Top Wall Street analysts expect these dividend stocks to enhance total returns

A Home Depot location in Encinitas, California.Mike Blake | Reuters

With the late 2023 rally underway, investors can bolster their portfolios by adding a select group of dividend payers into the mix.

Dividend-paying stocks give investors a combination of potential price appreciation and income, which can enhance total returns.

Bearing that in mind, here are five attractive dividend stocks, according to Wall Street's top experts on TipRanks, a platform that ranks analysts based on their past performance.

Energy Transfer

First on this week's list is Energy Transfer (ET), a limited partnership that operates a diversified portfolio of energy assets in the U.S., with nearly 125,000 miles of pipelines. ET recently completed its acquisition of Crestwood Equity Partners.

In October, ET declared a quarterly cash distribution of $0.3125 per common unit for the third quarter, which was paid on Nov. 20. The stock has a dividend yield of 9%.

Commenting on the third-quarter results, RBC Capital analyst Elvira Scotto said that Energy Transfer delivered a solid performance, with adjusted earnings before interest, taxes, depreciation and amortization exceeding the consensus estimate by 7%. The analyst also noted the increase in the 2023 midpoint adjusted EBITDA outlook by $300 million.

Scotto expects the Crestwood acquisition to offer commercial synergies. Further, she pointed out that ET intends to maintain a strong balance sheet, aiming for leverage of 4.0-4.5x debt/EBITDA. Also, ET aims to continue to return cash to unitholders via increased distribution and potential buybacks.

“With high return growth projects, accretive acquisitions and its integrated asset footprint across hydrocarbons and basins, we believe ET can generate significant cash flow in the coming years,” said Scotto.

Scotto increased her price target on Energy Transfer to $19 from $18 and reiterated a buy rating, calling the stock a compelling investment opportunity. She ranks No. 54 among more than 8,700 analysts tracked by TipRanks. Her ratings have been profitable 65% of the time, with each delivering an average return of 18.1%. (See Energy Transfer Insider Trading Activity on TipRanks)

Sunoco LP

Scotto is also upbeat about another limited partnership: Sunoco (SUN), one of the leading motor fuel distributors in the U.S.

For the third quarter, Sunoco announced a quarterly cash distribution of $0.8420 per unit, paid on Nov. 20. The company's dividend yield stands at 6.3%.

After Sunoco posted its quarterly results, Scotto raised the price target for SUN stock to $57 from $51 to reflect a higher earnings outlook. The analyst reiterated a buy rating, saying that the company's volumes and margins surpassed her estimates.

The analyst thinks that the company's scale, procurement ability and lower cost structure compared to the industry enable it to deliver beyond the industry's breakeven margin.

“SUN continues to maintain a strong balance sheet exiting 3Q23 with leverage of 3.9x and total liquidity of $1.1BN, which provides SUN with significant financial flexibility to pursue growth opportunities including acquisitions.”

Overall, Scotto remains bullish on Sunoco due to its solid cash flows and focus on breakeven margins and expense management. (See Sunoco Hedge Funds Trading Activity on TipRanks)

VICI Properties

Our next dividend stock is VICI Properties (VICI), a real estate investment trust. VICI owns a solid portfolio of gaming, hospitality, and entertainment properties, including the properties of the iconic Caesars Palace Las Vegas and MGM Grand.

For the third quarter, the company declared a cash dividend of $0.415 per share, reflecting a 6.4% increase. VICI offers a dividend yield of 5.4%.

In a recent research note, Stifel analyst Simon Yarmak, who ranks 573rd out of more than 8,700 analysts tracked by TipRanks, reiterated a buy rating on VICI stock and called it one of his top ideas in the North American triple-net REITs sector.

Yarmak noted that VICI has performed well in both gaming and non-gaming categories. He added that VICI's tenants remain in a strong position.

“VICI has negotiated favorable escalators in its leases, which provide strong internal growth. Many of these escalators are linked to uncapped CPI growth (50.0% of rent) and, therefore, VICI should benefit from meaningful lease escalations in the above-average inflationary environment,” noted Yarmak.

The analyst estimates that lease escalations would generate about $71 million of incremental rent in 2024, which was not captured in the 2023 results. He expects VICI to post some of the best year-over-year growth in 2024 in the triple-net sector, with nearly 4.5% to 5.0% adjusted funds from operations growth.

Yarmak's ratings have been successful 54% of the time, with each one delivering an average return of 8%. (See VICI's Options Activity on TipRanks)

Home Depot

We move to home improvement retailer Home Depot (HD). The company exceeded analysts' fiscal third-quarter estimates despite a decline in sales due to pressure in certain big-ticket, discretionary categories. However, the company narrowed its full-year outlook due to macro pressures.

For the third quarter, the company declared a cash dividend of $2.09 per share, payable on Dec. 14. HD's dividend yield stands at 2.6%.

Following the fiscal third-quarter results, JPMorgan analyst Christopher Horvers lowered the price target for HD stock to $318 from $332 but maintained a buy rating, saying that Home Depot is managing well against a tough backdrop.

The analyst thinks that management's tone was less optimistic versus the second quarter but not worse than the first quarter. While the home improvement category is expected to remain under pressure in the first half of 2024, comparable sales are projected to recover in the second half.

“We believe HD remains one of the best long-term stories in retail given company-specific sales and margin initiatives, the duopoly/AMZN-resistant nature of the industry, and significant financial and operating leverage that amplifies EPS growth in better sales environments,” said Horvers.

Horvers ranks No. 520 among more than 8,700 analysts on TipRanks. His ratings have been profitable 61% of the time, with each delivering an average return of 8%. (See Home Depot's Technical Analysis on TipRanks)

Walmart

We finally look at big-box retailer Walmart (WMT). Earlier this year, the company announced a 2% increase in its annual dividend per share to $2.28. This marked the 50th consecutive year of dividend hikes for the company, giving Walmart the tag of a dividend king. The stock offers a dividend yield of 1.5%.

Recently, the retailer beat analysts' fiscal third-quarter earnings and sales expectations. However, it cautioned investors about subdued consumer spending.

Following the print, Guggenheim analyst Robert Drbul reaffirmed a buy rating on the stock with a price target of $180. The analyst noted that Walmart witnessed solid traffic growth across physical stores and digital channels. He increased his full-year sales estimates to reflect upbeat Q3 performance but maintained his fiscal 2024 and 2025 adjusted earnings per share estimates due to additional expense pressures.

“We continue to believe Walmart is well positioned in an uncertain macro environment with its price and value proposition and with increased convenience and assortment,” said Drbul.

The analyst added that given the stock's 1.5% dividend yield and the fact that it's trading at 22.3 times his fiscal 2025 EPS estimate of $7, WMT stock offers something for income, value and growth investors.

Drbul holds the 652nd position among more than 8,700 analysts on TipRanks. His ratings have been successful 59% of the time, with each delivering an average return of 5.9%. (See Walmart's Financial Statements on TipRanks).