Morgan Stanley Says These 3 Reliable Dividend Stocks Should Be On Your Buy List (Especially Right Now) – Yahoo Finance | Jewelry Dukan

Major investment bank Morgan Stanley has been warning of increasingly difficult economic conditions for several months, and the firm’s chief US equity strategist Mike Wilson recently led a note on defensive investing, particularly dividend investing.

Wilson lays out a clear strategy for dividend investors, starting with the fact that the best dividend stocks inherently offer a safe and stable income stream, offering investors protection in any market environment.

“We believe that the ‘dividend sweet spot’ isn’t finding the highest-yielding stocks,” says Wilson, “but finding consistent companies that can grow their dividends year after year and have a proven track record of doing so. It is this underlying stability combined with the dividend yield that can provide a defensive cushion during times of market turbulence – much like the environment today.”

With that in mind, Morgan Stanley analysts have handpicked stocks that offer investors some of the most reliable dividends out there. Using the TiipRanks platform, we pulled the details of three of these tips. Let’s dive in.

Philip Morris International Inc. (PM)

The first stock we’ll look at, Philip Morris, is known for being one of the largest tobacco companies in the world and the owner of the venerable Marlboro brand of cigarettes. While cigarettes and other smoking products make up the lion’s share of the company’s sales, PM places great emphasis on its smoke-free product lines. These include vapes, heated tobacco products, and oral nicotine pouches. The company boasts that its smokeless products, particularly its heated tobacco lines, have helped over 13 million adult smokers worldwide quit smoking.

The company’s dividend is worth a close look, as it offers investors a reliable payment with a long-term history of steady growth. PM began paying dividends in 2008 when it went public; Since then, the company hasn’t missed a quarterly payment — and has increased the dividend at a CAGR of 7.5% each year. The current quarterly dividend payment is $1.27 per share, up 2 cents from the previous quarter. The annual dividend comes in at $5.08 per common share, yielding a strong 5.3%. The newly increased dividend is to be paid out on September 27.

The dividend payment is supported and fully funded by PM’s regular quarterly earnings, which were $1.32 per diluted share in Q2’22. Philip Morris is targeting full-year diluted earnings per share in the range of $5.73 to $5.88, which is good news for dividend investors since hitting that target will keep the company’s dividend easily affordable.

Analyst Pamela Kaufman, who covers this tobacconist for Morgan Stanley, notes the company’s rising sales of smoke-free products and its generally solid financial position and recommends the stock.

“Second quarter results reflect many of the key tenets of our thesis, including attractive IQOS momentum with accelerating new IQOS user growth, solid combustible fuel fundamentals with positive international cigarette market shares/volumes and an elevated underlying guidance,” said Kaufman.

Looking ahead, Kaufman rates PM as Overweight (ie Buy) with a price target of $112 for ~16% upside. (To see Kaufman’s track record, click here)

Overall, Philip Morris stocks have a Moderate Buy from the Street consensus based on 7 ratings including 4 buys and 3 holds. (See PM Stock Prediction on TipRanks)

Citizens Financial Group, Inc. (CFG)

Next is Citizens Financial Group, a retail bank in US markets. Citizens Financial is based in Rhode Island and operates 1,200 offices in 14 states, focused on New England but also extending into the Mid-Atlantic and Midwest regions. Personal and business customers can access a full range of services including checking and deposit accounts, personal and small business loans, wealth management and even forex. For customers who cannot reach a branch, CFG offers mobile and online banking as well as more than 3,300 ATMs.

Citizens Financial reported revenue of over $2.1 billion in the second quarter, up 23.5% year over year. The result fell short of expectations; Net income of $364 million was down 43% year over year, and earnings per share were 67 cents, less than half the $1.44 reported in the year-ago quarter.

Despite the decline in earnings and stock value, Citizens Financial was confident enough to expand its capital return program. The Board of Directors approved up to $1 billion in share repurchases in July, a $250 million increase over prior approval.

At the same time, the company announced an 8% increase in its quarterly common stock dividend. The new payment of 42 cents per share took place in August; it extrapolates to $1.68 per year, yielding a 4.5% yield. Citizens Financial has a history of reliable dividend payments and regular increases dating back to 2014; the dividend has been increased twice in the last three years.

This stock caught the eye of Morgan Stanley’s Betsy Graseck, who makes a positive case for buying CFG.

“We are Overweight Citizens because of its above-average earnings growth, which is driven by multiple broad-based drivers, including its differentiated credit categories driving better-than-peer credit growth, disciplined cost management and earnings per share from fee-based acquisitions,” Graseck wrote.

Graseck’s Overweight (ie, Buy) rating comes with a price target of $51. If their thesis holds, a 12-month gain of ~37% could potentially be on the horizon. (To see Graseck’s track record, click here)

Financially sound banking companies are sure to attract interest from Wall Street, and CFG stock has 13 recent analyst ratings including 10 buy and 3 hold, giving the stock a strong buy consensus rating. The average price target of $46.85 implies a ~28% annual gain from the trading price of $36.76. (See CFG Stock Prediction on TipRanks)

AvalonBay (AVB)

The third Morgan Stanley pick we’re looking at is AvalonBay, a real estate investment trust (REIT) focused on residential real estate. REITs have a strong reputation for paying solid dividends; They are required by tax laws to return a certain percentage of profits directly to shareholders and often use dividends to meet regulatory requirements. AvalonBay owns, acquires, develops and manages multi-family homes in the New York/New Jersey metropolitan area, New England and the Mid-Atlantic regions, the Pacific Northwest and California. The company targets real estate in leading urban centers of its business areas.

Rising rents were a big component of the overall increase in inflation, and that was reflected in AvalonBay’s sales. The company’s second-quarter revenue was $650 million, the highest in two years. On earnings, a “louder” metric, AvalonBay reported $138.7 million in net income attributable to shareholders; Diluted earnings per share were 99 cents per share compared to $3.21 in the year-ago quarter.

While earnings per share declined, the company posted a year-over-year gain on a key metric, fund from operations (FFO), attributable to common shareholders. On a diluted basis, FFO increased 22% year over year to $2.41 from $1.97. Dividend investors should be aware of this, since FFO is commonly used by REITs to cover dividends.

AvalonBay’s dividend was last paid in July at $1.59 per common share. The next payment for October has already been declared at the same rate. The quarterly payment of $1.59 equates to $6.36 per common share annually and yields 3.3%. AvalonBay has paid a quarterly dividend every quarter since it went public in 1994 — without missing a beat — and has experienced a compound annual payout increase of 5% over the past 28 years.

Morgan Stanley analyst Adam Kramer sees a way forward for this company and explains why investors should jump in now: “We believe AVB can trade at a premium [peers] in our reporting given industry-leading SS sales and strong FFO growth per share and a differentiated development program. We believe investors have an “empty option” on the development pipeline as the current share price is ~19.7 times our 23e FFO ex. external growth.”

Kramer is using these comments to bolster his Overweight (ie, Buy) stance on the stock, and his price target of $242 suggests AVB has 26% upside ahead. (To see Kramer’s track record, click here)

All in all, AVB shares have 8 Buy and 11 Hold, making the analyst consensus rating here a Moderate Buy. The stock is the most expensive on this list at $190.87 per share, and the median price target of $226.17 points to ~18% upside potential in the coming months. (See AVB Stock Prediction on TipRanks)

For great ideas on trading dividend stocks at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that brings together all of TipRanks’ stock insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is for informational purposes only. It is very important that you do your own analysis before making any investment.

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