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3 large dividend shares with a minimum yield of 8%; Analysts say ‘buy’
Do you like roller coasters? According to Deutsche Bank, we expect some roller coaster volatility in the coming months, with probable short-term gains, followed by a decline in the second half and gains in the second half. The company expects stock values to drop in the next three months, perhaps by as much as 5% to 10%, for several reasons expounded by the company’s strategist Binky Chadha. “The more anticipated the stimulus impact is, and the direct stimulus checks in about a quarter of the new package are clearly unique, the more pronounced the peak of growth will be. The closer this peak of macro growth is to a warmer climate (giving retail investors something else to do); and for a greater return to work in the office, the greater the pullback we expect, ”noted Chadha. This is the middle ground. In a long-term view, Chadha expects markets to strengthen by the end of the year, and has set a target of 4,100 on the S&P 500. This is above his previous target of 3,950 and suggests potential gains of 4% over levels current. Therefore, for investors, we are facing a rocky summer and autumn, with some drops and probable gains in the markets. In this environment, defensive action makes sense; it provides some stability to the portfolio, as well as some insurance if the gains do not materialize. Reliable dividend stocks, with their regular payments, provide an income stream independent of the share price appreciation, as well as an action profile that is less volatile to begin with, making them the ideal move for investors concerned with maintaining returns while deal with high macro volatility. To that end, we used the TipRanks database to obtain three high-yielding dividend shares that share a profile: a buy rating from the corps of Street analysts; considerable recovery potential; and a reliable dividend that yields more than 8%. Let’s see what Wall Street professionals have to say about them. Monroe Capital (MRCC) We will start with Monroe Capital, a private equity firm invested in the healthcare, media, retail and technology sectors. Monroe is focusing its business on companies owned by minorities and women, or on companies with employee stock plans. Monroe offers these demographic data, which are sometimes underserved, access to capital resources for business development. Monroe has shown two contradictory trends so far this year: falling revenue and profits, along with rising stock prices. The company’s revenue, of $ 12.6 million, fell 6% compared to the third quarter and 25% year-over-year, while EPS fell 40% sequentially to 42 cents. Year after year, however, EPS more than doubled. Looking at the stock price, Monroe’s shares have risen 60% in the past 12 months. In terms of dividends, Monroe paid 25 cents a share in December; the next is scheduled, at the same value, for the end of this month. With an annualized payment of $ 1, the dividend yields a strong 9.8%. This compares favorably to the average 2% yield found among similar companies. The dividend attracted the attention of Oppenheimer analyst Chris Kotowski, rated 5 stars by TipRanks. “We continue to see a clue to eventual full-rate dividend coverage as expenses as management increases the portfolio to its target leverage of 1.1-1.2x (from 1.0x currently) and redistributes funds currently tied up in no additions once resolved … The primary return factor for a BDC is the payment of dividends over time, and we are confident that the new $ 1.00 distribution from MRCC (equivalent to ~ 10% yield ) is sustainable, ”noted Kotowski. In line with his comments, Kotowski classifies the MRCC as Outperform (ie purchase), and its $ 12 target price suggests that it has room to grow 25% next year. (To view Kotowski’s track record, click here) Analysts’ analysis at MRCC is divided into 2 to 1 in favor of Buy versus Holds, making the consensus rating a Moderate Buy. The shares have a trading price of $ 9.59, and their average target of $ 11.13 implies an increase of 16% in the following year. (See MRCC stock analysis at TipRanks) Eagle Point Credit Company (ECC) We will stay with the mid-market financial sector. Eagle Point is another capital investment company that seeks to turn middle market debt into returns for investors. The company invests in CLO shares and focuses on generating current income – that is, ensuring returns for its own investors. Although Eagle Point is a small-cap player, the company boasts $ 3 billion in assets under management – showing that it is overweight. Last month, Eagle Point reported 4Q20 earnings, with earnings per share of 24 cents, below the expectation of 29 cents. However, the current profit only showed growth in the quarter and in the previous year, since 3Q20 and 4Q19 were 23 cents. Going back to the dividend, we found that Eagle Point does something a little unusual. The company pays a monthly rather than quarterly dividend. The current payment, at 8 cents per common share, has been stable for more than a year, and the company has not lost a distribution. At 96 cents per common share annually, the dividend yield is 8.4%. This is robust by any standard. B. Riley 5-star analyst Randy Binner covers Eagle Point and notes that the company should have no problem maintaining its dividend coverage in the future. “The company’s quarterly recurring CLO cash flows have averaged $ 0.75 / share over the past 12 months. Similar levels of recurring cash flows would leave a big cushion to serve the quarterly dividend of $ 0.24 going forward…. The company announced $ 29.5 million in cash on the balance sheet on February 9. This usable quarterly balance sheet cash and dividends of $ 0.24 contribute to a favorable liquidity position, ”wrote Binner. Binner’s comments reinforce a buy rating on the shares, and his target price of $ 14 implies a 23% rise in 12 months. (To view Binner’s track record, click here) Wall Street has the same stance on ECC as it did on MRCC: a moderate consensus purchase rating based on a 2-1 split between purchase reviews and retention. ECC’s shares have an average target price of $ 14, equal to Binner’s, and the shares are trading at $ 11.41. (See ECC stock analysis at TipRanks) Hess Midstream Operations (HESM) Midmarket finance is not the only place to find big dividends. Wall Street professionals also recommend the energy sector, and that is where we turn now. Hess Midstream is one of many companies in the midstream sector of the energy industry, providing and supporting the infrastructure necessary to collect, process, store and transport fossil fuel products from wellheads to the distribution network. Hess has a range of intermediate assets in the North Dakota Bakken formation, moving crude oil and natural gas, together with its derivatives. Hess released results for 4Q20 earlier this year, showing US $ 266 million in revenue and EPS of 36 cents per share. Revenues increased 5% year-over-year and were relatively stable compared to the third quarter. Earnings per share increased 20% compared to the previous quarter, but fell dramatically compared to the 87 cents reported in 4Q19. Of interest to investors, the company reported more than $ 126 million in free cash flow, which it used to finance dividends. Hess pays its dividends quarterly and has a reputation for not missing payments. The company has increased its payment regularly over the past four years, and the most recent dividend, 45 cents per common share, was paid in February. This dividend is considered ‘safe’, as the company expects to generate between $ 610 million and $ 640 million in free cash flow next year. These funds will fully cover dividends, with approximately $ 100 million remaining. Writing from Scotiabank, analyst Alonso Guerra-Garcia sees free cash flow as Hess’s priority in the future. “We hope that the focus this year will be on harvesting free cash flow (FCF) with implementation for repurchases and additional deleveraging. Improved FCF profiles this year also better position the group for a recovery in demand in 2H21. The continuous changes in energy policy and the energy transition may be adverse this year, but we continue to prefer exposure to more diversified companies with FCF option after dividends (FCFAD) and torque for a recovery ”, said the analyst. To this end, Guerra-Garcia classifies HESM as Outperform (ie, Purchase), with a target price of $ 27 indicating a potential upside of 26% at the end of the year. (To view Guerra-Garcia’s history, click here) In all, there are only 2 reviews of this small cap energy company, and they are divided equally – a Purchase and a Retention – giving Hess a Moderate Purchase rating. The shares are trading at $ 21.41 and their average price target of $ 27 suggests an increase of 26% in one year. (See TipRanks HESM stock analysis) To find good ideas for trading dividend stocks with compelling valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that brings together all TipRanks stock insights. 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 investments.