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September had a bumpy start for investors as volatility jolted markets in the first week, but dividend-paying stocks can help smooth the ride.

 

Investors with a long-term investment horizon can ignore short-term noise to focus on stocks that have the potential to enhance their total portfolio returns through a mix of dividends and share price appreciation.

 

To that end, the recommendations of top Wall Street analysts can help investors choose stocks with strong fundamentals and the ability to pay consistent dividends.

 

Here are three dividend stocks, highlighted by Wall Street's top pros on TipRanks, a platform that ranks analysts based on their past performance.

 

We start this week with MPLX (MPLX), a midstream energy player. The company's quarterly cash distribution was 85 cents per common unit ($3.40 on an annualized basis) for the second quarter of 2024. MPLX offers an attractive yield of nearly 8%.

 

Recently, RBC Capital analyst Elvira Scotto reiterated a buy rating on MPLX stock with a price target of $47. The analyst updated her model to reflect the company's solid second-quarter results, with adjusted earnings before interest, taxes, depreciation and amortization surpassing the Street's estimate by 3%.

 

Scotto raised her adjusted EBITDA estimates for 2024 and 2025 to reflect the strong performance of the Logistics & Storage segment in Q2 and some consolidation of joint venture interests. The analyst maintained her distribution per unit estimate of $3.57 for 2024 and $3.84 for 2025.

 

Scotto continues to view MPLX as "one of the most attractive income plays among large-cap MLP [master limited partnership]," thanks to its robust yield and rising free cash flow generation. The analyst thinks that MPLX's solid free cash flow will help the company to continue to grow its business and enhance shareholder returns through buybacks.

 

The analyst also highlighted that MPLX is expanding its natural gas and natural gas liquids assets across its integrated network via organic projects, joint venture interests and bolt-on acquisitions.

 

Scotto ranks No. 18 among more than 9,000 analysts tracked by TipRanks. Her ratings have been profitable 69% of the time, delivering an average return of 20.8%. 

 

We move to another dividend-paying energy stock, Chord Energy (CHRD). It is an independent oil and gas company operating in the Williston Basin. The company recently paid a base dividend of $1.25 per share of common stock and a variable dividend of $1.27 per share.

 

On Sept. 4, RBC Capital analyst Scott Hanold reaffirmed a buy rating on CHRD stock with a price target of $200. The analyst increased his earnings per share and cash flow per share estimates for 2024 and 2025 by nearly 3% to reflect modestly higher production and lower cash operating costs.

 

Hanold expects free cash flow of $1.2 billion and $1.4 billion in 2024 and 2025, respectively. The analyst anticipates that FCF will increase in the second half of 2024 due to the combination of the assets of Chord Energy and Enerplus, which the company acquired earlier this year.

 

Commenting on the Enerplus integration, the analyst said, "We remain optimistic the company is well-positioned to not just meet but potentially exceed the synergy target as operations are fully integrated."

 

Further, the analyst expects quarterly distribution of $4.50 to $5.00 per share in the second half of 2024, with dividends accounting for about 60% of the distributions and buybacks amounting to 40%.

 

Hanold ranks No. 27 among more than 9,000 analysts tracked by TipRanks. His ratings have been successful 63% of the time, delivering an average return of 25.4%. 

 

This week's third pick is fast-food chain McDonald's (MCD). MCD stock offers a dividend yield of 2.3%. McDonald's is a dividend aristocrat that has raised its dividends for 47 consecutive years.

 

On Sept. 3, Tigress Financial analyst Ivan Feinseth reiterated a buy rating on MCD stock and raised his price target to $360 from $355. Despite a challenging backdrop, the analyst continues to be bullish on McDonald's due to its ongoing technology initiatives, innovation and value focus. These factors support its resilient business model and long-term growth potential.

 

Feinseth noted that the company is focused on enhancing its value offerings to regain its competitive edge. The analyst highlighted several recent value deals introduced by McDonald's, including the $5 meal deal, which helped improve its image as a fast-food chain offering value and affordability.

 

Further, Feinseth pointed out MCD's competitive advantage, which is backed by its solid brand equity, loyalty program and digital initiatives. The company boasts a loyalty membership base of 166 million members. It is targeting 250 million active loyalty members by 2027.

