Dividend yields ranging from 6% to 13% in 2025, combined with rising valuations driven by robust business models and a favorable interest rate environment—here are the stocks worth keeping an eye on.
The four dividend stocks highlighted by Morgan Stanley boast dividend yields ranging from 6% to 13%, offering total returns that significantly exceed those of BTPs projected for 2025. In a market where investors are prioritizing stability and safety, especially amid expectations of declining interest rates, these stocks present an appealing alternative for those seeking returns higher than traditional fixed-income investments. Beyond consistent dividend payouts, many of these companies are strategically positioned to capitalize on favorable long-term trends, supported by robust growth strategies and disciplined cost management.
Below, we delve into the forecasts and opportunities associated with each company.
1) Enel
Morgan Stanley continues to regard Enel as one of the most compelling picks among Italian utilities. Despite potential shifts in regulatory frameworks, the company is well-positioned to deliver stable results in 2024. Analysts have set a target price of €8.25 per share, implying a potential upside of 16% from current levels.
Enel is among the most generous dividend payers on the Piazza Affari stock exchange and will distribute an interim dividend of €0.215 per share on January 20, 2024. For the full year, dividends are expected to reach €0.458, equating to a dividend yield of 6.5% based on the January 15 closing price of €7.05.
The company’s dividend policy, aligned with its 2024–2026 Strategic Plan, guarantees a minimum fixed dividend of €0.43 per share for the 2024 financial year. Additionally, payouts could increase to 70% of the group’s ordinary net profit if cash generation and capital strength targets are met, according to a company statement from November 6, 2023.
2) Engie
Morgan Stanley also highlights Engie as one of the most promising utilities for 2025, maintaining an overweight rating. The bank has recently upgraded its earnings projections for 2025 and 2026, with forecasts for 2027 now exceeding market consensus.
For 2024, dividends are expected to remain stable at €1.43 per share, reflecting a dividend yield of 9%, making Engie an attractive option for investors seeking reliable, high-yield income. The average target price of €18.83 per share suggests a potential upside of nearly 20% over the next 12 months.
3) Fortum
Fortum, Finland’s state-owned utility, stands out for its robust financial position and the potential for a special dividend. Morgan Stanley rates Fortum overweight and anticipates a special dividend of €0.80 per share, bringing the total dividend for 2024 to €1.79 per share, equivalent to a dividend yield of 13%.
The combination of recent divestments and reduced capital expenditure plans enables Fortum to maintain a net debt-to-EBITDA ratio of just 0.2x. Despite slightly lowering its target price for Fortum from €16.00 to €15.80, Morgan Stanley still sees a potential upside of 15% from current levels.
4) E.ON
The German utility giant E.ON also earns Morgan Stanley’s overweight rating. Analysts project a compound annual growth rate of 7.5% for earnings per share through 2030, alongside an average dividend yield of 6%, driving a total shareholder return exceeding 13%.
E.ON’s growth potential is partly tied to the upcoming German elections in February, which could clarify policies on energy subsidies and infrastructure investment. Morgan Stanley’s analysts have set a target price of €14, implying a 30% upside for the stock, which is listed on the Frankfurt exchange.
Other leading analysts also view E.ON favorably: Goldman Sachs has a price target of €17, while Berenberg estimates €15.90.
|DISCLAIMER
The information provided in this article is for informational purposes only and should not serve as the sole basis for making investment decisions. Readers retain full discretion and responsibility for their investment choices, including assessing their own risk tolerance and investment horizons. This content is not intended to constitute an offer or solicitation to the public for saving or investing.
Original article published on Money.it Italy 2025-01-19 18:17:00. Original title: 4 titoli da dividendo promossi da Morgan Stanley
