Dividend stocks are the Swiss army knives of the stock market.
When dividend stocks go up, you make money. When they don’t go up — you still make money (from the dividend). Heck, even when a dividend stock goes down in price, it’s not all bad news, because the dividend yield (the absolute dividend amount, divided by the stock price) gets richer the more the stock falls in price.
Knowing all this, wouldn’t you like to own find great dividend stocks? Of course you would!
And thanks to the Stock Screener at TipRanks, you can. In today’s screen, we’ve sought out stocks receiving “strong buy” recommendations on Wall Street, with price targets significantly above where they trade today — and dividend yields better than the S&P 500’s average 2% yield.
Here’s what we’ve found:
With a stock price down 30% over the past year, you might think that Energizer is running out of juice — but Wall Street begs to differ. TipRanks’ survey of stock analyst ratings shows that, on average, Wall Street considers the world’s second-most-famous battery maker a “strong buy,” and capable of delivering nearly 40% profit if it reaches its $60 consensus price target. (See ENR’s price targets and analyst ratings on TipRanks)
Energizer’s trailing profits have slipped from more than $200 million earned in 2017, to just $6.4 million earned over the last 12 months, hurt, as UBS analyst Steven Strycula explains, by “early-stage integration setbacks” of its Spectrum Auto Care subsidiary, and “higher debt leverage.”
That being said, the consensus of analysts who follow the stock is that Energizer will pull out a win this year, earning perhaps $1.96 per share — then double that by 2021, when earnings are expected to climb to $3.95 per share. Strycula argued in August that the bear case on this stock is now fully “priced-in,” whereas the problems that have hurt earnings are “fixable.” At “9.5x Consensus EBITDA” with a 3% dividend yield, he thinks the stock is a ‘buy’.
Evercore ISI analyst Robert Ottenstein added, “ENR screens as the most undervalued stock in our coverage, reflecting controversies over i) the strategic rationale of Energizer’s diversification into Auto Care; ii) structural changes in the battery industry and whether a constructive pricing can be supported and; iii) risks of integration hiccups that could derail the delivery of financial targets.”
Ottenstein has recently raised his price target on ENR to $60 (from $50), which implies nearly 50% upside from current levels. (To watch Ottenstein’s track record, click here)
Dine Brands Global (DIN)
It’s hard to find a stock with less sex appeal than batteries, but Dine Brands — the restaurateur behind the IHOP and Applebee’s chains — is a close second. Regardless, Wall Street loves this stock as well, predicting the stock could rise as much as 50% over the next 12 months — and for good reason.
Last quarter, Dine Brands posted an impressive 24% gain in sales, and 68% growth in earnings. With profits on the rise, the stock now sells for a P/E of less than 13, and pays a 3.6% dividend yield to boot!
Recently, MKM analyst Brett Levy initiated coverage of Dine Brands with a “buy” rating and a $90 price target (Dine Brands stock costs less than $73 today). The analyst likes Dine Equity’s existing dual-branded franchising model, which has produced positive same-store sales since late 2017, and notes that management is working hard to prepare for further “evolution” in its business.
With shares basically flat over the past 52 weeks, Levy thinks there’s still time to get in before the stock takes off. (To watch Levy’s track record, click here)
Levy is not the only fan of Dine Brands on Wall Street. Deutsche Bank’s Brian Mullan believes DIN’s valuation seems “too cheap to us absent a variant view that calls for persistently negative SSS and / or persistent unit closures (at either brand) in the out years, which we don’t have. As such, we are sticking with the Buy rating, and see a better setup for the balance of the year. Our PT of $104 implies ~27% upside from today’s close, with a 12 month time horizon in mind.”
CVS Health (CVS)
Coming at last to perhaps Wall Street’s highest profile pick, CVS Health is the nation’s largest retail pharmacy chain, with 24% market share as of the end of last year (more than one-third more than second-place Walgreens).
Surprisingly for a category leader, CVS sells for a very reasonable 17 times trailing earnings (the average P/E on the S&P 500 is 21.5), and pays its shareholders a market-beating 3.2% dividend yield to boot.
Last month, RBC Capital analyst Anton Hie initiated coverage of CVS with an ‘outperform’ rating and an $85 price target, which is even better than the consensus price target of $72.80 (which itself would mean an 18% profit from today’s price levels). (To watch Hie’s track record, click here)
Hie said his ‘buy’ thesis is predicated “on our belief that CVS is positioned to lead the transformation of healthcare delivery with its unique set of vertically-integrated assets.” As CVS executes on said transformation, Hie predicts “patient investors will be rewarded” as management “delivers strong value creation.”
It’s even possible that not too much patience will be required. Already, CVS showed strong revenue growth of 35% last quarter, which is pretty impressive for a company already doing $226 billion in business annually. That being said, even if it does take a while for investors to see the value in this one, CVS shareholders can sit back and quietly enjoy their 3.2% dividend checks until the market discovers what analysts already see in CVS stock. (See CVS’s price targets and analyst ratings on TipRanks)