Top Wall Street analysts select these dividend stocks to enhance returns

Verizon CEO Hans Vestberg on the floor at the New York Stock Exchange (NYSE) in New York, U.S., October 22, 2019.

Brendan McDermid

When markets get choppy, dividends offer investors’ portfolios some cushioning in the form of income.

Dividends provide a great opportunity to enhance investors’ total returns over a long-term horizon. Investors shouldn’t base their stock purchases on dividend yields alone, however: They ought to assess the strength of a company’s fundamentals and analyze the consistency of those payments first. Analysts have insight into those details.

To that effect, here are five attractive dividend stocks, according to Wall Street’s top experts on TipRanks, a platform that ranks analysts based on their past performance.

Verizon Communications

Let us first look at telecommunication giant Verizon (VZ). The stock offers a dividend yield of 8%. Last week, the company declared a quarterly dividend of 66.50 cents per outstanding share, an increase of 1.25 cents from the previous quarter. This marked the 17th consecutive year the company’s board approved a quarterly dividend increase.

Recently, Citi analyst Michael Rollins upgraded Verizon and its rival AT&T (T) to buy from hold. The analyst increased his price target for Verizon stock by $1 to $40, while maintaining AT&T’s price target at $17.

Rollins noted that several headwinds like competition, industry structure, higher rates and concerns about lead-covered cables have affected investor sentiment on telecom companies. That said, he has a more constructive outlook for large cap telecom stocks.

“The wireless competitive environment is showing positive signs of stabilization that should help operating performance,” said Rollins, who ranks No. 298 out of more than 8,500 analysts on TipRanks.

The analyst contended that the recently announced price hikes by Verizon and AT&T indicate a stabilizing competitive backdrop for wireless. He further noted that customers continue to hold onto their phones for longer, which is reducing device upgrade costs and stabilizing churn.

Overall, the analyst sees the possibility of some of the ongoing market concerns fading over the next 12 months. Also, he expects the prospects for improved free cash flow to lower net debt leverage and support the dividend payments. 

Rollins has a success rate of 65% and each of his ratings has returned 13.3%, on average. (See Verizon Hedge Fund Trading Activity on TipRanks)

Medtronic

Medical device company Medtronic (MDT) recently announced a quarterly dividend of $0.69 per share for the second quarter of fiscal 2024, payable on Oct. 13. MDT has increased its annual dividend for 46 consecutive years and has a dividend yield of 3.5%. 

Reacting to MDT’s upbeat fiscal first-quarter results and improved earnings outlook, Stifel analyst Rick Wise explained that continued recovery in elective procedure volumes, supply chain improvements and product launches helped drive revenue outperformance across multiple business units.

The analyst thinks that Medtronic’s guidance indicates that it is now well positioned to more consistently deliver better-than-expected growth and margins. He also expressed optimism about the company’s transformation initiatives under the leadership of CEO Geoff Martha.

“We view Medtronic as a core healthcare holding and total return vehicle in any market environment for investors looking for safety and stability,” said Wise, while raising his price target to $95 from $92 and reaffirming a buy rating.

Wise holds the 729th position among more than 8,500 analysts on TipRanks. Moreover, 58% of his ratings have been profitable, with each generating a return of 6.3%, on average. (See Medtronic Insider Trading Activity on TipRanks)   

Hasbro

Another Stifel analyst, Drew Crum, is bullish on toymaker Hasbro (HAS). He increased the price target for Hasbro to $94 from $79 while maintaining a buy rating, and moved the stock to the Stifel Select List.

Crum acknowledged that HAS stock has been a relative laggard over the past several years due to many fundamental issues that resulted in unhappy investors.

Nevertheless, the analyst is optimistic about the stock and expects higher earnings power and cash flow generation, driven by multiple catalysts like portfolio adjustments, further cost discipline, greater focus on gaming and licensing, as well as a new senior leadership team.

Crum noted that Hasbro grew its dividend for 10 consecutive years (2010-2020) at a compound annual growth rate of over 13%, with the annual payout representing more than 50% of free cash flow, on average. However, any upward adjustments were limited following the Entertainment One acquisition, with only one increase during 2021 to 2023.

