In this article, we discuss 11 best 5% dividend stocks to buy according to analysts. You can skip our detailed analysis of dividend stocks and their performance over the years, and go directly to read 5 Best 5% Dividend Stocks To Buy According To Analysts.
High-dividend stocks can be an attractive option for investors who are seeking regular income from their investments. However, it's important to note that a high dividend yield can sometimes indicate that the stock price has fallen significantly, which may indicate a riskier investment. It's also important to consider the company's financial health and growth potential, as well as the overall market conditions. According to analysts, dividend yields between 3% to 6% are considered healthy.
The current high-interest rates environment has turned investors’ attention toward high-dividend stocks because of their ability to generate stable income. Historically, dividend stocks have massively contributed to the market returns overall, especially during periods when interest rates were high. Since 1926, dividend stocks represented nearly one-third of the S&P 500’s total return and accounted for over 50% during decades with elevated interest rates and slowing growth, as reported by iShares. Last year’s returns show the outperformance of dividend stocks over the wider market. The iShares Core High Dividend ETF, which tracks the performance of relatively high-dividend-paying US equities, gained 7.1% in 2022, compared with an 18.1% decline in the S&P 500. Moreover, the S&P 500 Dividend Payers fell by only 7.6% last year, which is less severe than a 21.1% drop in the S&P 500 Non-Dividend Payers.
United Overseas Bank published a report in collaboration with JPMorgan Asset Management, stressing the positive performance of high-dividend stocks over the years. The report mentioned that the MSCI World High Index gained 3.7% from July 2007 to August 2022 with a volatility of 13.3%. In comparison, MSCI World returned 2.1% during this period with high volatility of 16%.
Analysts are also presenting a positive stance on quality dividend companies during this period of financial uncertainty. Michael Clarfeld, ClearBridge Investments portfolio manager, spoke to CNBC about dividend companies. Here are some comments from the analyst:
“High-quality dividend growers are a good place to be. The upfront yield provides strong downside support and the dividend growth provides a meaningful headwind against rising interest rates and preserves purchasing power.”
Some of the best dividend stocks with high yields include JPMorgan Chase & Co. (NYSE:JPM), Comcast Corporation (NASDAQ:CMCSA), and The Bank of New York Mellon Corporation (NYSE:BK) because of their strong dividend policies. To know more about high-dividend stocks, readers can have a look at 15 Best High Yield Dividend Stocks to Buy.
11 Best 5% Dividend Stocks To Buy According To Analysts
For this article, we first screened for dividend stocks with yields above 5%. From the resultant list, we selected companies that have raised their dividends for at least 5 years. We then found the average price targets and ratings of these stocks placed by Wall Street analysts and other investment firms and narrowed them down to the stocks with strongest upside potential based on their current share price and their average price targets. The stocks are ranked in ascending order of the upside potential as of April 12.
11 Best 5% Dividend Stocks To Buy According To Analysts
Average Price Target Based on Analyst Ratings: $48.8
Altria Group, Inc. (NYSE:MO) deals in the manufacturing of tobacco, cigarettes, and other related products. In the fourth quarter of 2022, the company posted net revenue of over $6.1 billion, which showed a 2.3% decline from the same period last year. It remained committed to its shareholder obligation, returning $1.7 billion to investors during the quarter, which places it as one of the best dividend stocks on our list.
In addition to Altria Group, Inc. (NYSE:MO), JPMorgan Chase & Co. (NYSE:JPM), Comcast Corporation (NASDAQ:CMCSA), and The Bank of New York Mellon Corporation (NYSE:BK) are other high-dividend stocks favored by investors.
Altria Group, Inc. (NYSE:MO) currently offers a quarterly dividend of $0.94 per share and has a dividend yield of 8.39%, as of April 12. The company maintains a 53-year streak of consistent dividend growth. According to analysts, the stock has an upside potential of 8.29%, as of April 12.
At the end of Q4 2022, 45 hedge funds tracked by Insider Monkey reported owning stakes in Altria Group, Inc. (NYSE:MO), compared with 47 in the previous quarter. These stakes have a total value of over $1.8 billion.
