Investor sentiment has been impacted by concerns over a potential government shutdown, a slowing labor market, and elevated stock valuations. In light of this uncertainty, many investors are turning to dividend stocks as a means of securing stable returns. According to analysts tracked by TipRanks, several dividend-paying companies have been identified as strong candidates for inclusion in investment portfolios.
Brookfield Infrastructure Partners
First on the list is Brookfield Infrastructure Partners (BIP), a global infrastructure firm that manages a diverse array of long-life assets across utilities, transport, midstream, and data sectors. The company announced a dividend of 43 cents per unit on September 29, 2023, marking a 6% year-over-year increase. With an annualized dividend of $1.72 per unit, BIP offers a dividend yield of 5.2%.
Following a recent Investor Day event, Devin Dodge, an analyst at BMO Capital, reiterated a buy rating for Brookfield Infrastructure with a price target of $42. Dodge noted that management’s presentations highlighted promising organic growth trends, particularly in the company’s digital infrastructure sector. He emphasized the significant investment opportunities available, especially as capital spending by hyperscalers is expected to rise by 50% this year. Dodge believes that BIP is approaching a pivotal point in its funds from operations per unit (FFO/unit) growth, which has averaged a compound annual growth rate of approximately 10% over the last five years despite challenges such as foreign exchange fluctuations and high interest rates.
Ares Capital
Next is Ares Capital (ARCC), a specialty finance company that provides loans and investments to private middle-market businesses. Ares has declared a quarterly dividend of 48 cents per share, resulting in an annualized dividend yield of 9.4%.
In a recent update, Kenneth Lee, an analyst with RBC Capital, maintained a buy rating on Ares Capital, setting a price target of $24. He highlighted Ares’ long-standing ability to manage risks effectively through various market cycles. Lee views the company’s access to the Ares global credit platform as a significant competitive advantage, contributing to its potential for returns that exceed peer averages. The strong management team and the backing of dividends by core earnings further bolster Ares Capital’s attractiveness to investors. Lee ranks No. 59 among over 10,000 analysts on TipRanks and his ratings have been successful 72% of the time, yielding an average return of 16.7%.
ONE Gas
Finally, ONE Gas (OGS), a regulated natural gas utility serving over 2.3 million customers across Kansas, Oklahoma, and Texas, rounds out the list. The company pays a quarterly dividend of 67 cents per share, which translates to an annualized dividend of $2.68 and a yield of 3.3%.
Gabe Moreen of Mizuho recently upgraded OGS from hold to buy, raising the price forecast to $86 from $77. Moreen cited the advantageous effects of Texas legislation HB 4384, which allows for cost recovery associated with utility infrastructure, as a key driver for the company’s financial outlook. He anticipates that this legislation could contribute approximately 18 cents in incremental earnings per share by fiscal 2026, a benefit expected to grow alongside ONE Gas’ capital spending.
Moreen also noted that OGS is well-positioned to benefit from anticipated interest rate cuts by the Federal Reserve, which should alleviate some cost pressures. He highlighted the growth potential driven by increasing natural gas demand from data centers and advanced manufacturing sectors. Moreen’s analysis suggests that OGS could return to its historical premium valuation levels, making it a compelling choice at its current price point. He ranks No. 142 among analysts on TipRanks, with a successful rating track record of 75% and an average return of 13.3%.
Investors seeking stable returns amidst economic uncertainty may find these three dividend stocks worth consideration, as they are backed by strong fundamentals and positive growth outlooks.