 

The analyst also noted that McDonald's is making capital investments between $2 billion and $2.5 billion annually to expand its store footprint and improve its technology, including through enhancing its ordering capabilities through automated voice artificial intelligence. Overall, Feinseth is confident about MCD's long-term growth potential and its ability to boost shareholder returns through dividends and share repurchases. In fact, he expects MCD to announce a dividend hike in October, similar to the 10% rise announced last year.

 

Feinseth ranks No. 210 among more than 9,000 analysts tracked by TipRanks. His ratings have been profitable 60% of the time, delivering an average return of 11.9%. 

The stock market is experiencing another bout of volatility.

 

US indexes fell on Wednesday, with the Dow dropping by as much as 600 points in the early morning as traders processed mixed inflation data.

 

The consumer price index for August indicated that prices increased by 2.5% annually, according to the Bureau of Labor Statistics. This marks the lowest headline inflation rate since early 2021. However, core inflation, which excludes the volatile food and energy sectors, exceeded expectations by rising 0.3% for the month, compared to the projected 0.2% increase.

 

Investors are concerned about this unexpected rise in core inflation, as it suggests that inflation remains persistent enough to likely prevent a 50 basis-point rate cut at the Federal Reserve's next policy meeting, which some investors had been hoping for.

 

Following the CPI report, the market now sees an 83% chance that the Fed will opt for a 25 basis-point rate cut next week, an increase from the 56% odds a week ago, as indicated by the CME FedWatch tool.

 

"Another month, another slightly awkward data point," Julian Howard, the chief multi-asset investment strategist at GAM Investments, noted in a statement, adding that core and services inflation appeared "firmly unvanquished" in the latest figures.

 

"However, it does seem at least that a full 0.5% cut just became a little less convincing. Apart from anything else, the Fed's dual mandate means that it can't build its case for an aggressive or any cut solely around a weakening labor market," he added.

 

Although markets are disappointed about the reduced likelihood of a larger cut, a 50 basis-point move by the Fed would be a double-edged sword. Cutting rates by 50 basis points could have signaled to markets that the Fed is worried about a significant economic slowdown, analysts have noted in recent weeks. Conversely, a smaller 25 basis-point cut implies prolonged higher interest rates.

 

Investors are paying close attention to the job market for additional signs of weakness. Jobless claims on Thursday will be the next labor market indicator ahead of the Fed meeting next week.

 

"The job market will continue to be an influence," Gina Bolvin, president of Bolvin Wealth Management Group, said in a statement. "Today's inflation data solidified a 25 basis-point cut for next week; 50 basis points is off the table," she added.

 

Housing costs were a major factor in driving inflation higher, with the Labor Department noting that shelter inflation rose by another 0.5% in August.

 

Shelter costs may soon decline, as market rent growth is estimated to be around 2% year-over-year, according to Preston Caldwell, a US economist at Morningstar.

 

"As long as this remains in place, housing inflation will inevitably have to fall," he stated in a note.

 

Even after adjusting their expectations, markets still anticipate moderate rate cuts from the Fed by the end of the year. Investors are pricing in an 84% chance that the Fed will cut rates by 100 basis points or more by December, though future rate cuts will depend on jobs and inflation data.

 

"If the economy continues to slow—without plunging into a sudden recession—the Fed will be able to cut rates at a steady 25 basis points per meeting pace," Chris Zacarelli, chief investment officer of Independent Advisor Alliance, noted in a statement.

 

"Given the current situation, with the Fed cutting rates, unemployment near multi-decade lows, and an expanding (though slowing) economy, the market should be able to achieve all-time highs again, once we navigate through the volatility that usually comes before most presidential elections," he added.

Seven & i Holdings has turned down a takeover bid from Canadian convenience store operator Alimentation Couche-Tard, citing that the offer is "not in the best interest" of its shareholders and stakeholders.

 

According to a filing with the Tokyo Stock Exchange, the owner of 7-Eleven disclosed that Couche-Tard had proposed to buy all outstanding shares of Seven & i for $14.86 per share, which would value Seven & i at $38.55 billion based on LSEG data.

 

Stephen Dacus, chairman of the special committee formed by Seven & i to review Couche-Tard's proposal, described the proposal as "opportunistically timed and significantly undervalues our standalone strategy and the additional actionable paths we see to enhance shareholder value in the near to medium term."

 

In April, Seven & i announced a restructuring plan focused on expanding 7-Eleven's global footprint while divesting underperforming supermarket operations.

