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5 Dividend Stocks for an Uncertain Market


Dec. 27 2019, Updated 4:10 p.m. ET

Investors look for stable dividend income in periods of high market uncertainties. The ongoing trade war and geopolitical uncertainties continue to keep stock markets volatile. This may attract investors to dividend stocks. Let’s take a look at five such stocks that are trading at attractive yields.

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Enterprise Products Partners: A top dividend stock

Midstream energy giant Enterprise Products Partners (EPD) is trading at a yield of 6.4%. The MLP is up 17% so far in 2019. Enterprise Products Partners is expected to benefit from the long-term growth in the US natural gas production. The US EIA (Energy Information Administration) expects that US dry natural gas production could grow 10% from the 2018 average.

Enterprise Products’ diversified operations across natural gas, petroleum, and refined products contribute to its cash-flow stability. Its DCF (distributable cash flow) for Q3 2019 was 1.7x the dividends for the period. A simplified structure and a conservative financial profile appear to make its dividends safe.

All of the 26 Reuters-surveyed analysts covering Enterprise Products Partners rate it as a “buy” or a “strong buy.” The analysts’ mean price target implies an upside potential of 33% for this dividend stock.

Phillips 66 Partners

Phillips 66 Partners (PSXP) is the midstream MLP of top refiner Phillips 66 (PSX). The stock is trading at a yield of 6.2% and has risen 33% year-to-date.

Quite a few analysts have revised their price targets for Phillips 66 Partners in the last week. Citigroup raised its price target for PSXP from $56.50 to $63. Stifel raised its price target for PSXP by $1, while Mizuho and RBC raised their respective price targets by $3 each.

Overall, half of the surveyed analysts rated PSXP as a “buy” while the remaining half rated it as a “hold.” PSXP’s mean price target implies an upside of 6% from its current levels.

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Magellan Midstream Partners’ dividend

Magellan Midstream Partners (MMP) is trading at an attractive yield of 6.5%. The MLP has a long track record of offering strong dividend coverage and growth. It recently increased its distributable cash flow guidance for 2019 by $40 million. Magellan expects to generate DCF of 1.35x of its expected 2019 dividends.

On November 1, Stifel raised its price target for MMP from $68 to $70. Of the 21 Reuters-surveyed analysts covering Magellan, 11 analysts rate it as a “buy,” nine analysts rated it as a “hold,” and one rated it as a “sell.” MMP’s mean price of $70.50 implies an upside potential of 12% from its current price.

CQP: A long-term play on LNG

Cheniere Energy’s (LNG) subsidiary Cheniere Energy Partners (CQP) offers a yield of approximately 5.6%. Growth in LNG (liquefied natural gas) exports is expected to benefit players in the segment. LNG  exports are the biggest driver of US natural gas demand growth.

CQP stock is up about 27% in 2019. Of the 17 analysts covering Cheniere Energy Partners, 12 rated it as a “hold.” Two analysts rated it as a “buy,” and three rated it as a “sell.” The mean price target implies a downside of approximately 2% from CQP’s current price.

ONEOK: An S&P 500 dividend stock

ONEOK (OKE) offers a yield of 5.2%. It is one of the top-yielding stocks in the S&P 500 Index. The stock has risen 37% year-to-date. Like EPD and Kinder Morgan (KMI), ONEOK stands to gain from the higher natural gas demand in the long term.

Of the 22 analysts covering ONEOK, 13 rated it as a “buy,” and the remaining nine rated it as a “hold.” Based on its mean price target, OKE offers an upside potential of 8% from its current levels.


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