rewrite this title Top Wall Street analysts tout these energy stocks for attractive dividends

Adding dividend-paying stocks to a portfolio helps enhance total return while ensuring income and diversification. Moreover, the appeal of dividend stocks increases as interest rates decline, as is currently the case.

Following the recommendations of top Wall Street analysts can help investors pick attractive dividend stocks, given that these experts conduct an in-depth analysis of a company’s financials to assess its ability to pay — and increase — dividends.

Here are three dividend-paying stocks, highlighted by Wall Street’s top pros as tracked by TipRanks, a platform that ranks analysts based on their past performance.

Chevron

We start this week with oil and gas producer Chevron (CVX). The company reported better-than-expected results for the third quarter of 2024. It returned $7.7 billion to shareholders in the third quarter, including $4.7 billion in share buybacks and $2.9 billion in dividends. At a quarterly dividend of $1.63 per share (or an annualized $6.52), CVX offers a dividend yield of 4.1%.

Recently, Goldman Sachs analyst Neil Mehta reiterated a buy rating on CVX and slightly raised the price target to $170 from $167 to reflect his updated earnings estimates. The analyst continues to have a constructive view on Chevron, thanks to “expectations for volume and [free cash flow] inflection driven by Tengiz [in Kazakhstan], where the company continues to demonstrate strong execution progress.”

Mehta added that his optimism is also driven by Chevron’s attractive capital returns profile that includes dividends and buybacks, with expectations of a yield of around 10% in both 2025 and 2026. He also highlighted the company’s differentiated capital allocation, which supports consistent shareholder returns despite a volatile macroeconomic backdrop.

Among other positives, Mehta also noted favorable updates on Chevron’s Gulf of Mexico projects, where the company intends to increase production to 300 Mb/d (million barrels per day) by 2026. He is also impressed by the company’s cost reduction efforts, which aim to generate as much as $3 billion of structural cost savings by the end of 2026.

Mehta ranks No. 391 among more than 9,200 analysts tracked by TipRanks. His ratings have been profitable 62% of the time, delivering an average return of 11%. See Chevron Stock Buybacks on TipRanks.

This week’s second dividend pick is Energy Transfer (ET), a midstream energy company that is structured as a limited partnership. In November, the company made a quarterly cash distribution of $0.3225 per common unit for the third quarter, a 3.2% year-over-year rise. Based on an annualized distribution of $1.29 per common unit, ET pays a yield of 6.8%.

Recently, JPMorgan analyst Jeremy Tonet reaffirmed a buy rating on ET and raised his 12-month price target to $23 from $20. The analyst noted the company’s third-quarter adjusted earnings before interest, taxes, depreciation and amortization of $3.96 billion exceeded JPMorgan’s estimate of $3.912 billion and the Street’s consensus of $3.881 billion.

While Energy Transfer reiterated its full-year adjusted EBITDA guidance in the range of $15.3 billion to $15.5 billion, Tonet thinks that the company is positioned to surpass the high end of that guidance, as the full impact of its optimization efforts isn’t reflected in the outlook.

Tonet further highlighted that the integration of the WTG Midstream acquisition is on track and Energy Transfer has approved several projects to improve reliability, reduce losses and enhance system efficiencies.

Overall, Tonet thinks that ET is trading at a discounted price, offering a lucrative entry point for investors. “We see [natural gas liquids] logistics, particularly [U.S. Gulf Coast] and Marcus Hook exports, as key growth engines for ET, particularly given global LPG demand growth,” said Tonet.

Tonet ranks No. 420 among more than 9,200 analysts tracked by TipRanks. His ratings have been successful 61% of the time, delivering an average return of 10.5%. See Energy Transfer Stock Charts on TipRanks.

Tonet is also bullish on Enterprise Products Partners (EPD), a partnership that offers midstream energy services. The company’s distribution of $0.525 per unit for the third quarter reflects a 5% annual increase. EPD’s annual distribution of $2.10 per common unit is equivalent to 6.4% yield.

The JPMorgan analyst said EPD’s Q3 performance gained from three natural gas processing plants that started commercial operations over the past year. The third quarter also benefited from wide natural gas spreads between Waha and other market hubs.

At its Investor Day, EPD emphasized that one of its key operating objectives for 2024 was to enhance the reliability and utilization rates of its two propane dehydrogenation (PDH) plants. Tonet said EPD expects its PDH enhancements to deliver an incremental $200 million in cash flows.

Capital allocation is favorable, Tonet said, noting that EPD repurchased $76 million in stock in the third quarter, up from $40 million in the second quarter. Enterprise plans to continue making buybacks in an annual range of $200 to $300 million over the remainder of 2024 and 2025, he said.

Tonet continues to be bullish on EPD stock, saying it “consistently delivered strong results throughout the various cycles, weathering downdrafts yet still participating during upward cycles.”

Tonet’s optimism is also based on EPD having the largest and most integrated natural gas liquids (NGL) footprint in North America, supporting superior operating leverage. He also believes that EPD’s financial flexibility gives it an edge over its peers.

Given all the positives, Tonet reiterated a buy rating on EPD stock and increased his price target to $37 from $34. See EPD Ownership Structure on TipRanks.