Top Wall Street analysts are bullish on these dividend stocks

The U.S. stock market has been under pressure recently due to fears of an economic slowdown, but dividend-paying names may help ease the going for investors.

Investors can consider the recommendations of top Wall Street analysts as they look for stocks that are backed by strong financials and the ability to pay dividends consistently.

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.

Pfizer

The health giant Pfizer (FE) is the first dividend act of this week. The company announced better-than-expected results in the second quarter thanks to its cost-cutting initiatives and solid sales of non-Covid products. Pfizer raised its guidance for the full year, reflecting strong demand for its non-Covid business, which is gaining from more acquired drugs and newly launched products.

In the first six months of 2024, Pfizer returned $4.8 billion to shareholders through dividends. The stock has a dividend yield of 5.9%.

In reaction to the upbeat Q2 results, Goldman Sachs analyst Chris Shibutani reiterated a buy rating on PFE shares and raised his price target to $34 from $31. The analyst said that while he anticipated Pfizer would raise its outlook, the magnitude of the increase exceeded his expectations.

The analyst raised his revenue estimates to reflect the strength of PFE’s heart disease drug Vyndaqel and cancer treatment Padcev. He also raised his EPS estimates due to improved top-line expectations and improved gross margin.

Shibutani said that while management did not provide significant updates related to the company’s obesity programs, he sees “the perfect for beating and further growing quarters during the balance of the year.” He also noted that the company’s capital allocation priorities, mainly dividends and debt reduction, remain intact.

Shibutani ranks #462 out of over 8,900 analysts tracked by TipRanks. Its ratings were profitable 46% of the time, delivering an average return of 13%. (See Pfizer stock charts on TipRanks)

Civitas Resources

We switch to oil and natural gas producer Civitas Resources (CIVILIANS). On August 1, the company announced its second quarter results and declared a quarterly dividend of $1.52 per share, payable on September 26.

The amount included a basic dividend of 50 cents per share and a variable dividend of $1.02 per share.

CIVI’s shareholder return policy entails the payment of at least 50% of its free cash flow (after the payment of the basic dividend) as a variable component. Interestingly, the company has now revised its shareholder return program to increase flexibility in how it rewards shareholders with variable returns. Starting in Q3 2024, the variable component of CIVI will include a combination of buybacks and dividends, with management and the board deciding on the allocation. CIVI also announced a new share buyback plan of up to $500 million.

Following the second quarter results, Mizuho analyst William Janela reaffirmed a buy rating on CIVI stock with a price target of $98, calling the company a top pick. Civitas has delivered another quarter of solid execution on Permian assets acquired in 2023, the analyst said.

Commenting on the revised shareholder return program, Janela said it gives the company “flexibility to lean more towards buybacks, which should resonate with investors and contribute positively to significant FCF (free cash flow) expansion ahead in 2H24”.

The analyst pointed out that Civitas cut its capital expenditure budget for the year by about 3%, fueled by reductions in well costs as the company integrates its Permian acquisitions. Additional cost savings in the DJ Basin also helped the company lower its 2024 capex estimate.

Janela ranks #406 out of over 8,900 analysts tracked by TipRanks. Its evaluations were successful 52% of the time, giving an average return of 25.6%. (See Civitas Resources Share Buybacks on TipRanks)

IBM

Finally, there’s the tech giant IBM (IBM), which recently impressed investors with better-than-expected second-quarter results. The company, which faces a strong generative artificial intelligence business, now expects full-year free cash flow to exceed $12 billion, up from a previous estimate of about $12 billion.

IBM returned $1.5 billion in dividends to shareholders in the second quarter. The stock offers a dividend yield of 3.5%. IBM’s dividend is supported by strong cash flows. The company is confident in its growth potential, supported by the strength of its diversified business model and hybrid cloud and AI strategy.

Following print, Evercore analyst Amit Daryanani reiterated a buy rating on IBM stock with a price target of $215. He noted that growth in the company’s software and infrastructure businesses was partially offset by pressures in the consulting business due to weak discretionary spending by enterprise clients. The analyst added that overall second-quarter results were better than feared.

Commenting on shareholder returns, Daryanani noted that the company did not do any share buybacks in the second quarter, but remains “committed to a stable and growing dividend.” He expects IBM to allocate more capital to M&A compared to share buybacks.

Daryanani ranks #429 out of over 8,900 analysts tracked by TipRanks. Its ratings were profitable 54% of the time, delivering an average return of 10.4%. (See IBM Ownership Structure on TipRanks)