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Top Wall Street analysts are bullish on these dividend stocks

Traders work on the floor of the New York Stock Exchange.

Brendan McDermid | Reuters

In tumultuous markets, investors can turn to dividend-paying stocks that offer income and can help cushion a portfolio in tough times.

Given the massive universe of dividend-paying companies, selecting the right stocks can be a difficult task. To that end, investors can track the recommendations of Wall Street experts, who conduct a thorough analysis of a company’s earnings growth potential and dividend history.    

Here are three attractive dividend stocks, according to Wall Street’s top pros on TipRanks, a platform that ranks analysts based on their past performance.

IBM

This week’s first dividend pick is tech giant IBM (IBM), which announced mixed first-quarter results. The company’s earnings exceeded expectations while revenue missed estimates amid an uncertain macro backdrop. Also, IBM announced a $6.4 billion acquisition of cloud software maker HashiCorp.

IBM paid dividends of $1.5 billion in the first quarter. The company generated free cash flow of $1.9 billion in Q1 2024 and expects to deliver free cash flow of about $12 billion in the full year. IBM’s yield stands at about 4%.  

Recently, Evercore analyst Amit Daryanani reiterated a buy rating on IBM stock with a price target of $215. The analyst is positive about the company’s growth levers and expects it to benefit from several tailwinds, including generative artificial intelligence and the acceleration of consulting revenue.

“IBM sounded confident on their ability to see revenues accelerate in H2 on the consulting side from the 2% growth in Q1,” said Daryanani.

While the consulting business in Q1 2024 was hit by the impact of macro challenges on discretionary spending, the analyst noted that there are many catalysts that hint at increased growth going forward. These catalysts include generative AI ramps, backlog conversion and M&A contribution in the second half of 2024 from previously announced deals. Daryanani is also optimistic about durable growth in the mainframe business.

Daryanani ranks No. 243 among more than 8,800 analysts tracked by TipRanks. His ratings have been profitable 59% of the time, delivering an average return of 13.2%. (See IBM Stock Buybacks on TipRanks)

Hasbro

We move to toymaker Hasbro (HAS). In April, the company reported better-than-expected first-quarter earnings, thanks to its turnaround efforts. Hasbro paid dividends worth $97.2 million in Q1 2024. HAS offers a dividend yield of 4.7%.

Following meetings with Hasbro’s management at JPMorgan’s 52nd Annual TMC Conference, JPM analyst Christopher Horvers upgraded HAS stock to buy from hold while increasing the price target to $74 from $61.

The analyst stated that his estimates for Hasbro are higher than the consensus forecasts, as the Street is underestimating the company’s cost efficiency efforts and digital gaming prospects, both of which should be felt in the second half of 2024 and the first half of 2025.

Despite a shortened holiday season, Horvers is optimistic about the industry experiencing improved growth in 2024 due to recovery in low ticket and short replacement cycle product categories.

“HAS is specifically positioned better in 2H24 given the shift of Transformers to 3Q from 2Q and early benefits from improved merchandising (newness and process improvements under new management),” said the analyst.

Horvers ranks No. 769 among more than 8,800 analysts tracked by TipRanks. His ratings have been successful 60% of the time, delivering an average return of 7.2%. (See Hasbro Technical Analysis on TipRanks)

Target

Finally, let’s look at big-box retailer Target (TGT). In the first quarter of 2024, Target paid $508 million in dividends to shareholders. TGT offers a dividend yield of 2.8%.

Commenting on Target’s first-quarter results, Baird analyst Peter Benedict noted that the company slightly missed analysts’ earnings per share expectations, as higher operating expenses offset increases in gross margin.

Benedict thinks that the post-earnings selloff in TGT stock due to lower-than-expected earnings and price cuts announced by the company seems overdone. He contends that an incremental investment in value and affordability via low pricing was always a part of Target’s strategy for fiscal 2024. The analyst added that the company’s inventory continues to be in good shape.      

In particular, Benedict thinks that management’s aim to restore positive comparable sales growth seems achievable in the fiscal second quarter due to easier comparisons with the prior-year period.

The analyst also thinks that the company “continues to plan prudently given the value-conscious spending environment.”

Overall, Benedict thinks that the risk/reward profile of TGT stock looks compelling. The analyst reiterated a buy rating on Target with a price target of $190.

Benedict ranks No. 77 among more than 8,800 analysts tracked by TipRanks. His ratings have been profitable 68% of the time, delivering an average return of 15.1%. (See Target Insider Trading Activity on TipRanks)

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