In the face of fluctuating markets, especially following significant political events, investors often seek refuge in dividend stocks. These equities not only provide the potential for capital appreciation but also deliver a steady stream of income through regular dividend payments. With the recent spike in major stock averages post-election, it’s essential for investors to consider how adding dividend stocks can buffer their portfolios against future volatility. Here, we analyze three notable dividend stocks highlighted by top analysts on the financial data platform TipRanks, providing insights into their potential for sustained returns and growth.
Enterprise Products Partners (EPD), a key player in midstream energy services, has caught the attention of investors looking for reliable income streams. Recently, EPD announced a healthy third-quarter distribution of $0.525 per unit, marking a 5% increase year-over-year and offering a commendable yield of 6.9%. Furthermore, the company is committed to enhancing shareholder value by executing share repurchases, having invested approximately $76 million in its common units.
RBC Capital analyst Elvira Scotto maintains a bullish stance on EPD, reaffirming a buy rating with a target price of $36. Her confidence stems from EPD’s solid Q3 earnings, which aligned with analyst expectations and saw strong contributions from natural gas marketing. Scotto emphasized EPD’s continued growth potential through its robust backlog of organic projects, which are expected to fuel long-term expansion.
Given EPD’s strong cash flow and conservative financial leverage, Scotto believes the company is well-positioned to navigate challenges and continue delivering reliable dividends. With a successful track record—70% of her ratings have been profitable—investors may find EPD a promising addition for long-term growth and stability.
International Business Machines (IBM) is often viewed through the lens of a traditional technology company, yet it has aligned its dividends with its ongoing transformation. In the latest quarter, IBM reported mixed results: while it surpassed earnings expectations, its revenue fell short. However, with a dividend yield of 3.1% and a commitment to returning $1.5 billion to shareholders through dividends, IBM remains a contender for dividend-seeking investors.
Following engagements with IBM’s management, Evercore analyst Amit Daryanani has a revised optimistic outlook, setting a price target of $240. His analysis highlights IBM’s robust positioning in the artificial intelligence market, showcasing a dramatic increase in its AI-related business, which surged to over $3 billion in recent months. Daryanani expects that ongoing growth in its Software segment, particularly post-acquisition of Red Hat, will fortify IBM’s revenue streams.
Despite some challenges within its consulting and infrastructure segments, Daryanani projects that IBM’s diversified business model and strategic leadership under CEO Arvind Krishna will facilitate an upward trajectory in earnings. With 58% of his recommendations being successful and an average return of 12.3%, Daryanani’s endorsement reflects a solid investment opportunity for those looking to balance the risks associated with tech with consistent dividend payouts.
Ares Capital (ARCC), specializing in financing solutions for private middle-market companies, presents another compelling option for dividend investors, boasting an impressive yield of 8.9%. The company reported robust third-quarter results that showcased significant new investment activity and strong credit performance. With fourth-quarter dividends set at 48 cents per share, ARCC aims to attract income-focused investors.
RBC Capital’s Kenneth Lee reiterates a buy rating for ARCC, slightly raising his price target to $23. Despite minor adjustments to his earnings estimates for 2024 and 2025, Lee remains confident in ARCC’s ability to manage risks effectively and leverage its scale advantages in the competitive specialty finance landscape. The company’s ability to maintain a low non-accrual rate of 1.3% signals its strong credit assessment practices.
Lee’s perspective is grounded in ARCC’s substantial portfolio growth, which significantly surpassed expectations, indicating strong market positioning and resilience. His successful track record—70% of his ratings profitable—suggests ARCC could potentially provide investors with returns above the peer average, affirming its attractiveness in a diversified income-focused portfolio.
As the markets react to external events and economic shifts, dividend-paying stocks stand out as a strategic investment choice for individuals looking to mitigate risks while enjoying potential income. The three companies analyzed—Enterprise Products Partners, IBM, and Ares Capital—demonstrate unique strengths and diverse opportunities within various sectors, showcasing their ability to provide ongoing shareholder value. By carefully considering these opportunities, investors can foster a balanced portfolio that rewards them with sustained income and growth potential amidst market uncertainties.