Some dividend stocks pay a very appealing yield — but at what price? Some of the classic dividend stocks look pretty weak from an investing perspective. For example, Exxon Mobil (NYSE:XOM) has a very cautious analyst consensus. So does General Electric (NYSE:GE) and Procter & Gamble (NYSE:PG). If you are going down the dividend route, you may as well find stocks that are performing well, regardless of the dividend — stocks where the price is set to rise. This gives you the flexibility to sell at a profit if you decide to cash in sooner rather than later.
That’s why all five of the dividend stocks covered here boast a “strong buy” rating from the Street’s best analysts. With these stocks, you can enjoy long-term dividend returns without compromising.
The analyst consensus is based on ratings from the past three months. I also focus on the consensus from only the top-performing analysts. This is according to analyst ranking service TipRanks. I use their stock screener to find “strong buy” dividend stocks with upside potential of over 10% according to top analysts.
So what makes these dividend stocks so attractive? Let’s take a closer look:
[Editor’s note: This post was originally published in August 2018. We have updated the picks with current statistics.]
• Dividend Aristocrat with 32 years dividend growth
• $4.48 annualized payout, paid quarterly
• 3.6% dividend yield vs. 4.7% sector average
One of the best oil and gas dividend stocks, Chevron Corporation (NYSE:CVX), previously announced an impressive $3 billion stock buyback. The news sent shares of Chevron up even though reported earnings of $3.41 billion missed the $3.94 billion consensus.
Most encouragingly, Chevron’s CEO Pat Yarrington said the buyback isn’t a one-off. She let slip on the earnings call that further buybacks could be on the way. “We do want this to be a sustainable element here,” she told analysts. “There might be a bit of conservatism in here in how we started.”
Plus Chevron delivered strong growth in the lucrative Permian basin. Well production in the region is now up by over 50% year-to-date. And analysts noted that the earnings miss was due to a slight expense increase that shouldn’t happen again.
Indeed the outlook from the Street is extremely bullish. Five best-performing analysts have rated CVX a buy in the last three months. Meanwhile, their average price target of $143 indicates roughly 13% upside potential. See what other Top Analysts are saying about CVX.
KLA-Tencor Corp (KLAC)
• 8 years dividend growth
• $3 annualized payout, paid quarterly
• 3% dividend yield vs. 1.8% sector average
Semiconductor equipment provider KLA-Tencor Corporation (NASDAQ:KLAC) stock wafted up 10% in just five days after sailing on earning results that beat Street expectations across the board. Revenue of $1.07 billion revealed a 14% year-over-year gain. It also came in $20 million higher than the consensus estimate, making it one of our top dividend stocks.
KLA-Tencor CEO Rick Wallace gave this review of the company’s stellar quarter: “We delivered the second highest quarterly bookings result in our history, while setting all-time records in quarterly shipments, revenue, and GAAP and non-GAAP earnings per diluted share.”
This sets the company up well for further dividend hikes. Back in February, the company announced its biggest-ever dividend increase of 27%, to 75 cents per share per quarter.
“The move is an even more impressive reflection on mgmt’s outlook for fundamental strength sustainability, since action does not appear to preclude a meaningful share repurchase” cheered top B.Riley FBR analyst Craig Ellis (Profile & Recommendations) at the time.
He believes the move still “leaves abundant wiggle room for substantial increases in early 2019.” Ellis has just reiterated his “buy” rating on the stock with a $145 price target (24% upside potential).
Overall, this “strong buy” stock has received six recent buy ratings, with only one top analyst remaining sidelined. The $138 average analyst price target works out at 17% upside potential. See what other Top Analysts are saying about KLAC.
• 2 years dividend growth
• $2.28 annualized payout, paid quarterly
• 3% dividend yield vs. 3% sector average
There’s no denying that Gilead Sciences (NASDAQ:GILD) has had a few rough years. The stock suffered on the rapid decline of its key hepatitis franchise. But the tide is shifting. With newly approved HIV medicine Biktarvy, Gilead is becoming investable again. Indeed, in the past month GILD stock has traversed 5.4% higher.