The analyst thinks that given the current dividend yield of around 4%, Hasbro’s board might be less inclined to approve an aggressive raise from here. That said, with expectations of higher cash flow generation, Crum said that “the company should have more flexibility around growing its dividend going forward.”

Crum ranks 322nd among more than 8,500 analysts tracked by TipRanks. His ratings have been profitable 59% of the time, with each rating delivering an average return of 12.9%. (See Hasbro Stock Chart on TipRanks)

Dell Technologies

Next up is Dell (DELL), a maker of IT hardware and infrastructure technology, which rallied after its fiscal second-quarter results far exceeded Wall Street’s estimates. The company returned $525 million to shareholders through share repurchases and dividends in that quarter. DELL offers a dividend yield of 2.1%.

Evercore analyst Amit Daryanani maintained a buy rating following the results and raised his price target for DELL stock to $70 from $60. Daryanani ranks No. 249 among more than 8,500 analysts tracked by TipRanks.

The analyst highlighted that Dell delivered impressive upside to July quarter revenue and earnings per share (EPS), driven by broad-based strength across both infrastructure and client segments. Specifically, the notable upside in the infrastructure segment was fueled by GPU-enabled servers.

The analyst also noted that Dell generated $3.2 billion of free cash flow in the quarter and is currently running at over $8 billion free cash flow on a trailing twelve-month basis. This implies that the company has “plenty of dry powder” to significantly enhance its capital allocation program, he added.

“We think the catalysts at DELL are starting to add up in a notable manner ranging from – cap allocation update during their upcoming analyst day, AI centric revenue acceleration and potential S&P 500 inclusion,” said Daryanani.

In all, 60% of his ratings have been profitable, with each generating an average return of 11.5%. (See Dell’s Financial Statements on TipRanks)

Walmart

We finally come to big-box retailer Walmart (WMT), which is a dividend aristocrat. Earlier this year, the company raised its annual dividend for fiscal 2024 by about 2% to $2.28 per share. This marked the 50th consecutive year of dividend increases for the company. WMT’s dividend yield stands at 1.4%.

Following WMT’s upbeat fiscal second-quarter results and upgraded full-year outlook, Baird analyst Peter Benedict highlighted that traffic gains in stores and online channels reflect that consumers are choosing Walmart for a blend of value and convenience.

Benedict also noted that the company’s efforts to drive improved productivity and profitability are gaining traction.

The analyst reiterated a buy rating on WMT and raised the price target to $180 from $165, saying that the new price target “assumes ~23x FY25E EPS, slightly above the stock’s five-year average of ~22x given the company’s defensive sales mix, market share gains, and an improved long-term profit/ROI profile as alternative revenue streams scale.” 

Benedict ranks 94th among more than 8,500 analysts tracked by TipRanks. His ratings have been profitable 68% of the time, with each rating delivering an average return of 13.7%. (See Walmart’s Technical Analysis on TipRanks)  

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Meta, Alphabet and 10 under-the-radar media stocks expected to soar

The media landscape is going through a difficult transition, and it isn’t only because streaming is such a tricky business.

Companies such as Walt Disney Co.
DIS,
Warner Bros. Discovery Inc.
WBD
and Paramount Global
PARA
have made heavy investments in streaming services as their traditional media businesses wither, only to find that it is harder than it looks to emulate Netflix Inc.’s
NFLX
ability to make money from streaming.

Some of the companies are also saddled by debt, in part resulting from mergers that don’t hold the same shine in the current media landscape.

Needless to say, this is the age of cost-cutting for Netflix’s streaming competitors and many others in the broader media landscape.

Below is a screen of U.S. media stocks, showing the ones that analysts favor the most over the next 12 months. But before that, we list the ones with the highest and lowest debt levels.

All the above-mentioned media companies are in the communications sector of the S&P 500
,
which also includes Alphabet Inc.
GOOGL

GOOG
and Meta Platforms Inc.
META,
as well as broadcasters, videogame developers and news providers.

But there are only 20 companies in the S&P 500 communications sector, which is tracked by the Communications Services Select Sector SPDR ETF
.

