Energy sectors stand out as top dividend yield contributors, owing to their judicious balance sheets and strategic capital deployment, highlighted by Wilson. Forecasts from Morgan Stanley anticipate 9.6% yields for Energy Transfer in 2024 and a 9.9% yield for MPLX, a master limited partnership derived from Marathon Petroleum, engaged in operating crude oil and refined product pipelines.
The tobacco industry is recognized for its stable dividends, driven by its cash-rich nature, minimal capital expenditure requirement, relatively subdued leverage, and a focus on dividends as a capital utilization strategy, according to Wilson. Philip Morris is favored by the bank within the tobacco sector, with a potential 2024 dividend yield of 5.5%, as per Morgan Stanley’s analysis.
In the realm of dividends, the packaged food sector presents a viable option, considering its consistent demand, lucrative margins, robust free cash flow, and manageable leverage, noted Wilson. Mondelez, known for producing Oreo cookies and Ritz crackers, emerges as the prime dividend selection in this domain.
Household product stocks also command attention for their “exceptionally secure” dividends, attributed to the “typically stable demand for daily use items and cash-rich operational models,” even though they register on the lower spectrum in yield terms. Procter & Gamble and Colgate-Palmolive are highlighted as leading choices, with projections indicating 2024 yields approximately at 2.5% and 2.7%, respectively.
Wilson asserted, “We hold the view [thatVZ these stocks] present enticing [upper single-digit] EPS growth and subsequent dividend amplification, supported by continuous market share advancements due to proficient execution, and a [gross margin] uptick windfall as pricing supremacy counterbalances cost strains in the short term, facilitating enhanced reinvestment into the business.” He added, “These firms recognize the pivotal role of a consistent and ascending dividend in constituting the total shareholder return to their investor constituency.”
Additional selections from Morgan Stanley encompass Utility Exelon, Regions Financial, Verizon, and Hess among others.
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