Wall Street Loves This 9% Dividend Stock and So Will Passive Income Investors

Investing

Published: May 9, 2024 9:55 am

Investors have choices when looking for passive income. Some common stocks pay dividends out of the company’s excess profits (dividends are discretionary). Other investments have an obligation to provide income.

For example, corporate bonds must pay interest. Real Estate Investment Trusts (REITs) must distribute 90% of their earnings to investors. And some public partnerships are required to distribute all of their available cash flow.

So passive income investors have choices.

Passive Income And Potential Growth

Investors looking for passive income and perhaps an opportunity for growth might consider AllianceBernstein Holdings, LP (NYSE: AB).

AllianceBernstein is a big money management firm. Its clients include institutions and individual investors around the world. It also provides investment research to institutions and advisors. The company is structured as a public limited partnership and its partnership units trade on the New York Stock Exchange just like shares of common stock.

What Does Wall Street Think Of AllianceBernstein Right Now?

Wall Street’s consensus opinion of a company is reflected in an average rating analysts have on it. Those individual ratings – or recommendations – are typically “Buy, “Outperform”, “Sell,” or “Hold.”

Analyst recommendations are like golf scores. The lower they are the better. They range on a scale of one to five with “Buy” recommendations coming at 1 and “Sell” ratings coming in at 5. Squarely in the middle is “Hold.”

Right now, the average rating on AllianceBernstein is 1.8, which works out to be a very solid “Buy.” In fact, no analyst currently recommends selling AllianceBernstein.

Part of AllianceBernstein’s appeal to analysts is its sustainable business model bolstered by its strategic equity partner, Equitable Holdings (NYSE: EQH). Equitable provides AllianceBernstein with permanent capital to seed new investment strategies.

What Do AllianceBernstein’s Numbers Reveal To Investors?

According to the analysts that know AllianceBernstein, earnings appear to be moving in a more positive direction than they had been a couple of years ago.

The consensus view is that AllianceBernstein’s earnings will grow about 18% annually between now and 2027. Analysts peg its share price at about $40.50 per unit in 12 months – up more than 24% over the current price. And then there is the distribution.

AllianceBernstein is required to distribute everything it takes in from operations, minus funds set aside to run the business. That works out to be equivalent to its adjusted net income.

AllianceBernstein’s cash distribution is currently $2.92 per unit. That represents a yield of better than 8.8%. It is also important to note that AllianceBernstein has reliably paid a distribution every year for the last 30 years.

Given the high investment rating analysts have on AllianceBernstein, its impressive earnings prospects, and the better-than-average yield it offers, one might see why passive income investors might love it as much as Wall Street does.

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