Top Dividend Stocks to Consider for Steady Income and Potential Growth
IBM: Transforming Business and Focusing on Growth Areas
Tech giant IBM (IBM) has reported mixed results for the second quarter, with revenue falling short of expectations but earnings exceeding estimates due to improved gross margin. Despite this, IBM is transforming its business and focusing on growth areas like hybrid cloud computing and artificial intelligence. In the first six months of 2023, the company generated over $3.4 billion in free cash flow and paid dividends worth $3 billion. IBM expects to deliver $10.5 billion in free cash flow for the full year. With a modest 0.6% increase, IBM raised its quarterly dividend to $1.66, marking 28 consecutive years of dividend hikes. IBM’s dividend yield is about 4.6%. Analysts are optimistic about IBM’s future, with Stifel analyst David Grossman increasing his price target for the stock and stating that it is most appropriate for dividend-sensitive value investors looking for a defensive market hedge.
Chord Energy: Rewarding Shareholders through Dividends and Buybacks
Chord Energy (CHRD) is an oil and gas operator with assets in the Williston Basin. The company rewards shareholders through a quarterly base dividend, a variable dividend, and share buybacks. In the first quarter, Chord declared a total cash dividend of $3.22 per share, including a variable dividend of $1.97 per share. RBC Capital analyst Scott Hanold expects Chord to declare a variable dividend of $0.15 per share for the second quarter, along with a base dividend of $1.25 per share and share buybacks. Hanold is bullish on CHRD, stating that the company’s strong balance sheet and minimal leverage provide the opportunity for significant allocation of free cash flow to shareholder returns.
Energy Transfer LP: Attractive Investment Opportunity with Strong Cash Flows
Energy Transfer (ET) is a publicly traded limited partnership that operates a vast pipeline network across 41 U.S. states. The company recently announced a quarterly cash distribution of $0.31 per common unit for the second quarter, marking a 0.8% increase compared to the previous quarter. Energy Transfer is targeting a 3% to 5% growth in its annual distribution and offers a dividend yield of over 9%. RBC Capital analyst Elvira Scotto believes that ET has one of the most attractive integrated asset bases and views it as a compelling investment opportunity. Scotto expects ET to generate significant cash flows, which, coupled with its solid balance sheet, could drive higher cash returns through increased distributions to unitholders.
EOG Resources: Strong Dividend with Potential for Buybacks
EOG Resources (EOG) is a crude oil and natural gas exploration and production company. The company returned $5.1 billion to shareholders through regular and special dividends last year, representing 67% of its free cash flow. EOG offers a forward dividend yield of about 2.6%. Mizuho analyst Nitin Kumar expects EOG to deliver strong free cash flow in the second quarter, allowing for potential buybacks. Kumar is bullish on EOG, stating that the company’s balance sheet and cash on hand provide the opportunity for excess cash allocation to shareholder returns.
Morgan Stanley: Market-Beating Results and Increased Dividend
Morgan Stanley (MS), a global financial services giant, reported strong second-quarter results, driven by the strength of its wealth management division. The company announced a dividend hike to $0.85 per share from $0.775, with a forward dividend yield of about 3.6%. Morgan Stanley’s board also reauthorized a $20 billion share repurchase program. BMO Capital analyst James Fotheringham increased his forward estimates and price target for MS stock, highlighting the wealth management division as the “bright spot.” Fotheringham is optimistic about near-term improvement in deal activity and holds a buy rating on the stock.
