Top Wall Street analysts like these 3 dividend stocks for passive income
When markets get rocky, dividend-paying stocks can give investors’ portfolios the cushioning they need to ride out volatile times.
Finding the right dividend payers can be difficult, though. Investors can turn to the expertise of Wall Street analysts who can identify stocks with long-term growth potential and the ability to generate the solid cash flows needed to support continued dividends.
Here are three attractive dividend stocks, according to Wall Street’s top experts on TipRanks, a platform that ranks analysts based on their past performance.
OneMain Holdings
This week’s first dividend pick is OneMain Holdings (OMF), a financial services company focused on the needs of non-prime customers. OMF stock offers an attractive dividend yield of 8.1%.
Aside from regular dividends, the company also boosts shareholder returns with share repurchases. In the fourth quarter, OneMain repurchased 531,000 shares for $20 million.
Recently, RBC Capital analyst Kenneth Lee updated his model and estimates for OMF stock and raised the price target to $55 from $50 to reflect a more favorable macro outlook. The analyst reiterated a buy rating on the stock, citing the company’s reliable business model and capital generation ability.
Lee said that OMF’s new price target is based on a price-to-tangible book value (2025 estimate) multiple of 2.9x. He thinks that the company warrants a premium multiple as it can deliver a very high return on tangible common equity of more than 40%, with the cost of equity (under normalized conditions) estimated in the range of 9% to 10% and finance receivables expected to grow by mid- to high-single digits.
“In our view, there could be meaningful opportunities for further growth in the non-prime personal loan markets, as the loans only form 16% of total non-prime unsecured credit,” said Lee.
Lee ranks No. 76 among more than 8,700 analysts tracked by TipRanks. His ratings have been profitable 68% of the time, with each delivering an average return of 17%. (See OneMain Holdings Financials on TipRanks)
Walmart
We move to big-box retailer Walmart (WMT), which recently announced about a 9% increase in its annual dividend to 83 cents per share, representing its largest hike in over a decade. The announcement marked the company’s 51st consecutive year of dividend raises. Walmart pays a dividend yield of 1.4%.
Following a meeting with Walmart’s management, Jefferies analyst Corey Tarlowe reiterated a buy rating on WMT stock with a price target of $70. Among the key highlights of the meeting was the analyst’s observation that the company is witnessing some signs of consumer stability. For one, the customer experience score rose 140 basis points in fiscal 2024, which ended Jan. 31.
Tarlowe also noted increasing private label penetration, enhanced e-commerce shopping experience, better order economics with improved e-commerce margins in fiscal 2024, and an impressive rise in Sam’s Club’s membership levels that is expected to boost the top-line growth.
Additionally, the analyst is upbeat about the prospects of Walmart’s international segment. He expects its sales to see high-single-digit growth on an annual average basis and projects profits to more than double by fiscal 2028 compared to fiscal 2023.
Commenting on WMT’s advertising business, Tarlowe said, “Last year, WMT’s global advertising business grew 28% to ~$3.4B and we believe that advertising remains a significant opportunity for WMT ahead.”
Tarlowe holds the 537th position among more than 8,700 analysts tracked by TipRanks. His ratings have been profitable 65% of the time, with each delivering an average return of 14.6%. (See Walmart Ownership Structure on TipRanks)
SLB
This week’s third dividend pick is oilfield services company SLB (SLB). Earlier this year, the company announced better-than-anticipated fourth-quarter results and increased its quarterly cash dividend by 10%. SLB stock offers a dividend yield of 2%.
On April 1, Goldman Sachs added SLB to its U.S. Conviction List with a price target of $62, as analyst Neil Mehta thinks that that the company is a leading energy services provider. It is also the preferred stock to gain exposure to international and offshore oil services growth, at an attractive price-to-earnings multiple of 13x (based on 2025 earnings estimates).
Mehta also highlighted SLB’s ability to generate strong free cash flow, which can drive capital returns and growth investments. The analyst expects management to return more than 60% of its free cash flow via share buybacks and dividends.
Furthermore, the analyst thinks that SLB’s digital business is underappreciated. He stated, “We believe SLB is uniquely positioned to expand its digital business given the industry is not as digitized and SLB is the only digital provider in the space that carries competitive moat.”
Mehta ranks No. 176 among more than 8,700 analysts tracked by TipRanks. His ratings have been successful 67% of the time, with each delivering an average return of 12.7%. (See SLB Stock Buybacks on TipRanks)