How to seek stability in a turbulent market? Wall Street analysts are optimistic about these three dividend stocks.
21/04/2025
GMT Eight
Although the market is troubled by concerns of a potential recession and uncertainty about tariff policies, dividend stocks can help investors stabilize their portfolios. Top analysts on Wall Street help identify companies that can withstand short-term challenges and generate stable cash flow to continue paying significant dividends. Here are three dividend stocks recommended by top analysts on Wall Street.
Energy Transfer (ET.US)
Energy Transfer has a diversified portfolio of energy assets in the United States, including over 130,000 miles of pipelines and related energy infrastructure. In February of this year, Energy Transfer declared a quarterly cash dividend of $0.3250 per common share, a 3.2% increase year-over-year. The stock currently has a dividend yield of 7.5%.
Energy Transfer plans to announce its first-quarter financial results on May 6th. In her Q1 outlook on the midstream sector of the US, RBC Capital analyst Elvira Scotto has named Energy Transfer as one of the companies she favors in this sector. The analyst notes that recent pullbacks in midstream stocks covered by RBC seem to be overblown, considering the highly contractual and fee-based nature of midstream operations.
Elvira Scotto believes that comments related to the Waha price differential (the difference between the Waha hub in the Permian Basin and the Henry Hub natural gas prices) may be a key driver for Energy Transfer. The analyst also expects the company to benefit from the latest developments in potential data center/artificial intelligence projects. Scotto adds that comments from management on export markets in the current trade war context will also affect investor sentiment.
Elvira Scotto's bullish stance on Energy Transfer is also driven by the company's diversified cash flow sources across multiple hydrocarbon products and basins, mostly fee-based cash flow. The analyst expects Energy Transfer's strong balance sheet and cash flow growth to drive cash returns to shareholders and believes the company's valuation is attractive with limited downside. Overall, the analyst reaffirms a "buy" rating on Energy Transfer but slightly lowers the target price from $23 to $22 due to market uncertainties.
Williams Companies, Inc. (WMB.US)
Elvira Scotto also favors another midstream energy company, Williams Companies, Inc. The company is set to announce its first-quarter earnings on May 5th. Williams Companies, Inc. recently raised its 2025 annual dividend by 5.3% to $2.00 per year. The current dividend yield is 3.4%.
Before the Q1 earnings release, Elvira Scotto listed several potential key drivers for Williams Companies, Inc.'s stock price, including long-term AI/data center growth opportunities, dry gas basin activity, marketing department performance, and the timing of growth projects going online.
"We believe investors currently prefer Williams Companies, Inc.'s focus on natural gas businesses, as natural gas demand is less affected during economic downturns compared to crude oil, and LNG exports and AI/data center demand continue to support natural gas consumption," said Elvira Scotto.
Elvira Scotto reaffirms a "buy" rating on Williams Companies, Inc. and maintains a target price of $63. The analyst expects the company's various business segments to continue strong transport volumes, although the Northeast region may face some transportation volume pressure. Scotto predicts that the company's Sequent business will perform well this quarter due to storage opportunities brought by weather factors.
Overall, Elvira Scotto is optimistic about Williams Companies, Inc. advancing its backlog of growth projects and strengthening its balance sheet. The analyst believes the company will maintain its investment-grade credit rating and keep its dividend policy unchanged during the forecast period.
Diamondback Energy (FANG.US)
Diamondback Energy focuses on onshore oil and natural gas reserves in the Permian Basin. This year, the company announced an 11% increase in its annual base dividend to $4 per share. The current dividend yield is 4.5%.
Before Diamondback Energy's first-quarter earnings release scheduled for early May, J.P. Morgan analyst Arun Jayaram reiterated a "buy" rating on the company's stock and slightly lowered the target price from $167 to $166. The analyst expects Diamondback Energy's Q1 2025 performance to roughly meet Wall Street expectations, with an estimated cash flow per share of $8.12, compared to market consensus of $8.09.
Despite commodity price fluctuations, the analyst expects Diamondback Energy not to adjust its maintenance capital plans in the short term, especially as operations continue as planned after the completion of the Double Eagle acquisition. The analyst also points out that projects launched by Diamondback Energy in 2024 exhibit good well production performance, further driving capital efficiency.
The analyst forecasts that Diamondback Energy will generate approximately $1.4 billion in free cash flow, including a quarterly dividend of $0.90 per share and $437 million in capital expenditures.Original stock buyback. Analysts say, "Diamondback Energy is one of the leaders in capital efficiency among exploration and production companies, with one of the lowest free cash flow breakeven points in the industry.""Bonjour, comment a va?"
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