Broyhill Asset Management mentioned Altria Group, Inc. (NYSE:MO) in its Q4 2022 investor letter. Here is what the firm has to say:
“We rebalanced our tobacco exposure during the year, reducing our investment in Altria Group, Inc. (NYSE:MO) as the future of the company’s combustible cigarette business became increasingly questionable given pending US legislation and a lackluster portfolio of reduced risk products. We reinvested the proceeds in Philip Morris so that relative position sizing is more consistent with our increased conviction.”
Average Price Target Based on Analyst Ratings: $112.7
Philip Morris International Inc. (NYSE:PM) is an American multinational tobacco company that also specializes in other nicotine-containing products. On March 9, the company declared a quarterly dividend of $1.27 per share, which was in line with its previous dividend. It is one of the best dividend stocks on our list as it holds a 14-year track record of consistent dividend growth. As of April 12, the stock has a dividend yield of 5.14%.
In March, JPMorgan upgraded Philip Morris International Inc. (NYSE:PM) to Overweight and also raised its price target on the stock to $116, presenting a positive outlook on the company's earnings growth.
In the fourth quarter of 2022, Philip Morris International Inc. (NYSE:PM) reported revenue of $8.1 billion, which showed a 0.59% growth from the same period last year. At the end of December 2022, the company had over $3.2 billion available in cash and cash equivalents.
As per Insider Monkey's Q4 2022 database, 47 hedge funds owned stakes in Philip Morris International Inc. (NYSE:PM), with a total value of over $6.2 billion. Among these elite funds, GQG Partners was the company's leading stakeholder in Q4.
Artisan Partners mentioned Philip Morris International Inc. (NYSE:PM) in its Q4 2022 investor letter. Here is what the firm has to say:
“Our top individual contributors were Philip Morris International Inc. (NYSE:PM), EOG Resources and Merck. Despite being US-based, tobacco company PM derives all its sales from outside the US. As a result, foreign exchange impacts can be an important driver of near-term returns, and the recent weakening in the US dollar should provide a strong tailwind for earnings due to translation effects. However, our investment case is not tied to currency movements. By virtue of its globally known brands, PM is the best-in-class operator with a well-diversified business, particularly by geography. We believe its next generation heat-not-burn product IQOS should gain share as consumers continue migrating to safer tobacco delivery systems. The company is progressing toward its acquisition of Swedish Match, a Swedish tobacco and nicotine products maker, which was previously held in the portfolio. The deal is a good fit for PM as it reduces PM’s dependence on cigarettes—a category in steady decline—and accelerates the company’s transition to smokeless “reduced-risk” products (RRPs)—a category that has experienced rapid growth over the past five years. PM can also leverage its global scale to generate significant revenue synergies from these complementary product sets, as well as quickly gain access to the US market—the world’s largest market for RRPs and one where regulators have embraced RRPs and other less harmful nicotine products. Looking at PM through our margin-of-safety criteria, the business trades for an undemanding valuation and has extraordinary business economics and a strong credit profile.”
Average Price Target Based on Analyst Ratings: $98.1
Prudential Financial, Inc. (NYSE:PRU) is a New Jersey-based insurance company that offers a wide range of insurance services to its consumers. In April, JPMorgan upgraded the stock to Overweight with a $114 price target, highlighting the company's strong balance sheet and lower-risk liability profile. The stock has an average upside potential of 14.9%, as of April 12.
Prudential Financial, Inc. (NYSE:PRU), one of the best dividend stocks on our list, has been raising its dividends consistently for the past 15 years. The company offers a quarterly dividend of $1.25 per share for a dividend yield of 5.89%, as recorded on April 12.
The number of hedge funds tracked by Insider Monkey owning stakes in Prudential Financial, Inc. (NYSE:PRU) grew to 29 in Q4 2022, from 21 in the preceding quarter. These stakes have a consolidated value of over $136 million. Ken Griffin and Noam Gottesman were some of the company's leading stakeholders in Q4.
Average Price Target Based on Analyst Ratings: $45.7
Verizon Communications Inc. (NYSE:VZ) is an American telecommunications company that has been paying regular dividends to shareholders for quite a long time. Moreover, the company maintains a 16-year streak of dividend growth. It currently offers a per-share dividend of $0.6525 every quarter and has a dividend yield of 6.66%, as of April 12. The company is among the best dividend stocks on our list.
