Let’s face it, inflation is coming down (slowly), and another rate hike is possible within the year. This environment has beaten both the stock markets and investor portfolios. We’ve seen crashes in certain sectors and large institutions collapse. In these challenging times, investors should always aim to be defensive and protect their capital. One of the excellent ways to help fight these scenarios is by having exposure to high-quality companies that offer dividends and have the backing of analysts through analyst ratings.
A dividend is a distribution some companies offer their shareholders. Dividends give investors an additional return on their investment without relying solely on capital appreciation. Investors who rely on income may look to the dividend yield of each company to understand better the potential earnings they may receive. The best, most elite companies are on the dividend aristocrats and dividend kings lists.
Dividend aristocrats are S&P500 listed companies that have increased their dividends for at least consecutive 25 years. On the other hand, Dividend kings, which is a rarer title for dividend companies, are US-listed companies that are paying and growing their dividend payments consecutively for at least 50 years. Notably, dividend kings don’t need to be listed on the S&P 500, so it’s possible that a dividend king is not a dividend aristocrat.
Which Are The “Buy Rated” Dividend Stocks?
Analyst ratings are recommendations on stocks based on what they think the stock should be valued and why you should buy them, hold them, or sell them. By looking at yield and analyst ratings allows you to consider companies that analysts not just heavily research, but also those that can give you 2 avenues for return: capital appreciation, and dividends.
Now let’s look at 3 buy-rated companies with the highest yields today.
Federal Realty Investment Trust(FRT)
Annual Dividend Yield: 4.65%
Federal Realty Investment Trust is a real estate investment trust and is one of the oldest in the U.S. The company was founded in 1962 by Samuel J. Gorlitz, and today, the company is headquartered in Rockville, Maryland, U.S. Additionally, the company employs about 300 employees.
FRT provides leasable properties in Arizona, California, Connecticut, Florida, and Illinois. The company offers three kinds of properties:
- The company now has about 2.2 million square feet of office space and plans to acquire more.
- The company's residential spaces complement its commercial settings, resulting in integrated, engaging communities where living, work and play seamlessly intersect.
- With the help of FRT's specialty leasing spaces, clients can experiment with new concepts, develop original brand experiences, introduce new products, and more.
Federal Realty Investment Trust has an annual dividend yield of 4.65% and a 5-year dividend growth rate of 8.59%. FRT has continuously increased its dividends for 55 straight years and, as such, is a part of the elite Dividend Kings.
Analyst Recommendations
Analysts rate Federal Realty Investment Trust a “Moderate Buy” rating based on 6 Strong Buys, and 7 Hold recommendations. FRT has a mean Target of $117.92 with a High Target of $131.00, an upside of 39.61%.
Realty Income Corp (O)
Annual Divided: 5%
Like FRT, Realty Income Corporation is a REIT. It has more than 12,200 real estate properties around the world. The company was founded in 1969 by William E. Clark, Jr. and Evelyn J. Clark. The company is headquartered in San Diego, California, United States. Interestingly, the company trademarked the phrase "The Monthly Dividend Company," as it pays monthly rather than quarterly dividends.
The company provides its services in all 50 states of the United States, Puerto Rico, the UK, and Spain. It has a massive catalog of well-known and liked clients, such as Walgreens, Tesco, 7-Eleven, FedEx, Home Depot, Sainsbury's, Walmart, and many more. The company’s operations include:
- Asset Management Services
- Development Services
- Property Management and Client Services
- Acquisition and Leasing Services
Realty Income Corporation’s annual dividend yield is currently 5%, another rare occurrence for companies of its size and history. Not only that, Realty Income Corporation has a 5-year dividend growth rate of 16.93%. Indeed, O has continuously increased its dividend for 30 years and is a part of the elite Dividend Aristocrat companies.
Analyst Recommendations
Analysts rate Realty Income Corporation a “Moderate Buy” rating based on 5 Strong Buys, 2 Moderate Buys, and 5 Hold recommendations. O has a mean Target of $71.00 with a High Target of $74.00, an upside of 19.28%.
International Business Machines Corporation (IBM)
Annual Divided: 5.10%
International Business Machines Corporation is a technology company that provides hybrid cloud and artificial intelligence (AI) solutions. It offers integrated solutions and products that use data and information technology (IT) in industries and business processes. Its segments include Software, Consulting, Infrastructure, and Financing.
- Software - Consists of two business areas: Hybrid Platform & Solutions, which includes software to help clients operate, manage, and optimize their IT resources and business processes within the hybrid, multi-cloud environments, and Transaction Processing, which includes software that supports clients’ mission-critical, on-premises workloads in various sectors.
- Consulting - engages in business transformation, technology consulting, and application operations.
- Infrastructure - engages in hybrid infrastructure and infrastructure support.
- Financing - engages in client financing and commercial financing business.
IBM’s annual dividend yield is currently at 5.10%, which is rare for companies of its size and history. IBM has a 5-year dividend growth of 11.69% and has continuously increased its dividend for 27 years. The company is part of the Dividend Aristocrats.
Analyst Recommendations
Analysts rate International Business Machines Corporation a “Hold” rating based on 3 Strong Buys, 6 Holds, and 1 Strong Sell recommendation.IBM has a mean Target of $143.44 with a High Target of $160.00, an upside of 23.35%.
Final Thoughts
Investing in quality dividend stocks is one way to increase your passive income. With record-high inflation and higher interest rates, investors are searching for the next best stock to preserve their portfolio value and generate a stable cash flow from dividends to fight inflation. However, investors should never forget that even if analysts recommend a stock with an attractive yield, it doesn’t mean it’s right for you.
On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
