Scott Mlyn | CNBC
While many growth stocks have recovered this year, investors continue to look for attractive dividend picks that can offer steady income and the potential for long-term capital appreciation.
Here are five
Scott Mlyn | CNBC
While many growth stocks have recovered this year, investors continue to look for attractive dividend picks that can offer steady income and the potential for long-term capital appreciation.
Here are five
Tech giant IBM (IBM) recently reported mixed results for the second quarter. While revenue fell short of expectations, the company’s earnings smashed estimates due to improved gross margin.
IBM is transforming its business and focusing on growth areas like hybrid cloud computing and artificial intelligence. It generated free cash flow of over $3.4 billion and paid dividends worth $3 billion in the first six months of 2023. IBM expects to deliver free cash flow of $10.5 billion for the full year.
Earlier this year, IBM increased its quarterly dividend by a modest 0.6% to $1.66, marking the 28th consecutive year of dividend hikes. IBM’s dividend yield is about 4.6%.
Following the results, Stifel analyst David Grossman increased his price target for IBM stock to $144 from $140 and reiterated a buy rating. The analyst slightly raised his 2023 and 2024 estimates based on the organic and inorganic growth in the company’s software business.
“IBM has been a source of funds YTD and remains most appropriate for the dividend sensitive value investor looking for a defensive market hedge,” said Grossman.
Grossman is ranked 389th among more than 8,500 analysts tracked by TipRanks. His ratings have been profitable 64% of the time, with each one delivering an average return of 14.4%. (See IBM Blogger Opinions & Sentiment on TipRanks)
Next up is Chord Energy (CHRD), 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.
For 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 sees the possibility of the company exceeding its 75% minimum shareholder payout if excess cash builds and no other accretive acquisition opportunities arise. 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 in the range of $25 million to $30 million.
Ahead of the upcoming results, Hanold lowered his Q2 2023 earnings per share and cash flow per share estimates due to lower benchmark commodity prices, wider price differentials, and lower production. He also reduced his price target for CHRD to $180 from $185 to reflect his new commodity price forecast.
Nonetheless, Hanold is bullish on CHRD and reiterated a buy rating on the stock, saying, “The company’s balance sheet is strong and leverage is de-minimis, providing the opportunity to allocate a significant portion of FCF to shareholder returns.”
Hanold, who ranks 43rd out of more than 8,500 on Tipranks, has a success rate of 63% and each of his ratings has returned 21.4%, on average. (See Chord Energy Hedge Fund Trading Activity on TipRanks)
Another RBC Capital analyst, Elvira Scotto, is bullish on dividend stock Energy Transfer (ET), a publicly traded limited partnership that operates a vast pipeline network spanning 41 U.S. states.
On July 25, Energy Transfer announced a quarterly cash distribution of $0.31 per common unit for the second quarter, marking a 0.8% increase compared to the first quarter of 2023. That brings the dividend yield to over 9%. The company is targeting a 3% to 5% growth in its annual distribution.
Heading into second-quarter results, Scotto expects the performance of midstream companies to be affected by lower commodity prices. Nonetheless, the analyst reiterated a buy rating on Energy Transfer stock with a price target of $17.
“We believe ET has one of the most attractive integrated asset bases across our midstream coverage universe and view ET as a compelling investment opportunity, trading at a discount to large cap peers on EV/EBITDA and at a FCF [free cash flow] yield of ~14%,” said Scotto.
The analyst thinks that ET is well positioned to generate significant rise in cash flows, which, coupled with its solid balance sheet, could drive higher cash returns through increased distributions to unitholders.
Scotto holds the 53rd position among more than 8,500 analysts on TipRanks. Additionally, 65% of her ratings have been profitable, with an average return of 19.6%. (See Energy Transfer Stock Chart on TipRanks)
Another energy name this week is EOG Resources (EOG), a crude oil and natural gas exploration and production company. Last year, the company returned $5.1 billion through regular and special dividends, representing 67% of its free cash flow.
For the first quarter of 2023, EOG declared a regular quarterly dividend of $0.825 per share, payable on July 31. Moreover, the company repurchased $310 million worth shares in Q1. EOG offers a forward dividend yield of about 2.6%.
Mizuho analyst Nitin Kumar recently revised his estimates for EOG ahead of its upcoming results, to reflect actual pricing and improving Delaware well productivity based on the data from his firm’s proprietary database. Kumar’s Q2 2023 volume estimates are biased toward the higher end of the outlook range.
The analyst projects that EOG will deliver free cash flow of $753 million in the second quarter, despite his expectation of a 10% fall in aggregate pricing compared to the first quarter.
“Compared to the base dividend burden of ~$484mm and over $5bn of cash on hand at March 31, the company should have excess cash to pursue buybacks opportunistically,” said Kumar, who reiterated a buy rating on EOG with a price target of $146.
Kumar ranks 111th among more than 8,500 analysts on TipRanks. His ratings have been profitable 69% of the time, delivering an average return of 22.5%. (See EOG Insider Trading Activity on TipRanks)
Finally, we will look at a dividend stock in the financial sector: Morgan Stanley (MS). Recently, the global financial services giant reported market-beating second-quarter results, as the strength in its wealth management division offset lower trading revenue.
Last month, Morgan Stanley announced that it will hike its quarterly dividend per share to $0.85 from $0.775, commencing with the dividend to be declared in the third quarter of 2023. With this hike, Morgan Stanley’s forward dividend yield stands at about 3.6%. The bank’s board also reauthorized a $20 billion multi-year share repurchase program, beginning in the third quarter of 2023.
The bank’s upbeat second-quarter results prompted BMO Capital analyst James Fotheringham to increase his forward estimates by 1% to 2% and raise his price target for MS stock to $103 from $100. The analyst reiterated a buy rating on the stock, noting that the wealth management division remains the “bright spot.”
“Following two lackluster quarters for capital markets, MS noted the emergence of ‘green shoots’ across its businesses, supportive of a near-term improvement in deal activity,” said Fotheringham.
Fotheringham holds the 215th position among more than 8,500 analysts on TipRanks. Additionally, 65% of his ratings have been profitable, with an average return of 12.4%. (See Morgan Stanley Financial Statements on TipRanks)