High debt

Before looking at the stock screen, you might be interested to see which of the 53 media companies are saddled with the highest levels of total debt relative to consensus estimates for earnings before interest and taxes (EBIT) for the next 12 months, among analysts polled by FactSet. This may be especially important at a time when long-term interest rates have been rising quickly. Dollar amounts are in millions.

Company

Ticker

Debt/ est. EBIT

Total debt

Est. EBIT

Debt service ratio

Total return – 2023

Market cap. ($mil)

Dish Network Corp. Class A

DISH 1,245%

$24,556

$1,973

15%

-57%

$1,773

Madison Square Garden Sports Corp. Class A

MSGS 1,125%

$1,121

$100

-14%

-4%

$3,400

Paramount Global Class B

PARA 656%

$17,401

$2,654

-29%

-13%

$9,529

Consolidated Communications Holdings Inc.

CNSL 651%

$2,152

$331

-26%

6%

$441

TechTarget Inc.

TTGT 629%

$479

$76

16%

-36%

$788

Cinemark Holdings Inc.

CNK 616%

$3,630

$589

61%

81%

$1,908

Cogent Communications Holdings Inc.

CCOI 548%

$1,858

$339

-19%

27%

$3,388

E.W. Scripps Co. Class A

SSP 529%

$3,084

$583

80%

-42%

$552

AMC Networks Inc. Class A

AMCX 492%

$2,945

$599

26%

-29%

$357

Live Nation Entertainment Inc.

LYV 466%

$8,413

$1,805

135%

22%

$19,515

Source: FactSet

Click on the tickers for more about each company, including business profiles, financials and estimates.

Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.

The debt figures are as of the end of the companies’ most recently reported fiscal quarters. The debt service ratios are EBIT divided by total interest paid (excluding capitalized interest) for the most recently reported quarters, as calculated by FactSet. It is best to see this number above 100%. Then again, these service ratios cover only one quarter.

Looking at the most indebted company by quarter-end debt to its 12-month EBIT estimate, it would take more than 10 years of Dish Network Corp.’s
DISH
operating income to pay off its total debt, excluding interest.

Shares of Dish have lost more than half their value during 2023, and the stock got booted from the S&P 500 earlier this year. The company has seen its satellite-TV business erode while it pursues a costly wireless build-out that won’t necessarily drive success in that competitive market. Dish plans to merge with satellite-communications company EchoStar Corp.
SATS
in a move seen as an attempt to improve balance sheet flexibility.

It is fascinating to see that for six of these companies, including Paramount, debt even exceeds the market capitalizations for their stocks. Paramount lowered its dividend by nearly 80% earlier this year as it continued its push toward streaming profitability, and Chief Executive Bob Bakish recently called the company’s planned sale of Simon & Schuster “an important step in our delevering plan.”

You are probably curious about debt levels for the largest U.S. media companies. Here they are for the biggest 10 by market cap:

Company

Ticker

Debt/ est. EBIT

Total debt

Est. EBIT

Debt service ratio

Total return – 2023

Market cap. ($mil)

Alphabet Inc. Class A

GOOGL 22%

$29,432

$133,096

711%

47%

$1,528,711

Meta Platforms Inc. Class A

META 47%

$36,965

$78,129

717%

137%

$634,547

Comcast Corp. Class A

CMCSA 266%

$102,669

$38,539

77%

33%

$187,140

Netflix Inc.

NFLX 197%

$16,994

$8,641

192%

41%

$184,362

T-Mobile US Inc.

TMUS 378%

$116,548

$30,838

32%

-5%

$156,881

Walt Disney Co.

DIS 263%

$47,189

$17,975

88%

-4%

$152,324

Verizon Communications Inc.

VZ 370%

$177,654

$48,031

36%

-11%

$140,205

AT&T Inc.

T 378%

$165,106

$43,681

31%

-20%

$100,872

Activision Blizzard Inc.

ATVI 93%

$3,612

$3,891

2159%

21%

$72,118

Charter Communications Inc. Class A

CHTR 434%

$98,263

$22,651

89%

23%

$62,380

Source: FactSet

Among the largest 10 companies in the S&P Composite 1500 communications sector by market cap, Charter Communications Inc.
CHTR
has the highest ratio of debt to estimated EBIT, while its debt service ratio of 89% shows it was close to covering its interest payments with operating income during its most recent reported quarter. Disney also came close, with a debt service ratio of 88%.

