In this article, we will take a look at the Top 10 High Dividend Stocks to Invest In According to Analysts.
According to a CNBC report published on May 29, dividend-paying stocks can play an important role in enhancing long-term investor returns. Morgan Stanley believes several companies may soon be in a position to begin distributing dividends, creating potential opportunities for shareholders.
Strategist Todd Castagno said in a note that companies initiating dividend payments have historically delivered “outsized returns.” Morgan Stanley’s analysis found that stocks announcing a regular quarterly dividend outperformed the broader market by an average of 650 basis points during the six months following the announcement.
The outperformance became even more pronounced over a longer period. Castagno wrote that these companies exceeded market returns by 1,000 basis points, on average, in the 12 months after announcing a dividend. One basis point equals 0.01%.
Those gains come on top of the long-term benefits investors may receive when dividends are reinvested and allowed to compound over time. He made the following remark:
“Most dividend initiating companies start their payments at a 2.0% yield, on average, with the highest initial yields coming from Consumer Staples, Utilities, and Energy sectors and the lowest yields in Information Technology, Industrials, and Consumer Discretionary.”
Given this, we will take a look at some of the best dividend stocks with high yields.
Photo by Annie Spratt on Unsplash
Our Methodology:
For this list, we screened for dividend companies with yields above 3%, as of May 29. From that list, we identified stocks with upside potential of at least 10%. We finally picked companies that have recently reported noteworthy developments likely to impact investor sentiment. The stocks are ranked according to their upside potential.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 498.7% since May 2014, beating its benchmark by 303 percentage points (see more details here).
10. Cal-Maine Foods, Inc. (NASDAQ:CALM)
Analyst Upside Potential as of May 29: 10.12%
Dividend Yield as of May 29: 6.30%
On May 12, Cal-Maine Foods, Inc. (NASDAQ:CALM) and Sara Lee Frozen Bakery, LLC, a leading manufacturer of premium frozen baked goods, announced that Cal-Maine Foods had acquired certain assets of the Van’s Foods business from Sara Lee Frozen Bakery, LLC, a Kohlberg portfolio company.
Van’s is the leading brand in gluten-free waffles and has established itself as a category leader in the rapidly growing better-for-you frozen breakfast market. The acquisition supports Cal-Maine Foods’ strategy to diversify its business, expand its prepared foods business-to-consumer (B2C) retail operations, and create greater value across the supply chain.
The addition of Van’s is expected to increase Cal-Maine Foods’ annual prepared foods sales by about 10% and boost volume by approximately 6% on a pro forma basis. The brand is expected to strengthen the company’s ability to meet changing consumer preferences while expanding its reach across grocery stores, e-commerce platforms, and other direct-to-consumer channels.
Van’s competes in the fast-growing better-for-you frozen breakfast category through broad retail distribution and a strong value proposition centered on taste, convenience, and products designed to meet a variety of dietary needs and preferences.
Cal-Maine Foods, Inc. (NASDAQ:CALM) is the largest egg producer in the United States and a leading company in the egg-based food industry.
9. American Electric Power Company, Inc. (NASDAQ:AEP)
Analyst Upside Potential as of May 29: 12.30%
Dividend Yield as of May 29: 3.01%
On May 29, Truist analyst Richard Sunderland lowered his price recommendation on American Electric Power Company, Inc. (NASDAQ:AEP) to $145 from $148. He reiterated a Buy rating on the stock. The update came as part of a broader research note covering Power and Utilities companies. The firm said that positive estimate revisions would reinforce the view that American Electric is well-positioned to benefit from nationwide data center construction. Truist also noted that the pace of data center development could still provide upside surprises, even compared with its already favorable outlook. The analyst shared these views in a research note to investors.
Earlier, on May 21, Morgan Stanley analyst David Arcaro reduced the firm’s price target on AEP to $129 from $136 and maintained an Overweight rating on the shares. The firm updated its April price targets for Regulated & Diversified Utilities and Independent Power Producers (IPPs) across North America. Morgan Stanley noted that utility stocks underperformed the S&P 500 during the month, according to the analyst’s note to investors.
American Electric Power Company, Inc. (NASDAQ:AEP) is an electric utility holding company. Through its operating utilities, the company provides generation, transmission, and distribution services to more than five million retail customers across Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia, and West Virginia.