Five-star RBC Capital analyst Brian Abrahams (Profile & Recommendations) has just reiterated his GILD “buy” rating. This is with a $90 price target (17.6% upside potential). “We believe Biktarvy’s strong profile and robust launch, along with favorable demographic and pricing dynamics, will underpin good HIV franchise sustainability through 2025” says Abrahams. And “with nearer-term competitive threats overblown; we expect this to maintain a strong foundation for GILD’s valuation.”
Plus even though it’s a relative dividend newbie (its dividend started in 2015), GILD has demonstrated a strong commitment to raising payouts. In just three years, Gilead has boosted its dividend payout by almost 33%, ranking it among our best dividend stocks.
In total, eight top analysts have published recent buy ratings on this “strong buy” stock. This is versus three hold ratings. The average price target: $89.57 (15% upside potential). See what other Top Analysts are saying about GILD.
Valero Energy (VLO)
• 7 years dividend growth
• $3.20 annualized payout, paid quarterly
• 2.8% dividend yield vs 4.1% sector average
Texas-based Valero Energy (NYSE:VLO) is the largest independent refiner in the world. It owns 14 refineries in the U.S., Canada and U.K., with total crude throughput capacity of nearly 2.4 million barrels per day.
The company has previously reported top-notch Q2 earnings — which could have been significantly better if not for a fire at Texas City. VLO’s 2Q18 $2.15 EPS represented a whopping 8% beat to consensus. The beat was driven by 1) higher refining margins and 2) higher throughput. Watch for the trend to continue in Valero’s Q3 report on Oct. 25.
The best part for investors interested in dividend stocks: VLO reiterated its shareholder return policy with a targeted annual payout ratio of 40%–50%. VLO believes this represents the right balance of shareholder returns and cash to invest back.
Five-star RBC Capital analyst Brad Heffern (Profile & Recommendations) gives VLO his seal of approval. He writes: “We like Valero Energy for its position at the bottom of the global refining cost curve and its significant leverage to the U.S. Gulf Coast refining market.” Plus “VLO has a very strong program to return capital to shareholders, with $8+ billion returned in 2015–17.”
Hefferen reiterated his “buy” rating on July 27 with a $131 price target. Overall, this stock scores two top analyst buy ratings and no hold or sell ratings. These analysts (on average) see VLO spiking 13.3% in the coming months to $131. See what other Top Analysts are saying about VLO.
Six Flags Entertainment (SIX)
• 8 years dividend growth
• $3.12 annualized payout, paid quarterly
• 4.7% dividend yield vs. 3.3% sector average
Six Flags Entertainment (NYSE:SIX) is the world’s largest regional theme park operator. The company currently owns 19 locations across the U.S., Canada and Mexico. Even though the company reported bankruptcy back in 2010, SIX is successfully turning itself around. The company now boasts a significantly de-levered balance sheet and very experienced new management.
Indeed, SIX reported solid 2Q18 results. “Pricing trends are strong and the new membership program will continue to build the active pass base and recurring revenues” applauds top Oppenheimer analyst Ian Zaffino (Profile & Recommendations). He has a bullish $80 price target on the stock (20.6% upside potential).
Zaffino continues “International opportunities remain rich given the burgeoning middle class in the emerging markets. Management also intends to grow its domestic footprint.” Set to fully open by 2022, Six Flags Kids World in Nanjing represents SIX’s 11th park in China. Management hopes to ramp up this number even further. It is eyeing 10-20 further multi-park locations in China.
Overall, SIX has a “strong buy” rating from top analysts. This comes with a compelling $76 average analyst price target (14.7% upside potential), placing it on our list of top dividend stocks to buy. See what other Top Analysts are saying about SIX.
TipRanks.com offers exclusive insights for investors by focusing on the moves of experts: Analysts, Insiders, Bloggers, Hedge Fund Managers and more. See what the experts are saying about your stocks now at TipRanks.com. As of this writing, Harriet Lefton did not hold a position in any of the aforementioned securities.