3 Overlooked Dividend Plays for Income in Volatile Times

Amid market volatility, the article highlights three dividend-paying stocks with growth potential: DHT Holdings (DHT), Sunoco LP (SUN), and Amcor plc (AMCR). DHT, a crude oil tanker company, reported strong earnings and has a 5.30% dividend yield with analysts projecting further upside. Sunoco, a motor fuel retailer, is expanding aggressively, offers a 6.50% dividend yield, and is also favored by analysts. While Amcor, a packaging manufacturer, had a disappointing earnings report, analysts remain optimistic, citing a potential 25% upside and a 5.65% dividend yield, though its high payout ratio warrants caution.

Analysis

The current market environment, characterized by heightened volatility and challenges within traditional safe-haven assets such as U.S. Treasury bonds, is prompting investors to explore dividend-paying equities that offer a combination of steady income and potential for capital appreciation. Within this context, crude oil tanker company DHT Holdings (DHT) has demonstrated robust operational and financial health, reporting first-quarter earnings per share of 27 cents, a significant 12 cents above analyst forecasts, and concluding the quarter with $277 million in total liquidity alongside new charter contracts. DHT offers a 5.30% dividend yield with a reasonable 54.55% payout ratio, is supported by a 17.4% return on equity, and projects 50% earnings growth, leading analysts to forecast over 14% upside despite an over 17% year-to-date share price increase. Concurrently, motor fuel retailer Sunoco LP (SUN) is executing an aggressive expansion strategy, notably with its planned over $9 billion acquisition of Parkland, which is anticipated to yield 10% cash flow accretion and provide a significant entry into U.S.-Canada energy infrastructure. SUN presents a 6.50% dividend yield, a 64.88% payout ratio considered sustainable, and has garnered unanimous Buy ratings from analysts, who see over 16% upside from current levels after a nearly 7% year-to-date climb. Conversely, packaging manufacturer Amcor plc (AMCR), despite its diversified industry exposure, experienced an underwhelming earnings period, missing analyst estimates on both top- and bottom-line performance, which contributed to a nearly 4% year-to-date stock decline. Nevertheless, a majority of analysts remain optimistic, assigning a consensus price target that suggests over 25% upside potential, complemented by a 5.65% dividend yield; however, its high 91.07% dividend payout ratio necessitates future profit improvements for continued sustainability.

Key Decisions for Investors

• Investors could consider DHT Holdings for its strong earnings momentum, 5.30% dividend yield, and projected 50% earnings growth, while monitoring tanker market cyclicality and the sustainability of its analyst-projected upside after a significant year-to-date run.
• Sunoco LP warrants attention for its aggressive growth-by-acquisition strategy, particularly the Parkland deal targeting 10% cash flow accretion, coupled with its attractive 6.50% dividend yield, though careful assessment of M&A integration risks and associated leverage is prudent.
• For Amcor plc, the recent share price underperformance following an earnings miss may present a contrarian investment opportunity, given analyst optimism for over 25% upside and a 5.65% yield, but its high 91.07% payout ratio requires close scrutiny of future profitability to ensure dividend sustainability.