2 blue chip dividend stocks yielding up to 7%;  Analysts Say Buy

In poker, blue chips have the highest value and the name has become attached to the highest quality stocks. Blue chips have a reputation for holding value and providing some degree of protection for investors’ portfolios, making them attractive at a time of heightened market volatility and generally falling stock prices.

Blue chip dividend payers are particularly attractive because they combine the two pillars of quality and long-term payout reliability.

So let’s follow that line and look at two of the higher dividend quality stocks. These are stocks with long histories of maintaining reliable payouts, more recent histories of dividend increases, and yields high enough to provide some degree of insulation against the current rate of inflation. It also doesn’t hurt that both stocks are admired by the analyst community, enough to earn a consensus Strong Buy rating.

Enterprise Product Partners (EPD)

The first stock we’ll look at, Enterprise Products, is a mid-cap company in the energy industry. Its business is moving products, getting the crude oil, natural gas and natural gas liquids out of the ground from producers out of wellheads and into the transportation network of pipelines and transfer terminals and the storage infrastructure of tank farms and refineries.

Enterprise’s assets include an extensive network of pipelines and storage facilities stretching from the Appalachian gas fields of Pennsylvania, the Great Lakes region, the Southeast and the Rockies, to Texas and the Gulf Coast region, where it has facilities for processing, storage farms, refineries and import/export terminals. It’s a big business, and Enterprise has a market capitalization of over $55 billion.

More important than the company’s business network or size, Enterprise shares have soared in this year’s choppy trading with a net year-to-date gain of 27%.

Those share gains came as the company’s revenue and earnings also grew. In its most recent quarterly earnings report, from 2Q22, Enterprise posted a top line of $16 billion, a significant increase from the $9.4 billion reported in the previous quarter, a year-over-year gain of 70%. The company’s earnings, net income attributable to shareholders, were reported at $1.4 billion, or 64 cents per diluted share, a 25% year-over-year gain.

Enterprise is clearly confident after about two years of rising top and bottom lines; company management increased the dividend payout in the last statement by ~6%, to 0.475 per common share. That payment, which came out on August 12, is annualized to $1.90 and yields 7.2%. Enterprise has a 14-year history of dividend growth and reliability.

All this caught the attention of analyst Truist Neil Dingman, which holds a 5-star rating from TipRanks. Dingman is impressed with Enterprise’s business expansion, writing, “EPD continues to see strong activity on its pipelines and storage facilities with the potential for even more natural gas facilities/fractionators. We also expect little or no slack in the $5.5 billion in projects, the majority of which will come on stream next year. The company maintains a stable, strong FCF-generating business while earning profit from price differentials and commodity-based contracts.”

“However,” the analyst concluded, “we believe the market has not given enough credit to EPD for its strong differentials and upside to commodity-based contracts.”

Dingman’s bullish outlook has him assigning a Buy rating to the stock, and his $33 price target suggests an upside of ~25% over the next year. Based on the current dividend yield and expected price appreciation, the stock has a ~32% potential total return profile. (To watch Dingmann’s record, Press here)

Overall, Enterprise has a Strong Buy consensus rating from Street analysts, and this rating is unanimous based on 9 positive reviews given in recent weeks. Shares are trading at $26.36 and their average target price of $32.78 indicates room for a 24% upside for the stock over the next year. (See the EPD stock forecast at TipRanks)

Gaming and Entertainment Properties (GLPI)

The second stock we’ll look at is a real estate investment trust, a REIT, a class of companies long known as powerful dividend payers. That firm, Gaming and Leisure Properties, is doing a twist on the REIT model by focusing its investments on acquiring and leasing real estate for gaming operators. Gaming and Leisure has 57 properties leased to leading casino and gaming companies in 17 states.

Gaming and leisure saw a modest increase this year, with the stock up about 5%. This outperformance in the general markets coincided with both stable revenues and profits and an increase in the casino gaming business as the economy reopened after the pandemic.

In 2Q12, the most recent reported quarter, GLPI posted a record high of $326.5 million, for a modest 2.7% year-over-year gain. These revenues supported net income of $155.8 million, up more than 12% from net income of $138.2 million in the year-ago quarter. Per share, diluted EPS was 61 cents, roughly in line with 2Q21’s 59 cents.

GLPI’s board increased the dividend payout earlier this year from 69 cents to 70.5 cents per common share. The dividend for the second quarter was held at this level, which on an annualized basis was $2.82 per common share, yielding a yield of 5.7%. Gaming and Leisure has a history of maintaining reliable quarterly dividend payments since 2014.

In his coverage of this stock, 5-star analyst Joseph Gref, of JPMorgan, explains how GLPI’s model helps provide the cash flow needed for a solid dividend: “We continue to like the stability of GLPI’s triple-net lease REIT business model and its attractive, safe and likely growing dividend, given strong tenant profiles and rent escalators and M&A-related growth supported by a strong balance sheet. This should result in an attractive risk reward, particularly for risk-averse investors, with stability in rent collection, which should continue to generate attractive free cash flow that will be deployed into tax-efficient capital returns, with an attractive dividend yield.’

Gref follows these comments with an Overweight (i.e., Buy) rating on the stock, and his price target, now set at $57, suggests a 15% upside over the next 12 months. (To watch Gref’s record, Press here)

Overall, out of the 12 recent analyst reviews on file for GLPI, 10 are Buys and only 2 are Holds (ie Neutral), giving the stock their consensus rating of Strong Buy. The average stock price target of $55.40 suggests a ~12% upside from the current stock price of $49.58. (See the GLPI stock forecast at TipRanks)

To find good stock trading ideas at attractive valuations, visit TipRanks’ The best stocks to buya recently launched tool that brings together all of TipRanks equity insights.

Rebuttal: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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