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Top Wall Street analysts favor these dividend stocks for better returns

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A sign is posted in front of an Olive Garden restaurant on June 20, 2024 in Rohnert Park, California. 
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Dividend-paying stocks can help investors bolster their portfolios and boost returns.

Investors searching for these names will need to find companies that have a track record of making steady payments, backed by robust financials.

Here are three attractive dividend stocks, according to Wall Street’s top pros on TipRanks, a platform that ranks analysts based on their past performance.

Darden Restaurants

The first dividend stock is Darden Restaurants (DRI), which operates several popular brands in full-service dining, including Olive Garden, LongHorn Steakhouse and Yard House. The company recently announced mixed results for the fourth quarter of fiscal 2024. While Darden exceeded analysts’ earnings expectations, its sales slightly missed the Street’s consensus amid increased discounting by rivals.

Darden issued $628 million in dividends and committed $454 million to share repurchases in fiscal 2024. Moreover, the company announced a dividend hike of nearly 7%, bringing the quarterly dividend to $1.40 per share. The stock has a dividend yield of 3.5%.

Following the results, BTIG analyst Peter Saleh reiterated a buy rating on DRI stock with a price target of $175. The analyst highlighted that at the mid-point, Darden’s earnings per share outlook of $9.40 to $9.60 indicates double-digit total shareholder return, which is in line with the company’s long-term targets.

Saleh thinks that the company can achieve its targeted return metrics, supported by several factors, including a modest rise in pricing, advertising initiatives and easing inflation.

“We view Darden Restaurants as one of the strongest operators in the industry with historical sales and restaurant margin performance that has consistently exceeded peers,” said Saleh.

Saleh ranks No. 360 among more than 8,900 analysts tracked by TipRanks. His ratings have been successful 61% of the time, with each delivering an average return of 11.7%. (See Darden’s Financial Statements on TipRanks)

International Seaways

Next up is International Seaways (INSW), a tanker company that offers energy transportation services for crude oil and petroleum products. On June 26, the company paid a combined dividend of $1.75 per share. The company’s combined dividend represented 60% of its first-quarter adjusted net income.

In its first-quarter results, INSW highlighted that its combined dividend payments of $5.74 per share over the last twelve months reflected a dividend yield of more than 13%.

Following meetings with INSW’s management, Stifel analyst Benjamin Nolan reaffirmed a buy rating on the stock and increased the price target to $68 from $66. The analyst noted that the tanker market remains cyclically strong due to a continued increase in global oil consumption, the limited supply of new ships and the longer average voyage lengths caused by the ongoing geopolitical troubles.

Accordingly, Nolan increased his rate assumptions for 2024 and 2025. The analyst expects International Seaways to continue to deliver higher cash flows, fueled by a favorable backdrop for the tanker market.

Nolan expects INSW to sustain high supplemental dividends, given the estimated $200 million to $300 million of excess cash flow after capital expenditure (assuming there is no new debt associated with tanker acquisitions). “We are modeling $5.51/share in 2024 dividends, although there is room to be a little higher,” said the analyst.

Nolan ranks No. 68 among more than 8,900 analysts tracked by TipRanks. His ratings have been successful 67% of the time, with each delivering an average return of 19.5%. (See International Seaways’ Stock Charts on TipRanks)

Citigroup

Finally, let’s discuss this week’s third dividend stock, banking giant Citigroup (C). At a quarterly dividend of 53 cents per share, Citigroup offers a yield of 3.3%.

The bank held its Services Investor Day on June 18. Management expressed confidence about achieving the 2024 guidance, driven by revenue growth across all the core businesses despite macro uncertainty and the possibility of lower interest rates.

Following the event, Goldman Sachs analyst Richard Ramsden reiterated a buy rating on Citigroup stock and slightly raised his price target to $72 from $71. The higher price target reflects an increase in the analyst’s EPS estimates for 2024, 2025 and 2026 based on management’s commentary, which indicated that the bank’s strategic transformation plan is gaining momentum.

Ramsden noted that Citi is highly focused on its transformation efforts, with the bank making steady progress on risk control and data quality. Coming to the Services business, the analyst noted that management established strategic priorities for this vital component of the company’s financial targets. The analyst estimates that the Services business will account for 25% of the group revenue growth through 2026.

“The Services business is well positioned to maintain their market leading positions with potential to continue share gains across businesses,” said Ramsden. The analyst’s optimism is based on Citi’s extensive global network in 95 countries, well-established long-term client relationships, and market share gains that are expected to be driven by investments in technology and innovative offerings.

Ramsden ranks No. 969 among more than 8,900 analysts tracked by TipRanks. His ratings have been successful 65% of the time, with each delivering an average return of 11.9%. (See Citigroup Technical Analysis on TipRanks)

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