Every investor wants to see his portfolio generate a solid return, and there’s no shortage of strategies to achieve this goal. One of the more popular strategies is dividend investing – a timeless approach that continues to stand the test of time.
The key here is the long-term total outperformance of the total return. Hartford Funds, after reviewing 50 years’ worth of stock records, demonstrated that dividend stocks generated an average annual return exceeding 9% for the half-century ending in 2023; non-dividend payers averaged about 4-and-a-quarter percent.
Dividend stocks achieve that quality return by combining the regular income stream of a dividend payment with a low-volatility profile. For investors, the combination of stability and solid return is hard to turn down.
Wall Street’s analysts also like dividend stocks, and they’re not shy about recommending them. Using the TipRanks database, we’ve pulled up some recent dividend picks from the analysts – stocks that can provide yields of up to 10%. Let’s dive in.
Kimbell Royalty Partners(KRP)
We’ll start in the Texas oil patch, with Kimbell Royalty Partners. This company, from its base in Fort Worth, operates in the mineral rights business, buying land titles and access to their associated royalties. Kimbell’s holdings are substantial, totaling approximately 17 million gross acres, spread across 28 states, with a presence in most of the major hydrocarbon production basins in the continental US. Among the assets the company owns are 129,000 gross wells, with 50,000 of those in the rich Permian Basin of its home state.
In a metric that bodes well for Kimbell going forward, the company has 5.13 wells that are drilled-but-not-completed (DUC), along with 2.71 net permitted locations, on its major properties. For comparison, the company needs 5.8 net wells in operation in order to maintain flat production numbers.
And production numbers are where it’s at. Kimbell’s income is derived from royalties on the hydrocarbon resources – oil, natural gas, and natural gas liquids – that are recovered from the drilling operations on its land holdings. In the last reported quarter, Kimbell reported 3Q24 revenues of $71.1 million, and generated earnings of 22 cents per share, a figure that beat the forecast by a penny. As of the end of Q3, Kimbell had $44.23 million in cash available for distribution.
That last figure directly supports the company’s dividend payment, which was paid out this month at 41 cents per share. The annualized dividend payment, of $1.64 per share, gives a forward yield of nearly 10.3%. Kimbell has a history of maintaining its dividend payment at 75% of the cash available for distribution.
5-star analyst Neal Dingmann is quick to recommend Kimbell, basing his upbeat stance on the company’s ability to maintain its dividend, along with the high potential for continued strong royalties on its properties. Dingmann writes, “Kimbell reported another solid quarter with virtually unchanged cash distributions despite notably sequentially weaker oil prices. The company’s Permian heavy position continues to ensure stable production as operational efficiencies continue at OXY, COP, XOM and the like. We believe KRP could become more acquisitive as M&A generally picks up toward year end with the company having ample dry powder to complete a strategic deal. We forecast stable production ahead with potentially slightly weaker near-term commodity prices though the approximately same distribution likely.”
These comments support Dingmann’s Buy rating on the shares, while his $21 price target points toward a one-year gain of 32%. Add in the dividend yield, and the total one-year return may reach over 42%. (To watch Dingmann’s track record, click here)
There are only two recent analyst reviews on record for this stock, and both are positive, making the consensus rating a Moderate Buy. The stock is selling for $15.87 and its average price target of $20 implies it will gain 26% over the coming months. (See KRP stock forecast)
Clearway Energy(CWEN)
Sticking with the energy sector, we’ll take a look at Clearway Energy, a company involved in the development and ownership of clean and green energy assets in the US market. Clearway is also a leader in the ongoing shift from fossil fuels to green energy. The company has assembled a wide portfolio of energy assets, including some 350 projects.
Clearway’s assets boast a total of 11.5 gigawatts of gross generating capacity, with 9 gigawatts of that being directly owned by the company. The portfolio projects are spread across 32 states and are hosted by some 500 landowners. The projects are clustered in the Northeast, in Illinois and Minnesota, in Texas, and in Arizona and California. Clearway’s assets include wind and solar power generation facilities, as well as energy storage assets and some 2.4 gigawatts of dispatchable power generation of the type used in supporting grid reliability.
Clearway uses its portfolio to support its own secondary mission: providing solid returns for its own investors. The company’s energy assets and activities generated solid revenue in 3Q24, the last reported period; the top line came to $486 million, up 31% year-over-year and above the $442.5 million analysts expected. However, Clearway’s bottom line, an EPS of $0.31, missed the forecast by 23 cents. Clearway generated $301 million in cash from operating activities during the quarter and reported having $146 million in cash available for distribution as of September 30 of this year.
The company’s cash available for distribution supported a dividend increase when the payment was declared this past October. The new common share dividend was set at 42.4 cents per share, a 1.7% increase from the previous quarter’s payment. The new annualized rate, $1.70 per share, gives a forward yield of almost 6%.
This stock has caught the attention of Bank of America analyst Dimple Gosai, who sees solid potential for additional dividend increases going forward. She says of the company, “We rate CWEN Buy as we see compelling upside potential given higher RA pricing in CA power markets supporting above average dividend growth and more than offsetting impact from higher interest rate. Further, a strong 30GW pipeline provides visibility. CAFD drop from sponsor offered at likely 10%+ with no external equity needs through 2027 remain key differentiating factors.”
Gosai’s stance backs up her Buy rating on the stock and a $33 price target that shows her confidence in a 15% upside potential for the coming year. When you add the dividend yield, this stock’s potential one-year return can reach 21%. (To watch Gosai’s track record, click here)
The Street clearly agrees that this is a stock to buy; there are 10 recent analyst reviews here, and the 9-to-1 split favoring Buy over Hold supports a Strong Buy consensus rating. The stock is currently trading for $28.70, and its $34 average price target implies it will gain 18.5% over the next year. (See CWEN stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