In the fourth quarter of 2022, Verizon Communications Inc. (NYSE:VZ) generated $35.3 billion in revenues, which saw a 3.5% growth from the same period last year. For FY22, the company's operating cash flow came in at $37.1 billion and its free cash flow stood at $14.1 billion.
In March, BofA maintained a Neutral rating on Verizon Communications Inc. (NYSE:VZ) with a $41 price target. The firm mentioned that the company's core business is solid and its dividends are sustainable.
At the end of Q4 2022, Verizon Communications Inc. (NYSE:VZ) was a part of 56 hedge fund portfolios, as per Insider Monkey’s data. The stakes owned by these funds have a total value of over $1.5 billion.
Mawer Investment Management mentioned Verizon Communications Inc. (NYSE:VZ) in its Q3 2022 investor letter. Here is what the firm has to say:
“There are a few other segments of our portfolios that displayed weakness in the quarter. Cable and telecommunication companies have been an area that has lagged the broader market as their worlds are increasingly colliding. Companies such as Verizon (NYSE:VZ) has been impacted as wireless operator is spending heavily to attract internet subscribers with fixed wired access and the cable companies are trying to build wireless businesses.”
Average Price Target Based on Analyst Ratings: $32.40
Enterprise Products Partners L.P. (NYSE:EPD) is a Texas-based crude oil pipeline company that also deals in refined products and petrochemicals. On April 6, the company declared a quarterly dividend of $0.49 per share, which was consistent with its previous dividend. In 2022, it took its dividend growth streak to 23 years, which places it as one of the best dividend stocks on our list. As of April 12, the stock has a dividend yield of 7.31%.
Scotiabank initiated its coverage of Enterprise Products Partners L.P. (NYSE:EPD) with an Outperform rating in March and a $31 price target in March. The firm gave a positive outlook on the sector's performance this year. The stock has an average upside potential of 21.4%, as of April 12.
According to Insider Monkey's Q4 2022 database, 24 hedge funds held investments in Enterprise Products Partners L.P. (NYSE:EPD), compared with 21 in the previous quarter. The stakes owned by these funds have a collective value of over $242.4 million. With over 4.1 million shares, Fairholme (FAIRX) was the company's leading stakeholder in Q4.
Legacy Ridge Capital Management, LLC mentioned Enterprise Products Partners L.P. (NYSE:EPD) in its Q4 2022 investor letter. Here is what the firm has to say:
“Enterprise Products Partners L.P. (NYSE:EPD) is still owned in the fund and remains one of our largest positions, as it has been since the partnership was founded. This has not been a great investment. Shares are down about 6% since I first wrote about it. However, we have received $8.93 per share in dividends, which is about 34% of the 2018 share price. So, with dividends included we’ve made 28% cumulatively over 5-years. Still not good, but not an impairment of capital either.
Average Price Target Based on Analyst Ratings: $37.3
The Williams Companies, Inc. (NYSE:WMB) is an Oklahoma-based energy company with its core businesses in natural gas processing and transportation. In January, US Capital Advisors upgraded the stock to Overweight with a $36 price target, appreciating the company's overall performance. As of April 12, the stock has an average upside potential of 23.7%.
The Williams Companies, Inc. (NYSE:WMB), one of the best dividend stocks on our list, announced a 5.3% hike in its quarterly dividend on March 9 to $0.4475 per share. This marked the company's seventh consecutive year of dividend growth. The stock's dividend yield on April 12 came in at 5.90%. JPMorgan Chase & Co. (NYSE:JPM), Comcast Corporation (NASDAQ:CMCSA), and The Bank of New York Mellon Corporation (NYSE:BK) are some other popular dividend stocks with high yields.
At the end of December 2022, 34 hedge funds in Insider Monkey's database owned stakes in The Williams Companies, Inc. (NYSE:WMB), valued at over $286.6 million collectively.
Longleaf Partners mentioned The Williams Companies, Inc. (NYSE:WMB) in its Q2 2022 investor letter. Here is what the firm has to say:
“The Williams Companies, Inc. (NYSE:WMB) – US natural gas pipeline operator Williams contributed as it benefitted from positive natural gas tailwinds in the quarter. After scaling back the position in the first quarter, we sold the remaining position in the quarter as its price reached our appraisal value. This was a very successful investment that was extremely contrarian in 2019 and now has become much more consensus appreciated.”
