High-Yield Total Shareholder Return Stocks for 2025: Morgan Stanley's Strategic Picks

In 2025, as investors navigate a shifting market landscape marked by waning momentum in tech-driven rallies and rising dispersion among equities, Morgan Stanley's strategic focus on high-yield total shareholder return (TSHR) stocks has emerged as a compelling framework for capital preservation and growth. The firm's Global Investment Committee emphasizes active investing, prioritizing quality over momentum, and leveraging tools like the Equity Vulnerability Score to identify resilient equities. This approach has led to the selection of two standout names-Chewy (CHWY) and EQT Corporation (EQT)-as top picks for 2025, each offering unique value propositions rooted in robust cash flow generation, strategic expansion, and dividend potential.

Chewy: A High-Yield Growth Story with Strong Free Cash Flow Potential

Chewy, the online pet supply retailer, has captured attention for its aggressive expansion into veterinary care and pharmaceuticals, sectors poised for long-term demand. According to a report by Morgan Stanley, the company raised its full-year 2025 net sales guidance to $12.5–$12.6 billion, reflecting an 8.6% year-over-year increase in the second quarter alone. Analyst Nathan Feather highlights Chewy's autoship program as a key driver, contributing 83% of total sales in Q2 2025.

Financially, Chewy's free cash flow (FCF) trajectory is equally compelling. The firm reiterated its expectation to convert approximately 80% of adjusted EBITDA into FCF in 2025, with Q2 2025 already generating $106 million in FCF. While Chewy currently maintains a 0% dividend yield, its $1.4 billion liquidity position and expanding veterinary clinic network position it to reinvest in growth or potentially initiate shareholder returns in the future. Morgan Stanley's $50 price target implies an 18% upside, underscoring confidence in the company's ability to capitalize on pet household formation trends and pricing power.

EQT: Energy Sector Efficiency and Dividend Durability

EQT Corporation, a leading U.S. hydrocarbon energy player, exemplifies Morgan Stanley's emphasis on operational efficiency and sector-specific tailwinds. The company's Q3 2025 results showcased a 5% dividend increase, raising the annualized payout to $0.66 per share, with a 20.52% payout ratio and a trailing yield of 1.09%. Analyst Devin McDermott notes that EQT's free cash flow generation-$484 million in Q3 2025-has been bolstered by cost discipline and strategic initiatives like the MVP Boost and LNG offtake agreements.

Looking ahead, EQT's five-year target of $19 billion in cumulative free cash flow underscores its durability in a sector facing cyclical volatility. The firm's non-GAAP EPS of 45 cents in Q2 2025 and $240 million in free cash flow further validate its ability to sustain dividends while funding growth. Morgan Stanley's $69 price target for EQT reflects its conviction in the company's cost advantages and alignment with energy transition themes, where hydrocarbon demand remains resilient in the near term.

The Role of "Dividend Hopefuls" in TSHR Strategy

Beyond Chewy and EQT, Morgan Stanley's 2025 strategy also highlights "dividend hopefuls"-companies with strong cash flow and net cash positions that could initiate or increase dividends. For instance, Lyft and Charles Schwab are cited as candidates with free cash flow yields of 11% and 8.7%, respectively, and net cash positions exceeding 12% of their market caps. These firms exemplify the firm's focus on income generation and long-term return potential, particularly as high-yield bonds offer elevated yields (7.5% in the U.S. and 5.7% in Europe) compared to investment-grade counterparts.

Conclusion: Quality, Cash Flow, and Strategic Positioning

Morgan Stanley's 2025 TSHR picks reflect a disciplined approach to equity selection, prioritizing companies with strong fundamentals, sector-specific advantages, and scalable cash flow. Chewy's growth in high-margin veterinary services and EQT's energy sector efficiency illustrate how active management can identify outperformers in a market increasingly defined by dispersion and macroeconomic uncertainty. As the firm cautions against overexposure to small-cap stocks and unprofitable tech names, its emphasis on quality and active risk management through tools like the Equity Vulnerability Score provides a roadmap for investors seeking resilient, high-yield returns in 2025.