Morgan Stanley Says These 3 Reliable Dividend Stocks Should Be on Your Buy List (Especially Right Now)

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The primary funding financial institution Morgan Stanley has been sounding signals concerning the an increasing number of tricky financial prerequisites for a number of months now, and the company’s leader US fairness strategist Mike Wilson headed up a up to date be aware on the subject of defensive making an investment, particularly dividend making an investment.

Wilson lays out a transparent technique for dividend traders, beginning with the truth that the most efficient dividend shares, via their nature, supply an source of revenue movement this is each protected and strong, and can supply coverage for traders in any marketplace setting.

“We believe the ‘dividend sweet spot’ is not to find the highest yielding stock,” Wilson says, “but to find consistent companies who can grow their dividend year-over-year and have a proven track record. It’s this underlying stability combined with the dividend return that can provide a defensive cushion during periods of market turbulence – similar to today’s environment.”

Against this backdrop, the analysts at Morgan Stanley have picked out shares that supply traders one of the maximum dependable dividends to be had. Using the TiipRanks platform, we’ve pulled up the main points on 3 of the ones alternatives. Let’s dive in.

Philip Morris International Inc. (PM)

The first inventory we’ll take a look at, Philip Morris, is well known as one of the crucial international’s biggest tobacco firms, and the landlord of venerable Marlboro logo cigarettes. While cigarettes and different smoking merchandise make up the lion’s proportion of the company’s gross sales, PM is strongly emphasizing its smokeless product traces. These come with vapes, heated tobacco merchandise, and oral nicotine pouches. The corporate boasts that its smokeless merchandise, particularly the heated tobacco traces, have helped over 13 million grownup people who smoke international surrender smoking.

The corporate’s dividend is price an in depth glance, because it gives traders a competent fee with a long-term historical past of stable expansion. PM first began paying out the dividend in 2008, when it went public; since then, the corporate has now not ignored a quarterly fee – and has raised the dividend once a year, with a CAGR of seven.5%. The present quarterly dividend fee is $1.27 according to proportion, up 2 cents from the former quarter. The dividend annualizes to $5.08 according to not unusual proportion, and yields a powerful 5.3%. The newly raised dividend is scheduled for fee on September 27.

The dividend fee is supported, and entirely lined, via PM’s common quarter income, which in 2Q22 got here in at $1.32 according to diluted proportion. Philip Morris is focused on full-year diluted EPS within the vary of $5.73 to $5.88, which is excellent news for dividend traders, as reaching that focus on will stay the dividend simply reasonably priced for the corporate.

Analyst Pamela Kaufman, protecting this tobacconist for Morgan Stanley, takes realize of the corporate’s expanding gross sales in smokeless merchandise, in addition to its normally sound monetary place, in recommending the inventory.

“Q2 results reflect many of the key tenets of our thesis, including attractive IQOS momentum with accelerating new IQOS user growth, solid combustibles fundamentals with positive international cigarette market share/volumes, and increased underlying guidance,” Kaufman opined.

Looking ahead, Kaufman charges PM an Overweight (i.e. Buy), and units a $112 value goal for ~16% upside doable. (To watch Kaufman’s observe document, click here)

Overall, Philip Morris stocks have a Moderate Buy from the Street consensus, primarily based on 7 critiques that come with 4 Buys and 3 Holds. (See PM stock forecast on TipRanks)


Citizens Financial Group, Inc. (CFG)

Next up is Citizens Financial Group, a retail banking company in america markets. Citizens Financial is primarily based in Rhode Island, and operates thru 1,200 branches in 14 states, focused in New England however extending to the Mid-Atlantic and Midwest areas. Retail and business consumers can get admission to a complete vary of services and products, together with checking and deposit accounts, non-public and small trade loans, wealth control, even foreign currency echange. For consumers not able to succeed in a department place of work, CFG gives cellular and on-line banking, and greater than 3,300 ATM machines.

Citizens Financial noticed revenues exceed $2.1 billion in 2Q22, a year-over-year bounce of 23.5%. Earnings got here in beneath expectancies; at $364 million, internet source of revenue was once down 43% y/y, and EPS, at 67 cents, was once lower than part of the $1.44 reported within the year-ago quarter.

Despite the drop in income and proportion worth, Citizens Financial felt assured sufficient to increase its capital go back program. The Board licensed, in July, proportion repurchases as much as $1 billion, and building up of $250 million from the former authorization.