 

Dacus noted that even if Couche-Tard significantly raised its bid, the proposal fails to consider the "numerous and significant challenges" the acquisition would face from U.S. antitrust agencies.

 

"Beyond your simple claim that you do not believe a merger would negatively affect the competitive landscape and that you would 'consider' potential divestitures, you have provided no details on the extent of divestitures required or how they would be implemented," he wrote in a letter seemingly addressed to ACT Chair Alain Bouchard, which was included in the Tokyo Stock Exchange filing.

 

He also highlighted that the Couche-Tard proposal did not specify any timeline for overcoming regulatory obstacles or indicate if the company was "prepared to take all necessary actions for regulatory clearance, including litigation with the government."

 

Dacus affirmed that Seven & i is open to sincerely considering proposals that benefit its stakeholders and shareholders but will resist ones that "strip our shareholders of the company's intrinsic value or fail to address significant regulatory concerns."

 

Ben Herrick, associate portfolio manager at Artisan Partners, told CNBC's "Squawk Box Asia" shortly before the response was filed on Friday that the Couche-Tard offer "highlights that the current management team and the board have not fully utilized their potential to elevate the corporate value of this organization."

 

Artisan Partners, a U.S. fund holding just over a 1% stake in Seven & i, reportedly had urged Seven & i Holdings in August to "seriously consider" the buyout offer and solicit bids for the company's Japanese subsidiaries "as soon as possible."

 

Herrick elaborated that Artisan believes capital allocation abroad has been neglected and that Seven & i should consider the offer.

 

He mentioned that the Japanese convenience store segment of Seven & i needs little adjustment but identified a "huge opportunity" in international licensees operating outside the United States.

 

"You have over 50,000 stores generating about $100 million or just over $100 million in operating profit for the company, which indicates a significant discrepancy," he noted.

 

Herrick also believes that due to insufficient oversight and accounting, Seven & i has been slow to implement changes.

 

"The company needs to accelerate its plan implementation. [Seven and i President Ryuichi] Isaka introduced a 100-day plan to reform [general merchandise store] Ito-Yokado in 2016, and nearly 3,000 days later, progress is slow. A faster pace is needed," he asserted.

 

Conversely, Richard Kaye, portfolio manager at independent asset management group Comgest, expressed a different view in an interview on CNBC's "Squawk Box Asia" on Monday: "I don’t think a radical reform from a foreign acquirer is necessary."

 

He added that the company excels in logistics and product innovation and "it’s hard to imagine that it could be done significantly better."

Gold prices were trading below record peak levels on Wednesday following a surge driven by Western fund inflows and U.S. rate-cut expectations, as investors awaited the minutes of the Federal Reserve's latest meeting for clarity on the extent of cuts.

 

Spot gold was up 0.1% at $2,517.38 per ounce, as of 0238 GMT, after reaching an all-time high of $2,531.60 on Tuesday. U.S. gold futures rose 0.2% to $2,555.20.

 

Gold has increased by approximately $460, or 22%, so far this year, with geopolitical tensions and uncertainty surrounding the upcoming U.S. Presidential elections and potential rate cuts expected to drive the precious metal to even higher levels.

 

"Gold's impressive rally reflects markets anticipating substantial Fed cuts," said OCBC FX strategist Christopher Wong.

 

Traders have fully priced in a rate cut at the Fed's September meeting, with a 68% probability of a 25 basis points cut, according to the CME FedWatch tool.

 

The dollar dropped to its lowest level this year against the euro, while benchmark 10-year Treasury yields also fell, making non-yielding bullion more attractive for holders of other currencies.

 

Traders now anticipate the minutes from the Fed's July policy meeting, expected later today, and Fed Chair Jerome Powell's speech on the U.S. economic outlook this Friday at Jackson Hole.

 

"Given that markets have already anticipated significant cuts to some degree, Powell faces high expectations to exceed dovish market expectations. A minor reality check might be enough to trigger a short-term gold price pullback," Wong added.

 

SPDR Gold Trust GLD, the world's largest gold-backed exchange-traded fund, reported a 0.20% decrease in its holdings on Tuesday from seven-month highs.

 

Spot silver rose 0.4% to $29.52 per ounce, platinum climbed 0.5% to $953.35, and palladium increased by 0.4% to $929.27.