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Midcap Momentum and Dividend Payers

Midcap stocks are gaining traction, offering growth potential and attractive dividends for investors.

The SPDR S&P MidCap 400 ETF (MDY) has posted several consecutive winning weeks, with a big gain over the past two days, driven by a tariff suspension agreement between the U.S. and China.

Trade deals, including one with the United Kingdom and progress with China, favor smaller companies, which are more sensitive to domestic economic conditions than larger firms.

Janus Henderson midcap portfolio manager Brian Demain noted in a recent article, “We’re working with companies exposed to tariffs to assess their contingency plans. Many are adopting quick fixes, despite cost challenges.”

Wall Street economists are also revising recession forecasts downward, with Goldman Sachs lowering its 12-month recession probability to 35% from 45% after the tentative U.S.-China deal.

This means it may be time to look at these businesses.

Dividend-Focused ETF and Stock Picks

Investors seeking both midcap growth and income may consider the ProShares S&P MidCap 400 Dividend Aristocrats ETF (REGL), which has risen 6.6% over the past month, including reinvested dividends, per FactSet data.

REGL’s constituents have consistently increased dividends for at least 15 years. Using FactSet data, a screen of REGL stocks was conducted with the following criteria:

  • Dividend yield of at least 1.5%.

  • Buy ratings from at least 51% of covering analysts.

  • At least 10% upside based on consensus price targets.

These names were picks as top stocks based on the above:

UMB Financial Corp

  • Dividend Yield: 1.5%

  • Analyst Ratings: 73% of analysts rate it buy or overweight.

  • Upside Potential: ~12% per consensus price targets.

Truist Financial analyst Brian Foran rated UMB a buy, citing its strengths in niche fee areas, diverse exposures, and strong fee and loan-to-deposit ratios.

UMB’s recent acquisition of Heartland Financial increased its assets by over 30% to ~$68 billion, enhancing its consumer segment offerings like mortgages and cards.

Reinsurance Group of America (RGA)

  • Dividend Yield: 1.7%

  • Analyst Ratings: 77% of analysts rate it buy-equivalent.

  • Upside Potential: ~16% per consensus price targets.

Piper Sandler’s John Barnidge maintained an overweight rating after RGA’s Q1 2025 operating income of $5.66 per share beat FactSet’s $5.31 estimate.

RGA’s stability in earnings and strong growth in its traditional mortality business were highlighted, driven by its role as a reinsurer managing mortality and morbidity risks.

Essential Utilities

  • Dividend Yield: 3.5%

  • Analyst Ratings: Buy rating reiterated by Janney Montgomery Scott’s Michael Gaugler.

  • Upside Potential: ~10% per consensus price targets.

Essential Utilities, a provider of water, wastewater, and natural gas services, reported Q1 2025 earnings of $1.03 per share on $784 million in revenue.

Gaugler noted a 7.5% increase in water revenues and a ~46% rise in natural gas sales, fueled by regulatory recoveries and higher gas volumes.

Data center developments in its Pennsylvania gas service territory signal future capital expenditure opportunities.

Equity LifeStyle Properties (ELS)

  • Dividend Yield: 2.67%

  • Analyst Ratings: Consensus rating is "Hold" with a mix of 6 Buy, 7 Hold, and 1 Sell ratings (based on recent analyst coverage).

  • Upside Potential: ~3.5% based on a consensus price target of ~$73.50 compared to the current price of ~$71.00.

    Equity LifeStyle Properties, a real estate investment trust (REIT) focused on manufactured home communities and RV resorts, reported Q3 2024 normalized FFO (Funds From Operations) of $0.73 per share, meeting expectations.

    Revenue growth was driven by stable occupancy rates and rental rate increases, with core portfolio revenue up ~5.2% year-over-year.

    The company benefits from demographic trends favoring affordable housing and lifestyle-driven communities, though rising interest rates pose a challenge to REIT valuations.

Prosperity Bancshares (PB)

  • Dividend Yield: 3.38%

  • Analyst Ratings: Consensus rating is "Buy" with 15 analysts covering the stock, including 10 Buy and 5 Hold ratings.

  • Upside Potential: ~8.02% based on a consensus price target of $82.88 compared to a current price of ~$76.70.

Prosperity Bancshares, a regional bank operating in Texas and Oklahoma, reported Q1 2025 earnings per share of $1.18, surpassing analyst estimates by $0.10, with revenue of $290.3 million, up 14% year-over-year.

Key drivers included improved net interest margins, loan growth, and the acquisition of Piedmont Bancorp, enhancing market share.

Economic optimism in Texas and Oklahoma supports loan demand and customer engagement, though integration costs from acquisitions impacted expenses.

Unum Group (UNM)

  • Dividend Yield: 2.18%

  • Analyst Ratings: Consensus rating is "Moderate Buy" with 8 Buy, 4 Hold, and 1 Neutral ratings.

  • Upside Potential: ~16.9% based on a consensus price target of ~$90.00 compared to a current price of ~$76.95.

Unum Group, a provider of disability, life, and employee benefits insurance, reported Q1 2025 EPS of $2.04, missing estimates by $0.14, with revenue of $3.24 billion, slightly below expectations.

Premium growth in core operations was 4.6%, with strong performance in Group Disability and Life insurance (benefit ratios under 70%). However, sales in Group Disability and voluntary lines declined.

The company maintains a strong balance sheet with $1.4 billion in liquidity and a 12.5% return on equity. A $1 billion share repurchase program in 2024 underscores confidence in long-term stability.

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Nothing in this newsletter is financial advice. Always do your own research and think for yourself.