TipRanks
2 large dividend shares with a minimum yield of 7%; Raymond James Says ‘Buy’
For investors looking for a strong dividend player, there are some market segments that are known for their high-yield dividends, making them logical places to start looking for reliable payers. The hydrocarbon, oil and gas production and integration sector is one of them. The sector deals with essential products – our world works with oil and its derivatives. And while overhead costs for energy companies are high, they still have a market for their bottom line, leading to ready cash flow – which can be used, among other things, to pay dividends. All of this has caused the investment firm Raymond James to look at the list of intermediary oil and gas companies for dividend stocks with growth potential. “We anticipate the [midstream] the group will add about ~ 1 lap to its average EV / EBITDA multiple this year. This amounts to a ~ 20-25% movement in equity value, “noted Justin Jenkins, an analyst at Raymond James. Jenkins outlined a number of points that led to an intermediate recovery in 2021, which include changing ‘blocking’ policies for ‘reopening’; a general push on the road to commodities as the economy recovers; a political point that some of DC’s most traditional centrists are unlikely to vote in favor of anti-oil policies and the New Green Deal; and finally, with stock values relatively low, dividend yields are high. A look at the TipRanks database reveals two intermediary companies that caught Raymond James’s attention – for all the points noted above. specific of clear attributes: a dividend yield of 7% or more and purchase ratings MPLX LP (MPLX) MPLX, which separated from Marathon Petroleum eight years ago as a midstre am separate, acquires, owns and operates a range of midstream assets, including pipelines, terminals, refineries and river shipping. MPLX’s main areas of operations are in the north of the Rocky Mountains and in the midwest, extending south to the Gulf of Mexico coast. Revenue reports during the ‘corona year’ of 2020 show the potential value of oil and gas midstreaming. The company recorded $ 2.18 billion in revenue in the first quarter, $ 1.99 billion in the second quarter and $ 2.16 billion in the third quarter; profits were negative in the first quarter, but were positive in the subsequent two quarters. The third quarter report also showed $ 1.2 billion in net cash generated, more than enough to cover the company’s dividend distribution. MPLX pays 68.75 cents per common share quarterly, or $ 2.75 annualized, which gives the dividend a high yield of 11.9%. The company has a diverse set of intermediary operations and strong cash generation, factors that led Justin Jenkins of Raymond James to update his position on MPLX from Neutral to Outperform (ie, Purchase). Its target price of $ 28 implies a 22% increase for the shares in one year. (To see Jenkins’ history, click here) Supporting his position, Jenkins writes: “Given the number of ‘boxes’ that MPLX’s history can verify, it is not surprising that it was a source of debate. With exposure to inflated G&P trends, an expected recovery in refined / refined product volume, the story touches many operating boxes – while spanning a number of financial debates … We also believe that solid 2020 financial results should give confidence in the long run … ”Moving on now to the rest of the Street, it appears that other analysts are usually on the same page. With 6 purchases and 2 retentions attributed in the last three months, the consensus rating comes as a strong purchase. In addition, the $ 26.71 average price target puts the positive side at ~ 17%. (See MPLX stock analysis at TipRanks) DCP Midstream Partners (DCP) Based in Denver, Colorado, the next stock is one of the nation’s largest natural gas midstream operators. The DCP controls a network of gas pipelines, hubs, storage facilities and plants that extend between the production areas of the Rocky Mountains, the Midcontinent and the Permian Basin and the Gulf Coast of Texas and Louisiana. The company also operates in the Antrim gas region in Michigan. In the last reported quarter – 3Q20 – DCP collected and processed 4.5 billion cubic feet of gas per day, along with 375 thousand barrels of liquid natural gas. The company also reported $ 268 million in net cash generated, of which $ 130 million in free cash flow. The company reduced its debt by US $ 156 million in the quarter and showed a 17% reduction in operating costs year on year. All of this allowed DCP to maintain its dividend at 39 cents per share. At the start of the corona crisis, the company had to cut that payment – but only once. The 4Q20 dividend recently declared is the fourth consecutive dividend, at 39 cents per common share. The $ 1.56 annualized fee gives a respectable 7.8% yield. This is another stock that receives an upgrade from Raymond James. Analyst James Weston raises this stock from Neutral to Outperform (ie, Buy), while setting a target price of $ 24 to imply 20% growth over the year. “[We] We expect DCP to publish another solid quarter of sequential improvements in NGL prices, NGL market volatility and positive upstream trends … we are not capitalizing on current propane prices and we expect a solid, but more normalized, price regime over the next 12 -18 months. In our opinion, this will create a beneficial operating environment for the DCP’s cash flows that is not reflected in Street’s estimates, ”noted Weston. In all, the moderate purchasing analyst’s consensus rating in the PDD is based on 7 recent reviews, dividing 4 to 3 purchases versus waiting. The shares are quoted at $ 19.58 and the average target of $ 23 suggests an increase of ~ 15% from that level. (See the PDP stock analysis at TipRanks) To find good ideas for trading dividend stocks with attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that gathers all the information about TipRanks stock. Disclaimer: The opinions expressed in this article are exclusively those of the analysts presented. The content should be used for informational purposes only. It is very important to do your own analysis before making any investment.