Morgan Stanley's Top Dividend-Paying Stock Picks
The Importance of Dividend Growers
Morgan Stanley advises investors to prioritize dividend growers rather than solely focusing on higher yields when selecting dividend-paying stocks to stabilize their portfolios during uncertain times. According to the investment bank, dividends provide a positive return cushion, with dividend-paying stocks outperforming nondividend payers across all large-cap sectors since 2000, except for consumer discretionary. Additionally, dividend growers tend to outperform over time, while high-yielding stocks can be volatile. These factors make dividend-paying stocks even more crucial for investors as the economy faces an environment of elevated but declining inflation.
Morgan Stanley's Top Picks
In line with their analysis, Morgan Stanley's analysts have identified several top dividend-paying stock picks. Energy Transfer, a company operating in the natural gas pipeline industry, is rated overweight by Morgan Stanley analyst Robert Kad. The stock offers an 8.9% dividend yield and has seen a nearly 18% increase in shares in 2023. Morgan Stanley believes that the midstream energy infrastructure sector, supported by conservative balance sheets and capital allocation strategies, offers attractive yield for income-oriented investors.
Morgan Stanley also favors Mondelez International, the company behind popular brands like Sour Patch Kids candy and Oreo cookies. Analyst Pamela Kaufman rates the stock as overweight, despite its modest 2.4% dividend yield. Morgan Stanley sees potential in Mondelez International due to expected double-digit EPS growth through 2025 and a stable payout ratio sustained by predictable capital expenditures.
Banks as Dividend Picks
Several banks, including Regions Financial, have made Morgan Stanley's list of top dividend picks. Analyst Betsy Graseck recommends an overweight rating for the Birmingham, Alabama-based lender, which offers a dividend yield of 5.6%. Morgan Stanley anticipates that banks will be able to grow their dividends by approximately 5% in 2024. The firm expresses confidence that even in a bear case scenario, where there is a surprise economic hard landing with higher credit losses, the majority of banks will not need to reduce current dividend per share payouts due to their modest current payouts.
In conclusion, Morgan Stanley's analysis highlights the importance of dividend growers in stabilizing portfolios and generating returns. Their top dividend-paying stock picks, including Energy Transfer, Mondelez International, and Regions Financial, offer opportunities for income-oriented investors seeking stable and predictable dividends.
Morgan Stanley's Dividend Strategy: Implications for New Businesses
The Value of Dividend Growers
Morgan Stanley's emphasis on dividend growers over high yields offers valuable insights for new businesses. The investment bank's analysis suggests that dividends can provide a positive return cushion, especially during periods of market uncertainty. With dividend-paying stocks outperforming nondividend payers in nearly all large-cap sectors since 2000, new businesses might consider this strategy to stabilize their portfolios in an economy facing declining but still elevated inflation.
Top Picks: Energy Transfer and Mondelez International
Morgan Stanley's top picks, including Energy Transfer and Mondelez International, highlight sectors where new businesses could potentially find lucrative opportunities. Energy Transfer, operating in the natural gas pipeline industry, offers an attractive yield for income-oriented investors, supported by conservative balance sheets and capital allocation strategies. Mondelez International, despite a modest dividend yield, presents potential due to expected double-digit EPS growth through 2025 and a stable payout ratio.
The Role of Banks in Dividend Strategy
Morgan Stanley's inclusion of banks, such as Regions Financial, in their top dividend picks underscores the potential for dividend growth in this sector. The firm anticipates banks will be able to grow their dividends by approximately 5% in 2024, a trend that new businesses could capitalize on. Even in a bear case scenario, the majority of banks are expected to maintain their current dividend per share payouts, offering stability for new businesses.
In summary, Morgan Stanley's dividend strategy highlights the importance of dividend growers and offers a roadmap for new businesses seeking to navigate an uncertain economic landscape. Their top picks provide a guide for income-oriented investors and new businesses aiming for stable and predictable dividends.