These stocks with healthy dividends have double-digit upside, analysts say
With volatility picking up in the markets, many investors will be drawn to dividend stocks that offer a steadier, more predictable return, and many stocks with healthy payouts are well liked on Wall Street. There are 10 stocks in the S & P 500 with dividend yields of at least 4% and upside to consensus price targets of more than 10% that also pass several quality screens, according to FactSet. Income investors should want to avoid yield traps, where companies dividend payouts are too good to be true given the condition of the company. To combat this, the list below only includes stocks with buy ratings from at least 60% of analysts surveyed by FactSet and have not fallen more than 10% during the last three months. Most of the stocks on the list are from the energy sector, which is still beaten down relative to its pre-pandemic levels despite a rally in recent months. The Energy Select Sector SPDR Fund is up nearly 37% since the end of October. The rally for energy stocks has come as Wall Street has turned bullish on the sector amid growing confidence about an economic recovery in 2021. Chevron , for example, has received multiple upgrades from major investment firms this month, including from analysts at Piper Sandler and HSBC. "Chevron is in a stronger financial position than many of its peers; even after consolidating the Noble Energy debt in 4Q, its balance sheet gearing will still be the lowest in the peer group," HSBC said in a note on Jan. 14. The energy giant has a dividend yield of 5.8% and 23.2% upside to the average analyst target, according to FactSet. Energy stocks make up four the top five dividend yields on the list, with tobacco company Philip Morris being the outlier at number three. Other non-energy stocks on the list include utility company Edison International and mid-sized bank Citizens Financial , and both of those stocks closed more than 20% below their consensus price targets on Friday, according to FactSet. The stock on the list with the highest upside, according to Wall Street analysts, is ConocoPhillips . The stock is up nearly 40% in the past three months, but nearly 78% of analysts still have buy ratings according to FactSet. Mizuho Securities upgraded the stock to buy on Jan. 11 and said in a note to clients that the company has been making "all the right moves." "COP is in a class of its own. It combines the best of what an E & P has to offer (oil price leverage and growth potential) with that of an Integrated Major (diversification, discipline, and cash return)," the Mizuho note said.

Traders on the floor of the New York Stock Exchange. Source: The New York Stock Exchange