Top Wall Street analysts suggest these 3 dividend picks for 2024

Instruments like money market funds saw significant inflows this year amid elevated interest rates. However, dividend stocks are expected to be back in focus in 2024, amid hopes for interest rate cuts.

Investors looking for stable streams of dividend income can turn to Wall Street analysts for their recommendations, which are backed by sound analysis.

Keeping that in mind, here are three attractive dividend stocks, according to Wall Street’s top experts on TipRanks, a platform that ranks analysts based on their past performance.

We start this week’s dividend list with Realty Income (O), a real estate investment trust (REIT). The company pays monthly dividends, which are supported by cash flow generated from more than 13,250 real estate properties that are mainly secured by long-term net lease agreements.

Earlier this month, Realty Income announced a monthly cash dividend of $0.2565 per share, which marks an increase compared to the prior dividend payment of $0.2560 per share and is payable on Jan. 12, 2024. The stock offers an attractive dividend yield of 5.3%.

In a recent research note, RBC Capital analyst Brad Heffern called Realty Income one of his top ideas for 2024 in the net lease REITs group. The analyst highlighted that the company’s cost of capital is one of the lowest among its peers, which in his opinion, is vital for operating in the net lease REIT space.    

“We think O has one of the highest-quality net lease portfolios in the space, with an above-average investment grade weighting, a strong industrial portfolio, and a high proportion of tenants with public reporting requirements,” said Heffern.

Citing recent deals like the Spirit Realty Capital merger, Heffern stated that Realty Income is well positioned to strike M&A deals that most of its rivals cannot. The analyst reiterated a buy rating on Realty Income stock, and slightly raised the price target to $58 from $57.

Heffern ranks No. 558 among more than 8,600 analysts tracked by TipRanks. His ratings have been profitable 45% of the time, with each delivering an average return of 11.3%. (See Realty Income Insider Trading Activity on TipRanks) 

We next move to Kraft Heinz (KHC), a packaged food and beverage company that owns an extensive portfolio of brands like Kraft, Oscar Mayer, and Heinz. With a quarterly dividend of 40 cents per share (and an annualized dividend of $1.60 per share), KHC stock offers a dividend yield of about 4.3%. To enhance shareholder returns, the company announced a $3 billion share repurchase plan, authorized through Dec. 26, 2026.  

Recently, Evercore analyst David Palmer upgraded Kraft Heinz stock to buy from hold and increased the price target to $42 from $40. The analyst believes that KHC’s organic sales trajectory will turn positive in 2024.

The analyst raised his 2024 EBITDA (earnings before interest, tax, depreciation and amortization) estimate for Kraft Heinz due to several factors, such as stabilizing domestic retail sales trends, improved margins driven by productivity efforts and moderating commodity costs, and growth prospects in emerging markets.

Palmer noted that Kraft stock offers a higher dividend yield than its peers, while trading at a lower 2024 P/E multiple of 11.5 times as compared to the “center store food” peer average of 13 times its price to earnings ratio. He highlighted that KHC is trading at a lower valuation multiple despite having a similar balance sheet leverage, comparable organic revenue growth, and a higher EPS growth outlook when compared to its peers.

The analyst sees the potential for robust shareholder returns. “We also like that the company has been proactive over the last few years selling low growth and margin businesses (e.g. cheese and Planters) and cutting unprofitable SKUs to better position the company for profitable growth,” said Palmer.

Palmer holds the 406th position among more than 8,600 analysts on TipRanks. His ratings have been successful 66% of the time, with each rating delivering an average return of 8%. (See Kraft Heinz Financial Statements on TipRanks).

This week’s third dividend pick is Darden Restaurants (DRI). On Dec. 15, the owner of Olive Garden and LongHorn Steakhouse chains announced mixed results for the fiscal second quarter ended Nov. 26. While earnings surpassed expectations, revenue missed estimates as the company’s fine dining business underperformed. 

During the quarter, the company repurchased about 1.2 million shares for $181 million. It also declared a quarterly dividend of $1.31 per share, payable on Feb. 1, 2024. DRI’s dividend yield stands at 3.2%.

Following the report, Stifel analyst Chris O’Cull reaffirmed a buy rating on DRI stock and increased its price target to $185 from $178. He stated that the company’s fiscal Q2 earnings beat was driven by its better-than-estimated restaurant margin.  

Darden trimmed its same-restaurant sales growth guidance due to a shift in the menu mix. That said, the analyst highlighted that the company raised its full-year adjusted EPS outlook to a range of $8.75 to $8.90 from the previous guidance of $8.55 to $8.85, with an improving margin forecast more than offsetting the lower sales estimate.

“We believe Darden can outperform the industry, leveraging its significant scale advantages, operational sophistication, and pricing gap to the broader industry to navigate a more challenging environment (should it materialize) more effectively than most competitors,” said O’Cull.

O’Cull ranks No. 463 among more than 8,600 analysts tracked by TipRanks. His ratings have been successful 59% of the time, with each delivering a return of 11.1%, on average. (See Darden’s Hedge Fund Trading Activity on TipRanks)