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Wall Street Analysts Highlight 3 Dividend Stocks for Steady Returns

Investor sentiment is currently challenged by concerns surrounding a potential government shutdown, a slowing labor market, and high stock valuations. In this climate of uncertainty, dividend stocks emerge as a compelling option for investors seeking stable returns. Analysts from Wall Street have identified three dividend-paying companies that exhibit strong fundamentals, making them attractive investments.

Brookfield Infrastructure Partners

The first stock recommended is Brookfield Infrastructure Partners (BIP), a global infrastructure company with diversified assets in the utilities, transport, midstream, and data sectors. On September 29, 2023, BIP announced a dividend payout of 43 cents per unit, marking a 6% year-over-year increase. With an annualized dividend of $1.72 per unit, the stock offers a yield of 5.2%.

Following a recent Investor Day event, Devin Dodge, an analyst at BMO Capital, reiterated a buy rating on BIP, with a price target of $42. Dodge noted that the management presentations revealed robust organic growth trends within the portfolio, which he expects to become increasingly apparent in the coming quarters. He emphasized the growing number of high-growth platforms and significant investment opportunities across various sectors, particularly in digital infrastructure.

Dodge pointed out that capital expenditures from hyperscalers are anticipated to increase by 50% this year, creating substantial growth potential for BIP’s data center platforms. Over the past five years, BIP’s funds from operations per unit (FFO/unit) have grown at a compound annual growth rate of approximately 10%, despite facing foreign exchange challenges and high interest rates. He predicts that easing conditions will lead to more visible FFO growth, stating, “As FFO/unit growth shifts higher, we believe there are positive implications for distribution growth and valuation.”

Interestingly, TipRanks’ AI Analyst holds a “neutral” rating on BIP, with a price target of $33. Dodge ranks No. 377 among over 10,000 analysts tracked by TipRanks, with a success rate of 73% and an average return of 13.2%.

Ares Capital

Next on the list is Ares Capital (ARCC), a specialty finance company that provides direct loans and investments to private middle-market firms. Ares currently pays a quarterly dividend of 48 cents per share, which translates to an annualized dividend of $1.92 and a yield of 9.4%.

In a recent update, Kenneth Lee, an analyst at RBC Capital, maintained a buy rating on Ares Capital, setting a price target of $24. Lee also noted that TipRanks’ AI Analyst has an “outperform” rating for ARCC, with a price target of $25. He prefers ARCC along with Blackstone Secured Lending Fund (BXSL) and Sixth Street Specialty Lending (TSLX)No. 59 among over 10,000 analysts tracked by TipRanks, achieving a success rate of 72% and an average return of 16.7%.

ONE Gas

The final recommendation is ONE Gas (OGS), a regulated natural gas utility serving over 2.3 million customers in Kansas, Oklahoma, and Texas. OGS pays a quarterly dividend of 67 cents per share, resulting in an annualized dividend of $2.68 and a yield of 3.3%.

Recently, Gabe Moreen, an analyst at Mizuho, upgraded OGS from hold to buy, raising his price forecast from $77 to $86. He cited several factors, including benefits from the Texas HB 4384 legislation, which allows for the recovery of specific costs associated with gas utility infrastructure. Moreen anticipates this legislation could generate an incremental earnings per share benefit of approximately 18 cents for fiscal 2026, with growth potential tied to ONE Gas’s annual capital spending in Texas.

Moreen believes that these factors will solidify OGS’s growth outlook at the higher end of its targeted range of 4-6%. He noted that elevated short-term interest rates prompted OGS to revise its guidance for 2023 and 2024, but he expects federal interest rate cuts to alleviate previous financial burdens. Furthermore, he pointed out growth opportunities stemming from rising natural gas demand from data centers and advanced manufacturing sectors.

Moreen ranks No. 142 among over 10,000 analysts tracked by TipRanks, with a success rate of 75% and an average return of 13.3%.

As investors navigate a complex market landscape, these dividend stocks offer a pathway to potential stability and growth. With insights from top analysts, those looking to enhance their portfolios may find value in these recommendations.

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