With the Federal Reserve poised to cut interest rates in September, the focus shifts to dividend-paying stocks as potential outperformers in the market. The allure of these stocks lies in their attractive dividend yields in comparison to other income-generating assets like bonds. However, given the vast array of companies offering dividends, investors may find it challenging to select the most suitable stocks. One approach could be to look to top analysts for recommendations, guiding investors towards attractive dividend stocks with strong financials.
The first highlighted dividend stock is EPR Properties (EPR), a real estate investment trust with a focus on experiential properties such as movie theaters, amusement parks, eat-and-play centers, and ski resorts. EPR boasts a dividend yield of 7.3%, making it an enticing option for income-seeking investors. Recently, RBC Capital analyst Michael Carroll upgraded his rating for EPR to buy from hold, with a raised price target of $50 from $48. Carroll believes that EPR has navigated challenging operating conditions, including the impact of the Covid-19 pandemic and other industry-specific headwinds. He anticipates a revival in the theatrical box office, driving higher percentage rents and bolstering the tenant base. Despite concerns about EPR’s exposure to theaters, management aims to reduce this over time. Additionally, Carroll notes that efforts by key tenant AMC, such as capital raises and debt refinancing, are alleviating worries. EPR’s high dividend yield is supported by a strong balance sheet and a healthy adjusted funds from operations payout ratio, providing investors with a sense of security.
Energy Transfer: A Limited Partnership
Another dividend pick is Energy Transfer (ET), a limited partnership in the midstream energy sector. With a dividend yield of 8%, ET offers an attractive option for income investors. Stifel analyst Selman Akyol reacted positively to ET’s Q2 results, citing better-than-expected EBITDA and highlighting growth opportunities in the Permian to Gulf Coast value chain. The optimism around natural gas as a primary energy source for data centers bodes well for ET, as the company aims to supply the necessary gas for continued power provision. Akyol also points out the increasing demand from utilities in states like Texas and Florida, providing ET with significant growth potential. Despite potential capex increases, Akyol remains bullish on ET’s positioning and reaffirms a buy rating with a price target of $19. ET’s ability to capitalize on various opportunities in the energy sector positions it favorably for growth.
The retail giant Walmart (WMT) has also caught the attention of analysts with its strong performance in the second quarter of fiscal 2025. Walmart’s consistent focus on value and convenience has enabled it to gain market share and deliver impressive results. In addition to its operational success, Walmart continues to reward shareholders through dividends and share repurchases. With a dividend increase of 9% earlier in the year, Walmart’s commitment to returning value to investors is evident. Baird analyst Peter Benedict reiterated a buy rating on Walmart, with a revised price target of $82, up from $70. Benedict highlights Walmart’s transformation efforts, emphasizing the significant impact of digital growth on its overall performance. The retailer’s strategic investments in automation and generative AI have contributed to improved returns and efficiency. With a solid track record of dividend hikes and a focus on strategic initiatives, Walmart remains a robust choice for income-focused investors.
Dividend-paying stocks present an appealing opportunity for investors seeking income in a low-interest-rate environment. By considering recommendations from top analysts and focusing on companies with strong financials and growth potential, investors can potentially enhance their portfolio returns. EPR Properties, Energy Transfer, and Walmart stand out as compelling options in the dividend stock universe, offering investors a blend of income generation and growth prospects. As market conditions evolve, staying informed and proactive in selecting dividend stocks can be key to achieving long-term investment success.