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Top Wall Street analysts pick these 3 dividend stocks for higher returns

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Macroeconomic woes and geopolitical tensions have been weighing on investor sentiment, shaking up the major averages in the past week.

Investors seeking stability may want to turn to dividend-paying stocks.

They can follow the recommendations of Wall Street analysts, who conduct a thorough analysis of the financials of the dividend-paying companies and assess their ability to grow their dividends over the long term.     

Here are three attractive dividend stocks, according to Wall Street’s top experts on TipRanks, a platform that ranks analysts based on their past performance.

Enterprise Products Partners

This week’s first dividend stock is Enterprise Products Partners (EPD), a midstream energy services provider. The limited partnership has increased its cash distribution for 25 consecutive years at a compound annual growth rate of 7%.

On April 5, Enterprise Products announced a quarterly cash distribution of $0.515 per unit, payable on May 14. This payment reflects an increase of 5.1% year over year. EPD stock offers an attractive dividend yield of 7.1%.

Following the company’s investor update call held earlier this month, RBC Capital analyst Elvira Scotto reiterated a buy rating on EPD stock with a price target of $35. The analyst said that the call supported her view that the company is well-positioned to gain from its organic growth projects, which are expected to come online through 2026.

Scotto added that the company’s organic projects (like the Mentone West 2 natural gas processing plant in the Delaware) are mainly focused on the Permian Basin, where it expects consistent growth for at least another 10 years.

The analyst is confident about EPD’s ability to support its growth investments, thanks to a strong operations base and balance sheet. Further, she expects mid-single-digit growth in the company’s distributions.

“EPD remains comfortable returning 55-60% of its adjusted CFO (cash flow from operation) to investors through distributions and buybacks,” said Scotto.

Scotto ranks No. 84 among more than 8,700 analysts tracked by TipRanks. Her ratings have been profitable 64% of the time, with each delivering an average return of 17.8%. (See EPD Technical Analysis on TipRanks) 

Goldman Sachs

Let’s move to Goldman Sachs (GS), one of the leading investment banks in the U.S. The bank recently reported better-than-anticipated first-quarter results, driven by a rise in trading and investment banking revenue. A rebound in capital market activities helped it deliver solid performance.

In the first quarter, Goldman Sachs returned $2.43 billion of capital to shareholders through share repurchases worth $1.5 billion and dividends of $929 million. The bank declared a dividend of $2.75 per share, payable on June 27. GS stock offers a dividend yield of 2.7%

In reaction to the impressive Q1 print, Argus analyst Stephen Biggar upgraded his rating for Goldman Sachs to buy from hold with a price target of $465, saying that the results “demonstrated the considerable strengths of the Goldman franchise during an investment banking upturn.”

While there were some appearances of false rebounds in the investment banking space in 2023, the analyst thinks that the current recovery appears to have the power to persist. His optimism is supported by the encouraging sequential improvement in the equity and debt underwriting business. He is further encouraged by the high-teens year-over-year growth in industrywide announced M&A deal value in the first quarter.

Biggar expects these factors to drive improved revenues in the second half of 2024. He highlighted data from the Securities Industry and Financial Markets Association, which indicates a triple-digit year-over-year increase in capital formation in Q1 2024. Notably, the value of IPO issuance jumped 239%, while secondary issuance surged 110% in the first quarter.

Biggar ranks No. 603 among more than 8,700 analysts tracked by TipRanks. His ratings have been profitable 60% of the time, with each delivering an average return of 11.8%. (See Goldman Sachs Stock Buybacks on TipRanks)

Cisco Systems

Finally, let’s look at Cisco Systems (CSCO), a networking equipment maker. In the second quarter of fiscal 2024, the company returned a total of $2.8 billion to stockholders through share repurchases and dividends of 39 cents per share.

Cisco announced a roughly 3% increase in its dividend to 40 cents per share, beginning the payment in April 2024. The stock has a dividend yield of 3.3%.

On April 15, Bank of America Securities analyst Tal Liani upgraded Cisco Systems to buy from hold and increased the price target to $60 from $55, citing valuation and three catalysts: AI-related tailwinds, growth in the security business and synergies from the recently completed Splunk acquisition.

“We expect Networking to start normalizing and see renewed growth driven by Cisco’s share gains in Ethernet-based AI buildouts of hyperscalers,” said Liani.

While the analyst agrees that the next two quarters may continue to be under pressure, he contends that this downtrend is fully reflected in Wall Street’s expectations. He thinks that management’s guidance is adequately conservative.

Meanwhile, Liani expects the company’s security business growth to accelerate, driven by stabilization in the firewall space and its recently launched products.

Liani holds the 532nd position among more than 8,700 analysts tracked by TipRanks. His ratings have been successful 55% of the time, with each delivering an average return of 10.9%. (See Cisco Ownership Structure on TipRanks)

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