Analysts recommend these growing dividend stocks.
Interest rates remain historically low following emergency central bank rate cuts last year. In a low-rate environment, high-yield dividend stocks can be particularly appealing investments. When a company gets into financial trouble, however, the dividend is often the first expense on the chopping block. One way investors can determine the reliability of a dividend is by looking for stocks that have a history of dividend hikes. Here are eight dividend stocks to buy that have yields of at least 3% and have increased their dividends by at least 5% annually over the past five years, according to Morningstar.
Axa (ticker: AXAHY)
Axa is the largest multiline insurance company in France. After a solid first-quarter earnings report, analyst Henry Heathfield says Axa's stock is undervalued. Heathfield says Axa is focusing on growth and shifting away from a pure life insurance and savings model. Half of the company's business now comes from property and casualty insurance. Axa is deleveraging its balance sheet and turning to Asia and commercial insurance for growth. The stock pays a 6.4% dividend, which more than doubled in 2021. Morningstar has a "buy" rating and a $34.20 fair value estimate for AXAHY stock.
British American Tobacco (BTI)
British American Tobacco is the largest European tobacco company. In May, the International Trade Commission ruled that Philip Morris International's (PM) IQOS heated tobacco device infringed on British American patents. Analyst Philip Gorham says the best-case scenario for British American is that the ITC bans IQOS in the U.S. Graham says British American's exposure to heated tobacco and vaping — and its nearly 20% stake in cannabis producer OrganiGram Holdings (OGI) — make it one of the most diversified tobacco stocks. British American pays a 7.3% dividend. Morningstar has a "buy" rating and a $56 fair value estimate for BTI stock.
Edison International (EIX)
Edison International is a public utility company that supplies electricity primarily to Southern California, including Los Angeles. Edison shares are down around 4% year to date, but analyst Travis Miller says the pullback is a buying opportunity. Miller says the market appears to be overestimating Edison's wildfire risks after California Gov. Gavin Newsom declared a drought emergency in May. Miller says Edison trades at a valuation discount to its utility peers, and its 4.6% dividend yield is well above peer average as well. Morningstar has a "buy" rating and a $70 fair value estimate for EIX stock.
Enbridge is one of the largest North American energy infrastructure companies. In May, Michigan Gov. Gretchen Whitmer ordered the shutdown of Enbridge's Line 5 pipeline. However, analyst Stephen Ellis says the pipeline will likely remain operational while Enbridge and the state of Michigan enter mediation to resolve the issue. Ellis says Enbridge's Canadian Mainline pipeline system should continue to operate near full capacity as long as crude oil prices remain at or near his long-term price forecast of $55 per barrel. Enbridge pays a 6.9% dividend. Morningstar has a "buy" rating and a $46 fair value estimate for ENB stock.
Gilead Sciences (GILD)
Gilead Sciences is a biopharmaceutical company that specializes in treatments for HIV/AIDS, hepatitis C, liver disease, inflammation and cancer. Analyst Karen Andersen says investors should look beyond Gilead's recent numbers and focus on its long-term drug pipeline. Gilead is in the process of launching the novel cancer drug Trodelvy, and Andersen has a probability-weighted sales estimate of $5 billion for Trodelvy by 2030. Also, Andersen has high hopes for data on large B-cell lymphoma treatment Yescarta coming later this year. Gilead pays a 4.1% dividend. Morningstar has a "buy" rating and an $81 fair value estimate for GILD stock.
Huntington Bancshares (HBAN)
Huntington Bancshares is a U.S. bank headquartered in Columbus, Ohio. Analyst Eric Compton says Huntington's 2020 acquisition of TCF Financial Corp. should provide significant cost synergy opportunities and will be the key to valuation upside for Huntington shareholders for the next several years. Meanwhile, Compton says an economic rebound, higher inflation and rising interest rates are all positives for the U.S. banking industry as a whole. Huntington shares trade at just 10.3 times forward earnings estimates and pay a 4.1% dividend. Morningstar has a "buy" rating and an $18 fair value estimate for HBAN stock.
Hanesbrands is a consumer goods company that produces innerwear and activewear, including men's and women's underwear and socks. Analyst David Swartz says Hanesbrands' near-term focus is on building its Champion brand. The company is targeting $3 billion in global Champion sales in 2024, a roughly 50% increase from current levels. Swartz also says Hanesbrands is taking steps to improve the efficiency of its supply chain, which has increased its manufacturing output by 15% in the past three years. Hanesbrands pays a 3.1% dividend, and Morningstar has a "buy" rating and a $25 fair value estimate for HBI stock.
Merck & Co. (MRK)
Merck is one of the largest global pharmaceutical companies. The company recently announced the spinoff of its Organon & Co. (OGN) business, which includes its Women's Health, Biosimilars and Established Brands divisions. Analyst Damien Conover says the spinoff will position Merck for long-term growth, led by its leading immuno-oncology drug Keytruda. Conover says cancer drug Lynparza and HPV vaccine Gardasil will also be key products in the years ahead. Conover targets $25 billion in peak annual sales for Keytruda. Merck pays a 3.4% dividend. Morningstar has a "buy" rating and a $94 fair value estimate for MRK stock.
Eight dividend stocks with growing yields:
— Axa (AXAHY)
— British American Tobacco (BTI)
— Edison International (EIX)
— Enbridge (ENB)
— Gilead Sciences (GILD)
— Huntington Bancshares (HBAN)
— Hanesbrands (HBI)
— Merck & Co. (MRK)