Top Wall Street analysts like these 3 dividend stocks for enhanced returns

CNBC

16 hours ago

The S&P 500 rose to a fresh record on Friday, but macro uncertainties persist. Investors may want to consider dividend-paying stocks as a way to enhance returns in the event of choppy markets.
Tracking the stock picks of top Wall Street analysts can help investors select attractive dividend stocks, given that these experts assign their ratings after an in-depth analysis of a company's fundamentals and its ability to generate solid cash flows to consistently pay dividends.
Here are three dividend-paying stocks, highlighted by Wall Street's top pros, as tracked by TipRanks, a platform that ranks analysts based on their past performance.
Fast-food chain McDonald's (MCD) is this week's first dividend pick. The company offers a quarterly dividend of $1.77 per share. With an annualized dividend of $7.08 per share, MCD stock offers a dividend yield of 2.4%. It is worth noting that McDonald's has increased its annual dividend for 49 consecutive years and is on track to becoming a dividend king.
Recently, Jefferies analyst Andy Barish reiterated a buy rating on McDonald's stock with a price target of $360. The analyst believes that MCD stock is a buy on a pullback. Meanwhile, TipRanks' AI analyst has an "outperform" rating on McDonald's stock and a price target of $342.
Barish sees near-term acceleration in McDonald's U.S. same-store sales (SSS) and medium-term acceleration in unit growth as the major drivers for the stock, which would help narrow the current valuation gap compared to rivals Yum Brands and Domino's. The analyst also noted improved international SSS, as the company remains a trade-down beneficiary due to its value proposition and low-price point combos.
Among other positives, Barish mentioned brand power and competitive advantages in size, scale, advertising, supply chain and most up-to-date chain of restaurants. He is also optimistic about MCD due to its defensive qualities and brand positioning during uncertain times, higher visibility in delivering low-single to mid-single digit SSS compared to rivals, acceleration of global unit growth to 4% to 5%, category-high operating margins and massive free cash flow generation to support dividends and repurchases.
"Despite a soft 1Q and well-known pressures on the low-end consumer, MCD is executing well by balancing value, innovation, and marketing," said Barish.
Barish ranks No. 591 among more than 9,600 analysts tracked by TipRanks. His ratings have been profitable 57% of the time, delivering an average return of 9.9%. See McDonald's Ownership Structure on TipRanks.
We move on to EPR Properties (EPR), a real estate investment trust (REIT) that is focused on experiential properties such as movie theaters, amusement parks, eat-and-play centers and ski resorts. EPR recently announced a 3.5% increase in its monthly dividend to $0.295 per share. At an annualized dividend of $3.54 per share, EPR stock offers a dividend yield of 6.2%.
Following an extensive visit to EPR's corporate headquarters and meetings with some teams in the company, Stifel analyst Simon Yarmak upgraded EPR stock to buy from hold and increased the price target to $65 from $52. TipRanks' AI analyst also has an "outperform" rating on EPR with a price target of $61.
Yarmak turned bullish on EPR, noting the recent rise in the stock and improvements in the cost of capital. He said that the company can "once again return to reasonable external growth."
Specifically, the analyst estimates that year to date, EPR's weighted average cost of capital (WACC) has improved to about 7.85% from nearly 9.3%. At these improved levels, Yarmak said that he thinks the company can start aggressively making more acquisitions and boost external growth.
Moreover, Yarmak highlighted the continued improvement in the fundamentals of the theatre industry and expects percentage rent to enhance EPR Properties' earnings over the next several years. Meanwhile, the improved cost of capital is enabling management to look at other external growth opportunities, mainly golf assets and health and wellness assets.
Yarmak ranks No. 670 among more than 9,600 analysts tracked by TipRanks. His ratings have been profitable 58% of the time, delivering an average return of 8.2%. See EPR Properties Stock Charts on TipRanks.
The third stock on this week's dividend list is Halliburton (HAL), an oilfield services company that provides products and services to the energy industry. HAL offers a quarterly dividend of 17 cents per share. At an annualized dividend of 68 cents per share, Halliburton stock's dividend yield stands at 3.3%.
Following a virtual investor meeting with management, Goldman Sachs analyst Neil Mehta reaffirmed a buy rating on Halliburton stock with a price target of $24. Also, TipRanks' AI analyst has an "outperform" rating on HAL stock with a price target of $23.
While management acknowledged near-term risks to the North American business, Mehta noted that about 60% of HAL's revenue comes from international markets and presents a relative degree of resilience, which is not priced into the stock. Halliburton expects continued softness in certain geographic locations such as Mexico, Saudi Arabia and Iraq. However, most of HAL's international rigs are exposed to unconventional drilling, and management does not expect these rigs to experience large suspensions.
Interestingly, management expects "idiosyncratic growth" from four key areas: unconventional completion opportunities in Argentina and Saudi Arabia, market share growth in directional drilling, intervention opportunities as operators are more likely to spend greater time optimizing existing assets than developing greenfield assets, and artificial lift opportunities. Mehta expects these opportunities to enhance margins and support strong free cash flow conversion, making HAL stock attractive at these levels.
Despite the expected softness in pricing in North America, Halliburton expects to maintain a premium to the market due to its differentiated Zeus technology and the long-term nature of its electric contracts, noted the analyst.
Mehta ranks No. 541 among more than 9,600 analysts tracked by TipRanks. His ratings have been successful 60% of the time, delivering an average return of 9.2%. See Halliburton Technical Analysis on TipRanks.