TipRanks
3 ‘strong buy’ shares with 8% dividend yield
Let’s talk about portfolio defense. After manipulating the social flash mob market last week, this is a topic that should not be ignored. Now, this does not mean that markets are collapsing. After 2% losses at the close of last week’s Friday session, this week’s trading started on a positive note, with the S&P 500 up 1.5% and the Nasdaq up 2.5%. The underlying bullish factors – a more stable political landscape, steadily progressing COVID vaccination programs – are still at stake, even if they are not as strong as investors expected. Although the increased volatility may remain with us for a while, it is time to consider defensive actions. And that will pay us dividends. By providing a stable revenue stream, regardless of market conditions, a reliable stock of dividends provides a cushion for your investment portfolio when the stock stops appreciating. With that in mind, we used the TipRanks database to extract three dividend stocks that yield 8%. That is not all that they offer, however. Each of these actions received enough praise from Street to earn a consensus rating of “Strong Buy”. New Residential Investment (NRZ) We will begin by examining the REIT sector, real estate investment funds. These companies have long been known for high-yield and reliable dividends – as a result of the company’s compliance with tax rules, which require REITs to return a certain percentage of profits directly to shareholders. NRZ, a midsize company with a market value of $ 3.9 billion, has a diversified portfolio of residential mortgages, original loans and mortgage loan maintenance rights. The company is headquartered in New York City. NRZ has an investment portfolio of US $ 20 billion, which has yielded US $ 3.4 billion in dividends since the beginning of the company. The portfolio proved to be resilient in the face of the corona crisis and, after a difficult first quarter last year, NRZ recorded increasing gains in the second and third quarters. The third quarter, the last reported, showed GAAP revenue of $ 77 million, or 19 cents per share. Although it fell year after year, this EPS was a sharp turnaround from the loss of 21 cents reported in the previous quarter. The increase in revenue put NRZ in a position to increase dividends. The third quarter payment was 15 cents per common share; the fourth quarter dividend rose to 20 cents per common share. At that rate, the dividend is annualized to 80 cents and produces an impressive 8.5%. In another move to return profits to investors, the company announced in November that it had approved $ 100 million in share buybacks. BTIG analyst Eric Hagen is impressed by New Residential – especially the company’s solid balance sheet and liquidity. “[We] as the opportunity to potentially build some capital through retained earnings while maintaining a competitive payment. We believe that the increase in dividends highlights the strengthening of the liquidity position that the company finds itself having now … we hope that NRZ has been able to release capital, since it acquired around US $ 1 billion of securitized debt for its portfolio MSR through two separate transactions since September, ”said Hagen. In line with his comments, Hagen values NRZ as Buy and its $ 11 target price implies a 17% increase for next year. (To see Hagen’s history, click here) It is not always that analysts agree on a stock, so when it does, write it down. NRZ’s strong purchase consensus rating is based on 7 unanimous purchases. The average target price of $ 11.25 per share suggests a ~ 20% increase from the current share price of $ 9.44. (See NRZ stock analysis at TipRanks) Saratoga Investment Corporation (SAR) With the next action, we move on to the investment management sector. Saratoga specializes in medium-sized debt, valuation and equity investments, and has more than $ 546 million in assets under management. Saratoga’s portfolio is broad and includes industries, software, waste disposal and residential security, among others. Saratoga saw a slow – but steady – recovery from the corona crisis. The company’s revenue fell in 1Q20 and has been increasing slowly since then. The third quarter fiscal report, released in early January, showed $ 14.3 million in revenue. In adjusted terms before taxes, Saratoga’s net investment income of 50 cents per share exceeded the forecast of 47 cents by 6%. They say it slowly and always wins the race, and Saratoga showed investors a generally steady hand last year. The stock rebounded 163% from its low post-fall in the crown last March. And dividends, which the company cut in CYQ2, have been increased twice since then. The current dividend, of 42 cents per common share, was declared last month for payment on February 10. The annualized payment of $ 1.68 yields 8.1%. Ladenburg Thalmann analyst Mickey Schleien takes an optimistic view of Saratoga, writing: “We believe the SAR portfolio is relatively defensive, with a focus on software, IT services, education services and CLO … The CLO of SAR remains current and performance, and the company is looking to refinance / increase the size, which we believe could provide an advantage for our forecast. “The analyst continued:” Our model foresees the use of cash and debentures from SBA to finance the net growth of the portfolio. We believe that the Board will continue to increase dividends considering the portfolio’s performance, the existence of undistributed taxable income and the economic benefit of the Covid-19 vaccination program. ”To this end, Schleien assigns SAR to Buy together with a target price of $ 25. This figure implies a 20% increase from current levels. (To see Schleien’s history, click here) Wall Street analysts agree with Schleien on this action – the other 3 recorded reviews are purchases and the analyst’s consensus rating is a strong buy. Saratoga’s shares are trading at $ 20.87 and have an average target price of $ 25.50, which suggests a 22% rise in the next 12 months. (See the analysis of SAR shares in TipRanks) Hercules Capital (HTGC) Last, but not least, is Hercules Capital, a venture capital firm. Hercules offers financial support to small client companies at an early stage with a scientific inclination; Hercules’ customers are in the areas of life sciences, technology and financial SaaS. Since its inception in 2003, Hercules has invested more than $ 11 billion in more than 500 companies. The quality of Hercules’ portfolio is evident from the company’s recent performance. The stock fully recovered from last winter’s corona crisis, recovering 140% from its lowest point reached last April. The gains have also recovered; in the first nine months of 2020, HTGC recorded net investment income of $ 115 million, or 11% higher than in the same period in 2019. For dividend investors, the main point here is that net investment income covered distribution – in fact, it totaled 106% of the base distribution payment. The company was confident enough to boost distribution with a supplementary payment of 2 cents. The combined payment gives an annualized payment of $ 1.28 per common share and a yield of 8.7%. In another sign of confidence, Hércules completed a $ 100 million investment-grade bond offering in November, raising capital for debt payments, new investments and corporate purposes. The bonds were offered in two installments, each $ 50 million, and the notes mature in March 2026. Covering Piper Sandler’s shares, analyst Crispin Love sees a lot to love at HTGC. “We continue to believe that HTGC’s focus on fast-growing technology and life sciences companies defines the company well in today’s environment. In addition, Hercules does not depend on a recovery from COVID, as it does not have investments in sectors “at risk”. Hercules also has a strong liquidity position, which should allow the company to act quickly when it finds attractive investment opportunities ”, commented Love. All of the above convinced Love to classify HTGC as Outperform (ie, buy). In addition to the call option, he set a price target of $ 16, suggesting a potential 9% increase. (To see Love’s history, click here) The recent appreciation of Hercules shares brought Hercules shares up to the average target price of $ 15.21, leaving just ~ 4% higher than the $ 14 trading price , 67. Wall Street doesn’t seem to mind, however, as the analysts’ consensus rating is a strong unanimous buy, based on 6 recent buyer reviews. (See the HTGC stock analysis on 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.