Charter Chief Financial Officer Jessica Fischer said at an investor day late last year that “delevering would only make sense if the market valuation of our shares fully reflected the intrinsic value of the cash-flow opportunity, if debt capacity in the market were limited or if our expectations of cash-flow growth, excluding the impact of our expansion were significantly impaired.”

Meanwhile, Kevin Lansberry, Disney’s interim CFO, said during the company’s latest earnings call that it had “made significant progress deleveraging coming out of the pandemic” and that it would “approach capital allocation in a disciplined and balanced manner.”

Disney’s debt increased when it bought 21st Century Fox assets in 2019, and the company suspended its dividend in 2020 in a bid to preserve cash during the pandemic.

When Disney announced its quarterly results on Aug. 9, it unveiled a plan to raise streaming prices in October. Several analysts reacted positively to the price increase and other operational moves.

Read: The long-simmering rumor of Apple buying Disney is resurfacing as Bob Iger looks to sell assets

The largest companies in the sector, Alphabet and Meta, have relatively low debt-to-estimated EBIT and very high debt-service ratios. Netflix has debt of nearly twice the estimated EBIT, but a high debt-service ratio. For all three companies, debt levels are low relative to market cap.

Low debt

Among the 52 companies in the S&P Composite 1500 communications sector, these 10 companies had the lowest total debt, relative to estimated EBIT, as of their most recent reported fiscal quarter-ends:

Company

Ticker

Debt/ est. EBIT

Total debt

Est. EBIT

Debt service ratio

Total return – 2023

Market cap. ($mil)

New York Times Co. Class A

NYT 0%

$0

$414

N/A

32%

$6,968

QuinStreet Inc.

QNST 18%

$5

$26

-153%

-35%

$513

Alphabet Inc. Class A

GOOGL 22%

$29,432

$133,096

711%

47%

$1,528,711

Shutterstock Inc.

SSTK 26%

$63

$241

39%

-20%

$1,502

Yelp Inc.

YELP 31%

$106

$344

78%

55%

$2,909

Meta Platforms Inc. Class A

META 47%

$36,965

$78,129

717%

137%

$634,547

Scholastic Corp.

SCHL 54%

$108

$201

319%

12%

$1,314

Electronic Arts Inc.

EA 73%

$1,951

$2,678

605%

-2%

$32,425

World Wrestling Entertainment Inc. Class A

WWE 93%

$415

$448

479%

66%

$9,455

Activision Blizzard Inc.

ATVI 93%

$3,612

$3,891

2159%

21%

$72,118

Source: FactSet

New York Times Co.
NYT
takes the prize, with no debt.

Wall Street’s favorite media companies

Starting again with the 52 companies in the sector, 46 are covered by at least five analysts polled by FactSet. Among these companies, 12 are rated “buy” or the equivalent by at least 70% of the analysts:

Company

Ticker

Share “buy” ratings

Aug. 25 price

Consensus price target

Implied 12-month upside potential

Thryv Holdings Inc.

THRY 100%

$21.11

$35.50

68%

T-Mobile US Inc.

TMUS 90%

$133.35

$174.96

31%

Nexstar Media Group Inc.

NXST 90%

$157.08

$212.56

35%

Meta Platforms Inc. Class A

META 88%

$285.50

$375.27

31%

Cars.com Inc.

CARS 86%

$18.85

$23.79

26%

Alphabet Inc. Class A

GOOGL 82%

$129.88

$150.04

16%

Iridium Communications Inc.

IRDM 80%

$47.80

$66.00

38%

News Corp. Class A

NWSA 78%

$20.74

$26.42

27%

Take-Two Interactive Software Inc.

TTWO 74%

$141.42

$155.96

10%

Live Nation Entertainment Inc.

LYV 74%

$84.79

$109.94

30%

Frontier Communications Parent Inc.

FYBR 73%

$15.24

$31.36

106%

Match Group Inc.

MTCH 70%

$43.79

$56.90

30%

Source: FactSet

News Corp.
NWSA
is the parent company of MarketWatch.

