Top Wall Street analysts are bullish on dividend stocks

Dividend-paying stocks can help enhance portfolio returns, but investors will need to perform their due diligence as they sift through the names.

Investors should carefully assess these companies by paying attention to various factors, including the dividend growth rate and the ability to consistently generate sufficient cash flows to support payments.

Bearing that in mind, here are five attractive dividend stocks, according to Wall Street’s top experts on TipRanks, a platform that ranks analysts based on their past performance.

First on this week’s dividend list is Public Service Enterprise Group (PEG), one of the leading electric and gas companies in the U.S. Last month, PEG reaffirmed its full-year earnings guidance, as the company expects growth in regulated operations, the realization of higher average hedged prices and its cost control efforts to offset the impact of higher interest rates and lower pension income.

Earlier this year, PEG increased its quarterly dividend by 5.6% to 57 cents per share (annualized dividend of $2.28), marking the 19th annual increase for the company. PEG’s dividend yield is 3.8%.

RBC Capital analyst Shelby Tucker highlighted that PEG’s subsidiary Public Service Electric and Gas (PSE&G), which is a franchised public utility in New Jersey, enjoys solid cash flows from the nuclear assets in its power generation business.

While the company faces cost and pension expense headwinds this year, the analyst expects a 6% EPS compound annual growth rate through 2027 and 5.5% annual dividend growth.

“We believe the primary attraction to PEG is a strong pipeline of electric and gas investments in New Jersey with low equity dilution risk,” said Tucker.

Tucker reiterated a buy rating on PEG while slightly lowering the price target to $69 from $70. He ranks No. 305 among more than 8,500 analysts tracked by TipRanks. Tucker’s ratings have been profitable 63% of the time, with each rating delivering a return of 9%, on average. (See PEG’s Insider Trading Activity on TipRanks)

Tucker is also bullish on Southern Company (SO), a gas and electric utility giant. Earlier this month, the analyst called SO a “quality utility operating in constructive regulatory environments.” He reiterated a buy rating on the stock and increased the price target to $80 from $78.

With the company’s much-delayed Vogtle nuclear project’s commercial operation date on the horizon, the analyst thinks that investors are finally hopeful of better times ahead. The company expects its Vogtle Unit 4 to be placed in service during late fourth quarter of 2023 or the first quarter of 2024.

The analyst sees the possibility of SO commanding a premium compared to its peers as the year progresses and heads into 2024. Post-Vogtle, Tucker expects the company to accelerate its EPS growth and use the higher cash flows to boost dividends.

Note that in April, Southern announced a 2.9% increase in its quarterly dividend to $0.70. This is the 22nd consecutive year in which SO has raised its dividend. SO offers a dividend yield of 4%.

“We note that SO’s utilities mostly operate in strong economic environments, which should support investment opportunities throughout the decade,” said Tucker. (See Southern Company Stock Chart on TipRanks)

Next up is dividend aristocrat Chevron (CVX). In January, the oil and gas giant increased its quarterly dividend by about 6% to $1.51 per share, making 2023 the 36th straight year with a higher dividend payment. CVX’s dividend yield stands at 3.6%.

On Sept. 13, Goldman Sachs hosted roundtable discussions with Chevron’s senior management. Analyst Neil Mehta said that the firm remains bullish on CVX due to its peer-leading capital returns profile, inflecting upstream operations expected in 2025 supported by higher Tengiz/Permian volumes and relative valuation.

The analyst contends that near-term pressures like risks around the Tengiz project are largely reflected in CVX’s valuation. He highlighted management’s constructive view on the upstream business, reaffirming nearly 3% CAGR forecast for production over the next five years.

“The company reiterated its commitment to competitive shareholder returns, which we believe is a core differentiating factor for CVX over the next few years,” added Mehta, who ranks No. 181 among more than 8,500 analysts on TipRanks.

The analyst currently expects about a 9% capital return yield in 2024/2025, higher than the U.S. energy majors peer average of about 7%. Overall, Mehta reiterated a buy rating on Chevron with a price target of $187.

Mehta’s ratings have been successful 67% of the time, with each rating delivering an average return of 13%. (See Chevron Hedge Fund Trading Activity on TipRanks)

Semiconductor company Broadcom (AVGO) managed to beat the Street’s fiscal third-quarter estimates. However, investors seemed unsatisfied as the quarterly outlook was in line with the analysts’ expectations, unlike that of chip giant Nvidia (NVDA), which crushed estimates on artificial intelligence tailwinds.

Broadcom generated $4.6 billion in free cash flow in the fiscal third quarter of 2023. It paid a cash dividend worth $1.9 billion in the quarter and repurchased 2.4 million shares.

Earlier, AVGO increased its quarterly dividend for fiscal 2023 by 12% to $4.60 per share (annualized $18.40). This hike reflected the company’s twelfth consecutive increase in annual dividends since it initiated dividends in fiscal 2011. It offers a dividend yield of 2.2%

Baird analyst Tristan Gerra recently reiterated a buy rating on AVGO stock while boosting the price target to $1,000 from $900 to reflect solid growth opportunities, mainly in the company’s custom application-specific integrated circuit (ASIC) business for AI applications. Gerra also noted that the company’s free cash flow remains strong.

The analyst said that recent channel checks revealed a surge in Broadcom’s custom ASIC business to over 2 million units for next year, which was more than 2.5 times his unit base expectation for 2023. He added that generative AI investments are accounting for nearly all the growth in Broadcom’s semiconductor business, with AI-related revenue now exceeding $1 billion.

Gerra holds the 514th position among more than 8,500 analysts tracked on TipRanks. Moreover, 54% of his ratings have been profitable, with each generating an average return of 8.7%. (See Broadcom’s Financial Statements on TipRanks)

We end this week’s list with biopharmaceutical company Bristol-Myers Squibb (BMY). The company repurchased 17 million shares for $1.2 billion and made dividend payments of $2.4 billion in the first six months, ended June 30.

The quarterly dividend of $0.57 per share for 2023 indicates a 5.6% year-over-year increase, marking the 14th consecutive year of dividend hikes. BMY’s dividend yield stands at 3.9%.

Following the company’s Research and Development (R&D) Day held in New York on Sept. 14, Goldman Sachs analyst Chris Shibutani reaffirmed a buy rating on BMY stock with a price target of $81.

At the event, management highlighted how new product launches and the acceleration of research and development productivity would drive future revenue growth, addressing concerns about the Inflation Reduction Act and loss of exclusivity of key drugs.

Shibutani noted that management expressed continued confidence in the 2030 new product launch revenue goal of more than $25 billion (non-risk adjusted), based on currently visible late-stage and already commercializing opportunities.

Commenting on BMY’s capital allocation program, Shibutani said that management’s priority remains business development (BD). “Beyond BD, the company remains committed to growing its dividend and will continue to be opportunistic with share buybacks,” the analyst added.

Shibutani holds the 271th position among more than 8,500 analysts tracked on TipRanks. In all, 44% of his ratings have been profitable, with each generating an average return of 20.5%. (See BMY Options Activity on TipRanks)