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According to Morgan Stanley, high-dividend stocks offer investors the ultimate benefit of higher income and higher stock prices. “On average, dividend increases lead to outperformance, while dividend cuts lead to lower returns,” Todd Castagno, global valuation, accounting and tax strategist at the investment bank, said in a note Monday. “Companies that increased their dividends outperformed companies that cut their dividends by about 780 bps (7.8 percentage points).” Dividend stocks are back in fashion in 2024, with a tailwind if the Federal Reserve starts lowering interest rates. There is a possibility of blowing. Last year’s high interest rate environment made U.S. Treasury yields more competitive compared to other income-producing assets. “Equity investors are looking for durable, high-yield dividends as market volatility is expected to continue during the easing cycle,” the strategist said. Castagno’s team’s analysis found that in the six months after a company changed its dividend, the stock prices of companies that announced dividend increases outperformed by an average of 3.1 percentage points, while the stock prices of companies that announced dividend cuts underperformed by 4.7 percentage points. It turned out that it was a form. The Wall Street firm highlighted several stock ideas, including large-cap stocks that have recently raised their dividends. Tech stocks are not usually associated with dividend income, but some semiconductor-related stocks made it onto Morgan Stanley’s list. Back in August, Lam Research announced that its board of directors approved a 16% increase in its quarterly dividend from $1.725 per share to $2 per share. The company has a dividend yield of 1.1% and an average consensus rating of Overweight, according to FactSet. Citi on Wednesday named Lam its No. 1 candidate in the U.S. semiconductor industry. “Our 2025 peak earnings sensitivity analysis shows that buy-rated LRCX/AMAT/KLAC has ~30% additional upside potential using peak multiples,” said Citi analyst Atif Malik. “However, it remains 20% below the historical peak average.” The stock price has increased about 64% over the past 12 months. Broadcom, which benefits from artificial intelligence, has seen its stock rise 88% in the past year and is on Morgan Stanley’s list of dividend candidates. This stock has a dividend yield of 1.9%. In December, Broadcom increased its dividend by 14% to $5.25 per share. This stock is a favorite on Wall Street. The average consensus rating is Overweight, according to FactSet. Goldman Sachs last month highlighted Broadcom as one of its list of semiconductor players that is “well-positioned to benefit from the continued buildout of data center AI infrastructure.” Finally, Mondelez International, the maker of Sour Patch Kids candy and Oreo cookies, was named to Morgan Stanley’s list of dividend producers. Wall Street analysts have given the packaged food giant a consensus buy rating, despite its underwhelming 2023 performance, with the company’s stock up less than 9%, according to FactSet. That’s what it means. Morgan Stanley’s Pamela Kaufman sees upside to Mondelez’s earnings per share, and the company recently raised its price target to $78 per share from $74. “we [overweight] “MDLZ is well-positioned heading into 2024,” the bank said, adding that Mondelez’s competition in “attractive” categories in developed and emerging markets and the company’s “strong “global and local brands.” Other companies on Morgan Stanley’s list of dividend increasers include Accenture, Microsoft, Marathon Petroleum, and DR Horton.
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