Investors are always on the lookout for the best opportunities to grow their portfolio, especially when it comes to dividend-paying stocks. With the Federal Reserve expected to cut interest rates in September, dividend-paying stocks are becoming more attractive due to their potential for outperformance. However, while these stocks offer the appeal of high dividend yields, there are also risks to consider.
EPR Properties is a real estate investment trust that focuses on experiential properties such as movie theaters and amusement parks. With a dividend yield of 7.3%, the company has caught the attention of investors and analysts alike. RBC Capital analyst Michael Carroll recently upgraded his rating for EPR to buy, citing the company’s ability to navigate through tough operating conditions, including the Covid-19 pandemic. He expects the theatrical box office to rebound in the future, driving higher percentage rents and strengthening the tenant base.
Energy Transfer is a limited partnership in the midstream energy sector with a dividend yield of 8%. Stifel analyst Selman Akyol praised the company for its growth opportunities, particularly in the Permian to Gulf Coast value chain. Akyol also highlighted the positive sentiment around natural gas as a major energy source for data centers. Despite some concerns about rising capex, Akyol reaffirmed a buy rating on ET stock with a price target of $19.
Retail giant Walmart has been a consistent performer when it comes to rewarding shareholders with dividends and share repurchases. In the first half of fiscal 2025, the company paid over $3 billion in dividends and repurchased shares worth $2.1 billion. Following strong second-quarter results, Baird analyst Peter Benedict reiterated a buy rating on Walmart, praising the company’s market share gains and innovative transformation efforts. Walmart’s consistent dividend hikes over the years have also been a key driver of investor confidence.
While high-dividend stocks offer the allure of attractive yields, investors should be mindful of the risks involved. Companies with high dividend yields may be more vulnerable to economic downturns and market disruptions, especially in sectors like real estate and energy. Additionally, high dividend payouts could limit a company’s ability to reinvest in growth opportunities or withstand financial setbacks. It is crucial for investors to conduct thorough research and due diligence before investing in high-dividend stocks.
High-dividend stocks can be a valuable addition to an investor’s portfolio, especially in a low-interest-rate environment. Companies like EPR Properties, Energy Transfer, and Walmart offer compelling investment opportunities with their strong financials and consistent dividend payouts. However, it is essential for investors to weigh the potential risks and rewards of investing in high-dividend stocks and diversify their portfolio accordingly to mitigate risks. By staying informed and being strategic in their investment decisions, investors can navigate the dynamic landscape of the stock market and maximize their returns over the long term.
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