At the similar time, the corporate additionally announce an 8% building up in its quarterly not unusual proportion dividend fee. The new fee, of 42 cents according to proportion, went out in August; it annualizes to $1.68 and provides a yield of four.5%. Citizens Financial has a historical past of each dependable dividend bills and common will increase going again to 2014; the dividend has been raised two times within the ultimate 3 years.

This inventory has stuck the attention of Morgan Stanley’s Betsy Graseck, who lays out an upbeat case for purchasing into CFG.

“We are Overweight Citizens due to its above-peer earnings growth driven by multiple broad-based drivers, including its differentiated loan categories which drive better-than-peer loan growth, disciplined expense management, and EPS upside from bolt-on fee based acquisitions,” Graseck wrote.

Graseck’s Overweight (i.e. Buy) score comes with a $51 value goal. Should her thesis play out, a twelve-month acquire of ~37% may just doubtlessly be within the playing cards. (To watch Graseck’s observe document, click here)

Financially sound banking companies are certain to pick out up Wall Street pastime, and CFG stocks have 13 fresh analyst critiques on record, together with 10 to Buy and 3 to Hold, giving the inventory a Strong Buy consensus score. The moderate value goal of $46.85 implies ~28% one-year acquire from the buying and selling value of $36.76. (See CFG stock forecast on TipRanks)


AvalonBay (AVB)

The 3rd Morgan Stanley select we are taking a look at is AvalonBay, an actual property funding accept as true with (REIT) centered on condo houses. REIT’s have a powerful recognition for paying out forged dividends; they’re required via tax codes to go back a undeniable share of income without delay to shareholders, and ceaselessly use dividends to agree to the regulatory calls for. AvalonBay owns, acquires, develops, and manages multi-family tendencies within the New York/New Jersey metropolitan house, in New England and the Mid-Atlantic areas, within the Pacific Northwest, and in California. The corporate goals houses in main city facilities of its running spaces.

Rising rents were a big element of the overall building up within the fee of inflation, and that has been mirrored in AvalonBay’s most sensible line. The corporate’s Q2 earnings, of $650 million, was once the easiest prior to now two years. On income, a ‘noisier’ metric, AvalonBay reported $138.7 million in internet source of revenue as a result of stockholders; diluted EPS got here in at 99 cents according to proportion, down from $3.21 within the year-ago quarter.

While income according to proportion have been down, the corporate did document a year-over-year acquire in a key metric, fund from operations (FFO) as a result of not unusual stockholders. On a diluted foundation, the FFO grew 22% y/y, from $1.97 to $2.41. This will have to be famous via dividend traders, as FFO is frequently utilized by REITs to hide the dividend.

AvalonBay’s dividend was once ultimate paid out in July, at $1.59 according to not unusual proportion. The subsequent fee, for October, has already been declared on the identical fee. The $1.59 quarterly fee annualizes to $6.36 according to not unusual proportion, and provides a yield of 3.3%. AvalonBay has paid out a quarterly dividend in each quarter – with out lacking a beat – because it went public in 1994, and over the last 28 years has moderate a 5% annual building up within the fee.

Morgan Stanley analyst Adam Kramer sees a trail ahead for this corporate, and explains why traders will have to get in now: “We think AVB can trade at a premium to [peers] in our coverage given peer-leading SS-Revenue and strong FFO per share growth and a differentiated development program. We believe investors have a ‘free option’ on the development pipeline as the current stock price implies a ~19.7x multiple on our ’23e FFO ex. external growth.”

Kramer makes use of those feedback to enhance his Overweight (i.e. Buy) score on the inventory, and his value goal, set at $242, means that AVB has a 26% upside doable forward of it. (To watch Kramer’s observe document, click here)

All in all, AVB stocks have 8 Buys and 11 Holds, making the analyst consensus score right here a Moderate Buy. The inventory is the costliest on this checklist, at $190.87 according to proportion, and the $226.17 moderate value goal is indicative of ~18% upside doable for the approaching months. (See AVB stock forecast on TipRanks)


To to find just right concepts for dividend shares buying and selling at horny valuations, discuss with TipRanks’ Best Stocks to Buy, a newly introduced device that unites all of TipRanks’ fairness insights.

Disclaimer: The critiques expressed on this article are only the ones of the featured analysts. The content material is meant for use for informational functions best. It is essential to do your personal research prior to making any funding.

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