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As the AI-led rally drives stock valuations higher, value-conscious investors are looking to undervalued stocks for stable income and opportunities for price appreciation. The Madison Dividend Income Fund said in its first quarter report that it believes dividend stocks will rebound amid a broader change in sector leadership in the market seen during the quarter, with the energy, industrial and financial sectors made significant gains. The valuation of dividend stocks is another reason behind the fund’s optimism, as it cites data from Bank of America (BofA) Global Research, which says some dividend funds are “historically cheap” compared to the S&P 500.
Many other notable Wall Street analysts recommend dividend stocks in today’s volatile environment. Speaking to CNBC in April, JoAnne Feeney, partner and portfolio manager at Advisors Capital Management, advised investors to focus on “good” companies that pay dividends and keep their eyes “firmly on the long term.” The analyst thinks dividend stocks help investors navigate cyclical volatility.
Against this backdrop, let’s take a look at some top high-yield dividend stocks that also have upside potential in terms of share price. Based on the average price target of Wall Street analysts, we preferred stocks with a dividend yield of at least 4% and an upside potential of 20%.
Vale SA
Average one-year analyst price target: $15.74
Upside potential: 40%
Brazilian metals and mining company Vale SA (NYSE:VALE) is one of the notable high-yield dividend stocks with upside potential. The stock’s dividend yield hit 11% on June 18, while Vale shares are down 28% so far this year, driven by volatility in iron ore and copper prices after new data from China raised concerns about the economic recovery in the country. In May, UBS upgraded the stock to Buy from Neutral and raised its price target from $13 to $15. UBS believes the ESG risks dragging down the share price are ‘moderate’ as the company believes the overall risk reward for the business has also improved.
Wall Street analysts have an average price target of $15.74 for Vale, which offers 40% upside potential from the share price on June 18.
BPPLC
Average one-year analyst price target: $43.30
Upside potential: 22.35%
British oil giant BPPLC (NYSE:BP) was in the news after Citi called the company a potential “standard-bearer” in Europe’s future energy policy following the European Union’s parliamentary elections, in which right-wing leaders gained ground. BP has a dividend yield of approximately 4.9%. BP reported weak first-quarter results in May and expects upstream production in the second quarter to be slightly lower than in the first quarter.
According to data from Yahoo Finance, Wall Street has a $43.30 price target for BP, which shows an upside of 22.35% from the stock’s current levels.
KeyCorp
Average one-year analyst price target: $16.44
Upside potential: 21%
With a 6% yield and 14 consecutive years of dividend growth, the Cleveland, Ohio-based banking company KeyCorp (NYSE:KEY) is one of the notable high-yield dividend stocks with over 20% upside potential.
On average, Wall Street analysts expect the stock to reach $16.44 over the next twelve months, which is about 21% higher than the share price on June 18. In April, the regional bank posted first-quarter results, which were weak due to rising costs and a decline in net interest income. Adjusted earnings per share from continuing operations amounted to $0.22, missing the consensus of $0.23.
Shares of KeyCorp were trading at $13.59 on June 18, while Wall Street analysts have an average price target of $16.44 for the stock, which represents an upside of 21%.
Rio Tinto
Average one-year analyst price target: $81.38
Upside potential: 23%
Mining giant Rio Tinto PLC ADR ordinary shares (NYSE:RIO) pays a semi-annual dividend and has a yield of over 6.5% as of June 18, one of the highest among peers in the mining sector. In April, the company said iron ore deliveries fell 10% quarter-on-quarter. However, the company maintained its annual shipment guidance of 323 million to 338 million tons for the full year.
Wall Street analysts have an average price estimate of $81.38 for Rio Tinto, which represents a 23% increase from the stock’s price at the market close on June 18.
UGI Company
Average one-year analyst price target: $30.67
Upside potential: 39%
A Pennsylvania-based natural gas and power distribution company UGI Corp. (NYSE:UGI) has been paying dividends for 140 years and has increased payouts for 36 consecutive years as of 2023. The share has a dividend yield of 6.7% as of June 18. In the second quarter, the company’s adjusted earnings per share came in at $1.97, beating expectations by $0.33, while revenue fell 20.3% year over year to $2.47 billion, beating consensus by $600 million left behind. . The company affirmed its 2024 adjusted EPS outlook of $2.70 to $3. Based on this EPS outlook, the company’s payout ratio of less than 50% makes the dividend safe.
According to data compiled by Yahoo Finance, Wall Street analysts expect the stock price to average about $31 over the next twelve months. This estimate represents an increase of 39% from the current price.
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This article 5 High-Yield Dividend Stocks With More Than 20% Upside Potential originally appeared on Benzinga.com
