Dividend Stocks Can Help Investors Weather Economic Storms
The U.S. stock market has recently faced pressure due to concerns about an economic slowdown. However, dividend-paying stocks can provide a cushion for investors navigating these turbulent waters. These stocks offer consistent income streams, even during market volatility, and are especially attractive to investors seeking a reliable source of returns. To help investors identify such gems, we can turn to the recommendations of top Wall Street analysts on TipRanks, a platform that ranks analysts based on their past performance. Here are three compelling dividend stocks, chosen by TipRanks’ top analysts, that offer the potential for both growth and reliable income.
Key Takeaways
- Dividend-paying stocks can offer a stable income source, even in a volatile market.
- Strong financials and the ability to pay dividends consistently are key factors to consider in selecting dividend stocks.
- Top analysts on TipRanks have identified three compelling dividend stocks: Pfizer (PFE), Civitas Resources (CIVI), and IBM (IBM).
Pfizer: A Healthcare Giant with a High Dividend Yield
Pfizer (PFE), a leading healthcare giant, is our first dividend stock pick. The company recently reported better-than-expected second-quarter results, driven by cost-cutting measures and robust sales of non-COVID products. Pfizer’s success is further reflected in its increased full-year guidance, a testament to strong demand for its non-COVID offerings, particularly due to newly launched products and acquired drugs.
Pfizer returned a substantial $4.8 billion to shareholders through dividends in the first half of 2024. The stock boasts an impressive dividend yield of 5.9%, making it a very attractive option for income-seeking investors.
Chris Shibutani, an analyst at Goldman Sachs, maintains a buy rating on PFE stock and has raised his price target to $34 from $31, acknowledging Pfizer’s strong performance. Shibutani attributes this positive outlook to Pfizer’s success with its heart disease drug, Vyndaqel, and cancer treatment, Padcev . He also anticipates continued success for Pfizer throughout the year due to the company’s strong non-COVID business and the potential for further beat-and-raise quarters.
Civitas Resources: Leveraging Permian Opportunities
Our next dividend stock pick is Civitas Resources (CIVI), a prominent oil and natural gas producer. The company announced an impressive quarterly dividend of $1.52 per share, payable on September 26th, consisting of a base dividend of $0.50 per share and a variable dividend of $1.02 per share.
Civitas has a shareholder return policy that emphasizes rewarding investors with a significant portion of its free cash flow (FCF). The company’s revised shareholder-return program allows for greater flexibility in allocating returns, including a combination of buybacks and dividends. This strategy, along with the announcement of a new $500 million share buyback plan, signifies Civitas’ commitment to maximizing shareholder value.
William Janela, an analyst at Mizuho, reiterates a buy rating on CIVI stock with a price target of $98, highlighting the company’s solid execution across its Permian assets acquired in 2023. He views the revised shareholder-return program favorably, as it provides the company with "flexibility to lean more heavily into buybacks," potentially resonating with investors and setting the stage for significant FCF expansion in the latter half of 2024.
Janela acknowledges Civitas’ reduction in its capital expenditure budget for 2024, attributed to reduced well costs thanks to the integration of its Permian acquisitions and cost savings in the DJ Basin. He remains optimistic about Civitas’ future trajectory, predicting continued value creation for shareholders.
IBM: Navigating the AI Landscape
Finally, we have IBM (IBM), a tech giant making waves in the generative artificial intelligence (AI) sector. The company recently impressed investors with better-than-expected second-quarter results, driven by strong AI business. IBM’s confidence in its growth potential is further amplified by their revised full-year free cash flow forecast, exceeding $12 billion, surpassing the previous projection of around $12 billion.
IBM demonstrated its commitment to shareholder returns by distributing $1.5 billion in dividends during the second quarter. The stock currently offers a dividend yield of 3.5% , supported by robust cash flows. IBM’s diversified business model, particularly its hybrid cloud and AI strategy, fuels the company’s confidence in its long-term growth potential.
Amit Daryanani, an analyst at Evercore, maintains a buy rating on IBM stock and a price target of $215. Although he acknowledges that the growth in IBM’s software and infrastructure businesses was partially offset by consulting business pressures stemming from weak discretionary spending, he acknowledges a strong performance overall. While IBM did not engage in share repurchases during the second quarter, Daryanani emphasizes the company’s commitment to a "stable and growing dividend," anticipating more capital allocation toward mergers and acquisitions in the future.
Conclusion
Navigating a volatile market landscape can be challenging for investors. However, embracing dividend-paying stocks can offer a strategic advantage by providing a consistent stream of income and potentially cushioning returns during market downturns. Pfizer, Civitas Resources, and IBM, as highlighted by TipRanks’ top analysts, represent compelling choices for investors seeking a blend of growth and reliable income. By considering these stocks in their portfolios, investors can potentially weather market volatility while also capturing the potential for long-term returns.
