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Top Wall Street Analysts Like These 3 Dividend Stocks for High Yields

A favorable Consumer Price Index report for April has revived investors’ hopes for rate cuts from the Federal Reserve – and this environment could prove favorable for dividend-paying stocks.

A lower interest rate environment makes dividend payers more attractive to income investors, particularly because these stocks would offer returns competitive with those on Treasuries.

Recent results released by several dividend-paying companies have proven their resilience and ability to pay dividends despite a challenging macroeconomic environment.

With that in mind, here are three attractive dividend stocks, according to top Wall Street professionals on TipRanks, a platform that ranks analysts based on their past performance.

Ares Capital

The first title on this week’s list is Ares Capital (ARCC), a company that focuses on financing solutions for small and medium-sized businesses. On May 1, the company announced its first quarter results and declared a quarterly dividend of 48 cents per share, payable on June 28. ARCC stock offers an attractive dividend yield of 9.1%.

Following the results, RBC Capital analyst Kenneth Lee reaffirmed a Buy rating on ARCC stock with a price target of $22. Although the company’s core earnings per share were slightly below the analyst’s estimate, the analyst noted that portfolio activity in the first quarter, including originations, was well above his expectations in what is generally considered a seasonally slower quarter.

The analyst added that credit performance in ARCC’s portfolio continues to be strong. Although the non-accrual rate increased slightly quarter over quarter, it remained low at 1.7% of the portfolio, compared to the industry average of nearly 3.8%.

“We maintain our Outperform rating as we favor ARCC’s strong track record of risk management through the cycle, well-supported dividends and scale advantages,” Lee said.

Overall, Lee is bullish on ARCC due to its size and capital position, access to resources in the broader Ares Credit Group platform, experienced management team and of its expectations that it can generate an annualized return on equity above the average of its peers.

Lee ranks 40th among more than 8,800 analysts tracked by TipRanks. Its ratings were successful 71% of the time, each delivering an average return of 17.2%. (See Ares Capital ownership structure on TipRanks)

Brookfield Infrastructure Partners

The next step is Brookfield Infrastructure (PIF), a leading global infrastructure company that owns and operates diversified long-term assets in the utilities, transportation, midstream and data sectors. The company recently announced its first quarter results and reported a quarterly distribution of $0.405 per unit.

This quarterly distribution marks a 6% year-over-year increase and is payable on June 28. With an annualized distribution of $1.62 per unit, BIP offers a yield of 5.3%.

Following the Q1 release, BMO Capital analyst Devin Dodge reaffirmed a Buy rating on BIP stock, stating that Q1 results were largely in line with expectations. However, the analyst lowered his price target from $40 to $36 to reflect the impact of rising interest rates on the stock’s valuation.

Dodge noted that Brookfield’s investment in container leasing company Triton International exceeds its underlying assumptions. BIP’s transportation business benefits from the acquisition of Triton, as the Red Sea crisis has led to the lengthening of some trade routes and an increase in global demand for containers.

At the same time, the analyst expects BIP’s capital deployment to focus on integration opportunities into its existing businesses. He highlighted that the company’s acquisition pipeline also includes large-scale opportunities focused on Asia Pacific, North America and Europe. The analyst expects new investment activities to accelerate through 2024.

“We believe BIP’s portfolio companies are performing well, the yield is attractive and the valuation appears undemanding,” Dodge said.

Dodge ranks 582nd among more than 8,800 analysts tracked by TipRanks. Its ratings have been profitable 68% of the time, each providing an average return of 10.6%. (See Brookfield Infrastructure’s insider trading activity on TipRanks)

Real estate income

This week’s final dividend pick is Real estate income (Oh). It is a real estate investment trust that invests in diversified commercial real estate and has a portfolio of more than 15,450 properties in the United States and seven countries in Europe.

On May 15, the company paid a monthly dividend of $0.257 per share. Overall, based on an annualized dividend of $3.08 per share, the stock’s dividend yield stands at 5.6%.

Responding to Realty Income’s first quarter results, RBC Capital analyst Brad Heffern reiterated a Buy rating on Realty Income stock with a price target of $58. The analyst notes that the results for the first quarter of 2024 slightly exceeded his expectations, marked by an impressive capitalization rate of 8.2% on acquisitions.

Heffern added that the vast majority of acquisitions in the first quarter took place in Europe, with the region accounting for 95% of acquisition volumes. The company attributed the opportunity in Europe to improving confidence in the macroeconomic outlook and seller motivation. In comparison, rising interest rates and macroeconomic uncertainty in the United States affected transaction volume in the first quarter. That said, the company expects U.S. volumes to recover in the second half, with a clearer picture of interest rates and the macroeconomic outlook.

“We believe O has one of the highest quality net lease portfolios in the industry, with an above-average investment grade weighting, a strong industrial portfolio and a high proportion of tenants subject to requirements of public reporting,” Heffern said.

Heffern ranks 505th among more than 8,800 analysts tracked by TipRanks. Its ratings have been profitable 48% of the time, each providing an average return of 12%. (See Realty Income Stock Buybacks on TipRanks)

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