according to Mehta.
Chevron Stock Buybacks: Mehta ranks No. 391 among more than 9,200 analysts tracked by TipRanks. His ratings have been profitable 62% of the time, delivering an average return of 11%.
Energy Transfer
This week's second dividend pick is Energy Transfer (ET), a midstream energy company that is structured as a limited partnership. In November, the company made a quarterly cash distribution of $0.3225 per common unit for the third quarter, a 3.2% year-over-year increase. Based on an annualized distribution of $1.29 per common unit, ET pays a yield of 6.8%.
JPMorgan analyst Jeremy Tonet recently reaffirmed a buy rating on ET and increased his 12-month price target from $20 to $23. The analyst highlighted that the company's third-quarter adjusted earnings before interest, taxes, depreciation and amortization of $3.96 billion surpassed JPMorgan's estimate of $3.912 billion and the Street's consensus of $3.881 billion.
Energy Transfer has maintained its full-year adjusted EBITDA guidance in the range of $15.3 billion to $15.5 billion, but Tonet believes the company can exceed the high end of that range, as the full impact of its optimization efforts is not reflected in the outlook.
Energy Transfer has approved several projects to improve reliability, reduce losses, and enhance system efficiencies, as Tonet further emphasized that the integration of the WTG Midstream acquisition is on track.
"We see logistics, particularly U.S. Gulf Coast and Marcus Hook exports, as key growth engines for ET, particularly given global LPG demand growth," said Tonet.
Among more than 9,200 analysts tracked by TipRanks, Tonet ranks No. 420. His ratings have been successful 61% of the time, delivering an average return of 10.5%. Check out Energy Transfer Stock Charts on TipRanks.
Enterprise Products Partners
Enterprise Products Partners (EPD) is also viewed positively by Tonet, with its third-quarter distribution of $0.525 per unit representing a 5% yearly increase. EPD's annual distribution of $2.10 per common unit translates to a 6.4% yield.
EPD's Q3 performance improved due to three natural gas processing plants that began commercial operations in the past year, as well as wide natural gas spreads between Waha and other market hubs.
EPD's key operating objective for 2024 is to improve the reliability and utilization rates of its two propane dehydrogenation (PDH) plants, with the expectation that these enhancements will generate an additional $200 million in cash flows.
According to Tonet, EPD's capital allocation is advantageous, as they repurchased $76 million in stock in the third quarter, up from $40 million in the second quarter. Enterprise plans to continue making buybacks in an annual range of $200 to $300 million over the next two years.
EPD stock continues to impress Tonet with its consistent delivery of strong results, even during downturns, while still participating in upward cycles.
EPD's large and integrated NGL footprint in North America provides Tonet with optimism, as it supports superior operating leverage. Additionally, Tonet believes that EPD's financial flexibility gives it a competitive advantage over its peers.
EPD stock was given a buy rating and a higher price target of $37 by Tonet, despite the positives. Check out the ownership structure of EPD on TipRanks.
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