Finally, here are the debt figures for these 12 media companies favored by the analysts:

Company

Ticker

Debt/ est. EBIT

Total debt

Est. EBIT

Debt service ratio

Total return – 2023

Market cap. ($mil)

Thryv Holdings Inc.

THRY 227%

$433

$191

53%

11%

$730

T-Mobile US Inc.

TMUS 378%

$116,548

$30,838

32%

-5%

$156,881

Nexstar Media Group Inc.

NXST 358%

$7,183

$2,009

63%

-8%

$5,511

Meta Platforms Inc. Class A

META 47%

$36,965

$78,129

717%

137%

$634,547

Cars.com Inc.

CARS 223%

$451

$202

41%

37%

$1,253

Alphabet Inc. Class A

GOOGL 22%

$29,432

$133,096

711%

47%

$1,528,711

Iridium Communications Inc.

IRDM 306%

$1,481

$483

54%

-7%

$5,977

News Corp. Class A

NWSA 261%

$4,207

$1,611

109%

15%

$11,940

Take-Two Interactive Software Inc.

TTWO 272%

$3,492

$1,283

-40%

36%

$24,017

Live Nation Entertainment Inc.

LYV 466%

$8,413

$1,805

135%

22%

$19,515

Frontier Communications Parent Inc.

FYBR 453%

$9,844

$2,173

85%

-40%

$3,745

Match Group Inc.

MTCH 287%

$3,839

$1,337

540%

6%

$12,177

Source: FactSet

In case you are wondering about how the analysts feel about debt-free New York Times, it appears the analysts believe the shares are fairly priced at $42.60. Among eight analysts polled by FactSet, three rated NYT a buy, while the rest had neutral ratings. The consensus price target was $43.93. The stock trades at a forward price-to-earnings ratio of 27.7, which is high when compared with the forward P/E of 21.7 for the S&P 500
.

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Comcast beats estimates despite slowing broadband growth, higher Peacock losses

Comcast topped analyst expectations with its first-quarter earnings report Thursday, despite the cable and media giant’s residential broadband business’s slowing growth and mounting Peacock losses.

Shares of the company rose more than 7%.

related investing news

CNBC Investing Club

Here’s how Comcast performed, compared with estimates from analysts surveyed by Refinitiv:

  • Earnings per share: 92 cents adjusted vs. 82 cents expected
  • Revenue: $29.69 billion vs. $29.3 billion expected

For the quarter ended March 31, Comcast reported earnings of $3.83 billion, or 91 cents per share, compared with $3.55 billion, or 78 cents per share, a year earlier. Adjusting for one-time items, Comcast posted earnings per share of 92 cents for the most recent period.

Revenue dropped 4% to $29.69 billion from $31.01 billion in the prior-year period, with the company noting that last year it had broadcast both the Super Bowl and Beijing Olympics during the first quarter. 

The Philadelphia company said its first-quarter adjusted earnings before interest, taxes, depreciation and amortization grew 3% to $9.42 billion during the first quarter. 

Comcast said it returned $3.2 billion to shareholders in the quarter through a mix of $1.2 billion in dividend payments and $2 billion in share repurchases. 

Comcast had 21,000 fewer residential broadband customers year-over-year at the end of the three-month period, adding just 3,000 during the quarter. It received a slight boost from its business customers. Company executives had warned earlier this year that Comcast was likely to lose broadband subscribers in the first quarter. 

Still, it was a sign that Comcast, like its peers, continues to face slowing growth in the broadband business. Executives have said that, while the loss rate of customers is very low, growth has stagnated – especially since the early days of the Covid pandemic – as they face heightened competition from telecom and wireless providers. 

Comcast executives said on Thursday’s earnings call that the company expects adding subscribers to likely be a challenge in the near term, but will focus on average revenue per user to grow revenue for the segment.

The Xfinity mobile business grew to nearly 5.67 million customers during the quarter, a sign that its wireless service – which is provided in conjunction with an agreement to use Verizon‘s network – remains a bright spot. 

Cable TV customers continued their exodus from the traditional bundle, with Comcast losing 614,000 subscribers during the quarter. 

