These stocks have cash to keep hiking dividends, Wolfe Research says
Investors seeking income may want to consider stocks that offer robust dividend growth and the ability to keep increasing their payouts, according to Wolfe Research. Dividend stocks can not only provide a reliable income stream, they can help stabilize portfolios during market volatility. On Tuesday, stocks continued their downward slide , with the S & P 500 on pace for its fourth straight decline, amid concerns about the valuations of artificial intelligence-related stocks. In addition, dividends become relatively more attractive to investors as bond yields fall. The Federal Reserve has cut rates twice this year, most recently in October, when it doubts about easing again at its next meeting in December. While there are different dividend strategies, Wolfe focuses on those companies that have a history of substantially increasing their payouts . While they may initially have lower dividends, the income can be reinvested so investors achieve compound returns and capture long-term capital appreciation. “We believe the high dividend growth is a positive signal from management in the fundamentals of the company, and the high free cash flow yield provides the fuel for continued high dividend growth,” Chris Senyek, chief investment strategist at Wolfe Research, said in an email to CNBC. With that in mind, Senyek and his team identified companies that offer dividend growth and high estimated “free cash flow to the firm” that can help bolster future payouts. Free cash flow to the firm is a type of free cash flow that tracks unleveraged free cash flow , or cash available to all equity and debt investors after operating expenses and capital expenditures are paid. Here are some of the names that made the Wolfe screen: Nexstar Media Group was highlighted. The television broadcasting and media company, which currently yields around 4%, has last-twelve-months dividend growth of 17% and an estimated 12% free cash flow to firm yield for 2026. In August, Nexstar agreed to acquire rival Tenga for $3.5 billion, expanding its presence in nine of the top 10 U.S. media markets. The deal is expected to close by the second half of next year. “Our goal is to become a big company, a bigger company and hopefully be able to compete on a level playing field with big tech that is pervasive in all aspects of media: advertising, programming, sports rights,” CEO Perry Sook told CNBC after the deal was announced. Nexstar has an average analyst rating of overweight and about 29% upside to the average analyst price target, according to FactSet. Shares are up 19% year to date. Merck is among the health care stocks that made the list. The drugmaker is well-liked on Wall Street, with analysts covering the stock giving it an average rating of overweight. It has 8% upside to the average price target, per FactSet. Last Friday, Merck agreed to acquire Cidara Therapeutics in a deal worth nearly $9.2 billion, giving it access to an experimental flu drug ahead of the loss of its patent for cancer drug Kaytruda. Merck also recently posted third-quarter earnings and revenue that beat Wall Street’s expectations, with quarterly sales of Keytruda topping more than $8 billion for the first time. New Jersey-based Merck is also in the midst of an effort to cut $3 billion in costs by the end of 2027. Merck has an estimated free cash flow to firm yield of 9% for 2026 and 5% last-twelve-month dividend growth. The stock yields 3.49% and is down 3% year to date. Lastly, Qualcomm also turned up on Wolfe’s screen. The chipmaker has an estimated 6.7% free cash flow to firm yield and last-twelve-month dividend growth of 5%. Qualcomm’s fiscal fourth-quarter adjusted earnings and revenue recently topped analyst expectations . The company also announced it will release new AI accelerator chips . The stock has an average rating of overweight and about 18% upside to the average price target, FactSet numbers show. Qualcomm yields 2.13% and has gained nearly 6% so far this year.
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