Last Friday, Federal Reserve Chair Jerome Powell provided the most unambiguous indication yet that the central bank is preparing to lower historically high interest rates in September. While he didn't specify the exact amount of the rate cut, most experts anticipate a quarter-point reduction. Powell stated at the Fed's annual symposium in Jackson Hole, Wyoming, "The time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks." He also expressed growing confidence that inflation is on a sustainable path back to the Fed's 2% target.
Fed rate cuts would likely reduce borrowing costs for mortgages, credit cards, and other loans while, in turn, potentially boosting the stock market. However, it could also lead to lower yields on savings accounts, making high-yield dividend stocks more attractive to income-seeking investors. As rates decline, the appeal of these dividend-paying stocks tends to rise, offering both income and potential upside.
So, let's take a closer look at three high-yielding dividend stocks with potential upside according to analyst ratings.
Energy Transfer Nears Breakout as Analysts Remain Optimistic
Energy Transfer (NYSE: ET) operates a vast network of midstream energy assets across the U.S., making it a diversified play on natural gas, crude oil, and their derivatives. With an impressive dividend yield of 8.05% and projected earnings growth of 13.42% for the full year, the stock has been a strong performer, gaining 15.29% year-to-date. Currently, Energy Transfer is consolidating near its 52-week high, just 3.58% away from a potential breakout on a higher timeframe.
Analysts are optimistic, with the stock receiving a Moderate Buy rating based on eight analyst ratings and a price target of $19.29, suggesting over 21% potential upside. Although the company missed earnings expectations slightly in its August 7, 2024, report—posting $0.35 EPS versus the consensus estimate of $0.36—the business saw a significant revenue increase, up 13.1% compared to the same quarter last year, with total revenue of $20.73 billion.
Notably, there have been five insider transactions in the past twelve months, all on the buy side. Insiders have collectively purchased $62.67 million worth of ET stock, with no insider sales during this period.
Host Hotels Nears Resistance, Potential for Trend Reversal
Host Hotels & Resorts (NASDAQ: HST), a member of the S&P 500 index and the largest lodging real estate investment trust (REIT), boasts a portfolio of luxury and upper-upscale hotels. With a dividend yield of 4.62% and a P/E ratio of 16.96, HST offers an income stream, though it faces some bearish sentiment. As of August 15, the stock had a short interest of 5.6%, a 12.75% increase from the previous month, and on August 21, Morgan Stanley analyst Stephen Grambling maintained a Sell rating.
Despite this, the consensus among sixteen analysts is a Moderate Buy, with a price target of $21.50, indicating nearly 24% upside potential. From a technical standpoint, the stock has bottomed after its July 31 earnings report, which led to a brief selloff. Since then, shares have rebounded sharply, approaching resistance within its higher timeframe downtrend. A break above $18 could signal a momentum shift, potentially leading to a higher timeframe breakout and trend reversal.
Vodafone’s High Yield and Growth Prospects Make It a Top Pick
Vodafone Group Public Limited (NASDAQ: VOD) is a telecommunications giant with a market capitalization of $26.5 billion, providing services across Europe and internationally. The company boasts an impressive 9.54% dividend yield and is expected to see full-year earnings growth of 35.21%, all while maintaining a modest P/E ratio of just 9.04.
Vodafone's shares have performed well year-to-date, gaining over 13%. Despite its attractive P/E ratio, some might wonder if the stock is a classic value trap. However, analysts are optimistic.
With a Moderate Buy rating based on five analyst reviews—up from a Hold rating three months and a year ago—the stock's consensus price target of $14.45 suggests a potential upside of nearly 47%.