Last month, Comcast announced it was changing how it reported its segments, now grouping its Xfinity-branded broadband, cable TV and wireless services with its U.K.-based Sky, which includes pay TV services and Sky-branded entertainment TV channels to form the “connectivity and platforms” segment. Total revenue for the segment was about $20.15 billion, a slight drop from the last quarter due to the impact of foreign currency. 

The second segment, content and experiences, includes all of NBCUniversal’s TV and streaming business, the international networks and Sky Sports channels, as well as its film studios and theme parks units. Overall revenue for the segment was down nearly 10% to $10.26 billion in the quarter.

The media business’ revenue took a dip in the first quarter, with it dropping about 20% to $6.15 billion, due to its comparison last year, when NBC aired the Super Bowl and had the rights to the Beijing Olympics for its TV networks and Peacock. Still, Comcast said excluding the $1.5 billion incremental revenue from these two major sporting events, media revenue was still down about 2%. 

The tightening ad market showed on Comcast’s balance sheet this quarter, as it has for peers like Paramount Global and Warner Bros. Discovery. Excluding the Olympics and Super Bowl – two events that generate a lot of ad revenue – domestic advertising during the quarter was down about 6% driven by lower TV network revenue and a TV ratings decline. 

Domestic TV distribution revenue was up, excluding the Olympics, which Comcast noted was primarily due to higher revenue at Peacock, which had more paid subscribers. 

Comcast said Peacock subscribers grew more than 60% year over year to 22 million, and revenue was up 45% to $685 million. Peacock had $704 million in losses, compared with losses of $456 million in the same period last year. 

Last quarter, the company noted Peacock losses would amount to about $3 billion this year. The streaming service’s costs continued to weigh on the media segment’s earnings. Executives said Thursday they were “encouraged” by Peacock’s results, and following the expected peak losses this year will see a steady improvement. Comcast President Mike Cavanagh said the company had the confidence Peacock would “break even and grow from there.”

NBCUniversal’s film segment got a boost from the animated “Shrek” spinoff “Puss in Boots: The Last Wish” and horror flick “M3GAN,” during the quarter, with revenue up nearly 2% to $2.96 billion. 

Both Comcast CEO Brian Roberts and Cavanagh touted NBCUniversal’s animation film business on Thursday’s call, with the success of “The Super Mario Bros. Movie,” which was released earlier this month. This week it surpassed $900 million at the global box office, including $444 million domestically.

“We’ve had tremendous success creating franchises,” Roberts said on Thursday’s call, noting the “Despicable Me” and “Shrek” franchises. “These are the results of the strategic decisions we made years ago to become a leader in animation and the conviction to invest in the business in the pandemic.”

Cavanagh noted that NBCUniversal’s “Jurassic Park,” “Minions” and “Halloween” installments last year helped boost its box office.

“We’re really proud of our animation business,” Cavanagh said Thursday.

NBCUniversal’s upcoming film slate includes next month’s “Fast X,” the next installment in the popular “Fast and Furious” franchise, as well as Christopher Nolan’s next epic, “Oppenheimer,” about the scientist who led the development of the atomic bomb during World War II. It will be released in July.

The company’s theme park segment kept on rolling higher, especially since the shutdowns of parks during the height of the pandemic, with revenue up 25% to $1.95 billion. Revenue was boosted by international parks, which were still weighed down by pandemic restrictions last year. The opening of Super Nintendo World helped boost revenue, too. 

Earlier this week, NBCUniversal faced a shake-up with the ouster of CEO Jeff Shell due to a sexual harassment and discrimination complaint filed by an employee. Roberts addressed the matter at the start of Thursday’s call, saying it was “obviously a tough moment” for the company but noting his confidence in NBCUniversal’s leadership team, which will now report to Cavanagh.

“Think of me as being here for awhile,” Cavanagh said regarding his future as overseeing the NBCUniversal team. He noted during the call he’s been close to the business since joining Comcast nearly eight years ago and has been “deeply involved for a long time.”

Investors also shouldn’t expect to see NBCUniversal “revisiting strategy” as a result of Shell’s departure alone, and instead would react “as the environment changes.”

Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.

Correction: Comcast’s total media revenue was down more than 20%. An earlier version misstated that figure.

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#Comcast #beats #estimates #slowing #broadband #growth #higher #Peacock #losses