What's better than a dividend stock that pays an exceptionally juicy yield? One that also has the potential to deliver tremendous returns.
Granted, there aren't many stocks that check off both boxes. However, a select few do. Here are three ultra-high-yield dividend stocks that could soar 32% to 55% higher, according to Wall Street.
1. Energy Transfer LP
Energy Transfer LP (ET 0.11%) ranks among the leaders in the U.S. midstream energy industry. It operates pipelines that transport crude oil, natural gas, natural gas liquids (NGLs), and refined petrochemical products. The limited partnership (LP) also runs major terminals as well as processing and storage facilities.
Like several of its midstream energy peers, Energy Transfer pays an attractive distribution. Its yield currently stands at nearly 9.6%. The company expects to grow its distribution by 3% to 5% per year.
NYSE: ET
Key Data Points
The stock has performed relatively well so far in 2023, rising close to 10%. Analysts think it has plenty of room to run. The consensus 12-month price target reflects an upside potential of more than 32%.
There are at least a couple of reasons why that price target could be attainable. The Federal Reserve no longer predicts that a U.S. recession is on the way. This should translate to sustained demand for the fossil fuels that Energy Transfer transports, processes, and stores. Also, the stock remains attractively valued with a forward earnings multiple of only 8.4x.
2. British American Tobacco
British American Tobacco (BTI 1.44%) (BAT) originally built its business selling cigarette brands including Camel, Lucky Strike, Newport, and Pall Mall. These days, though, the company focuses much more heavily on new product categories. For example, its Vuse ranks as the No. 1 vaping brand in the world. BAT also markets oral nicotine and tobacco heating products.
The tobacco giant hasn't always paid an ultra-high dividend yield. In recent years, however, a significant stock decline has pushed its yield higher. BAT's dividend currently yields nearly 10.5%.
NYSE: BTI
Key Data Points
Only two analysts surveyed by Refinitiv in August cover BAT. Both, though, rate the stock as a strong buy. The average price target for the stock is a whopping 52% higher than BAT's current share price.
I'm skeptical about the chances that BAT stock will actually jump that much. The environment remains challenging with high inflation impacting customers. However, it wouldn't be surprising if BAT delivers market-beating total returns over the next year.
3. NextEra Energy Partners
NextEra Energy Partners (NEP +0.39%) is a limited partnership that's a subsidiary of NextEra Energy (NEE 0.08%). It focuses on acquiring and managing clean energy projects including wind, solar, and natural gas facilities.
Income investors have at least a couple of reasons to like NextEra Energy Partners more than its much larger parent. For one thing, the LP offers a distribution yield of nearly 7% compared to a dividend yield of around 2.7% for NextEra Energy.
NYSE: NEP
Key Data Points
Wall Street is also more bullish about NextEra Energy Partners. The consensus 12-month price target reflects an upside potential of more than 55%. Analysts think that NextEra Energy stock could move close to 31% higher.
There's certainly a big opportunity in clean energy. NextEra Energy Partners should be in a great position to capitalize on it with the support of its big parent. My primary concern about the stock being able to soar as much as analysts project, though, is its valuation. The stock trades at a sky-high forward price-to-earnings ratio of over 48.5x.
