Wall Street's 2 Best Dividend Stocks to Buy Now

AI stocks may have dominated the last year, but some Wall Street analysts are still bullish on top consumer brands. Investors like to hold dividend-paying equities. Most analysts' opinions aren't useful to long-term investors since Wall Street doesn't play the long game. However, analysts' calls sometimes provide timely purchasing opportunities.

Two positive analyst calls on PepsiCo (NASDAQ: PEP) and Starbucks (NASDAQ: SBUX) suggest that. Why these top stocks are ripe for picking.

Morgan Stanley analyst Dara Mohsenian recently ranked PepsiCo as his #1 pick. He upgraded the shares to overweight (buy) with a $190 price objective, somewhat higher than the current price. Given PepsiCo's strong brand portfolio and dividend growth, its above-average yield suggests it may be undervalued.

Over the last few years, PepsiCo handled high inflation successfully. The company's 2023 adjusted revenue grew 9.5%, while constant-currency non-GAAP EPS rose 14%. Top brands like Doritos, Gatorade, and Quaker Oats have driven profitable expansion for decades.

PepsiCo pays out three-quarters of its earnings as dividends. It's encouraging to see management still expanding into convenient foods and overseas markets. Analysts anticipate PepsiCo will boost earnings 7% annually over the next five years.

These reasons make the stock worth buying on the drop. Shares are down 12% from its 2023 high but up marginally year to date, with a 2.9% dividend yield. PepsiCo has raised its dividend annually for 52 years and has good prospects to continue.

Despite a 5% year-to-date decline, JP Morgan analysts retain an overweight (buy) rating and $100 price objective on Starbucks shares. Starbucks has also handled inflationary challenges effectively, with revenue and earnings up from three years ago. Recent quarter global comparative sales climbed 5% year over year due to loyalty club member growth and expenditure per member.

Starbucks' products are in high demand. Premium drinks are becoming more popular, leading to more personalization and better margins. Management expects adjusted (non-GAAP) EPS to climb by the high teens annually through fiscal 2025. The fiscal 2024 first quarter (ending Dec. 31) had 20% adjusted EPS growth.

Starbucks released 57% of its earnings as dividends last year, so the high growth expectation could lead to big dividend increases, but the stock's 2.4% yield is already appealing. Starbucks should outperform investor returns with its above-average yield and double-digit earnings growth.

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