2 High-Dividend Stocks with a Strong Buy Rating: AB, USAC

The Zacks Rank #1 (Strong Buy) list highlights stocks that are most likely to have more upside in correlation with rising earnings estimate revisions (EPS), which is considered the most precise indicator of upward momentum in stocks.

Many platforms don’t offer an advanced stock screener tool like Zacks to sift out an intriguing short-term EPS revision trend, so chances are they won't be able to pinpoint a stock that also offers a 5% annual dividend yield or higher as well while trading at a realistic P/E valuation.

However, if you are ambitiously seeking these prospects, here are two highly ranked Zacks stocks that do.

Top Asset Manager with an 8% Dividend Yield & Record AUM

1. AllianceBernstein AB has joined a list of top investment management firms that are sitting at peaks in assets under management (AUM). Reporting record AUM of $860 billion during Q3, AllianceBernstein stock stands out among the elite asset managers with a whopping 8.67% annual dividend yield, with its Zacks Financial-Investment Management Industry average at 2.27%.

2.  AllianceBernstein is known to carry a very low debt-to-capital ratio, suggesting its dividend is safe, and has also stood out by efficiently generating profits from shareholder capital with a trailing twelve-month ROE of 21% compared to the industry average of 9%.

3. EPS revisions for FY25 and FY26 are modestly higher in the last 30 days, making it an ideal time to potentially add positions in AB for an income-oriented play. Making this feasible and desirable regarding adding positions is that compared to some of the other higher-tier investment management stocks, AB trades rather cheaply at around $40 a share and 11X forward earnings.

Plus, the annual EPS growth projections for AB are enticing, with a nearly 15% increase expected next year.

An MLP with Soaring Earnings

If you think AllianceBernstein’s EPS growth targets are attractive, how about a Master Limited Partnership (MLP) that‘s expected to post a 30% increase in earnings per share this year and another 38% uptick in FY26.

Because of their tax structures, MLPs are required by law to distribute most of their cash to shareholders. This typically makes them very popular income-focused investments, especially as it relates to the energy sector, with USA Compression Partners USAC setting itself apart.

As one of the largest independent natural gas compression services providers in the U.S., this MLP offers an 8.75% annual dividend yield. Furthermore, at under $25 a share, USAC trades at a reasonable 27X forward earnings multiple considering its EPS growth.

More reassuring is that over the last 60 days, FY25 and FY26 EPS revisions for USA Compression Partners have now risen over 5% and 7% respectively.

Bottom Line

For investors seeking income in the portfolio, these highly ranked Zacks stocks are hard to overlook at the moment. Enticing dividends, EPS growth, and fair P/E valuations make them appealing long-term prospects, and the positive earnings estimate revision trend points to more short-term upside.

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This article originally published on Zacks Investment Research (zacks.com).

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