TipRanks
2 Shares with attractive dividends, with a minimum yield of 8%; Oppenheimer Says ‘Buy’
Last year’s crises – the COVID pandemic, social blocks, the economic shock – are easing, and that is a good thing. However, the post-mortems crisis is going on. It is natural to compare the current economic crisis with the ‘Great Recession’ of 12 years ago, but as Oppenheimer’s chief investment strategist, John Stoltzfus, points out: “Considering the differences in what caused the Great Financial Crisis of just over 12 years ago … and the current crisis … no wonder how good things are when compared to this time last year, there is still a lot to be revealed about how the pandemic’s exit and legacy to crisis it will take shape… ”Stoltzfus also believes that economic data, while suffering some setbacks, are generally resilient. The markets are going up and that, as Stoltzfus says, “… in our opinion, probably presents more opportunities than risk for investors who have adequate risk tolerance and practice patience”. Taking into account Stoltzfus’ perspective, we wanted to take a closer look at two stocks that received applause from Oppenheimer stock analysts. Using the TipRanks database, we learned that they both share a profile: a strong buying consensus rating from the Street analyst corps and a reliable dividend that yields at least 8%. Let’s see what Oppenheimer has to say about them. Owl Rock Capital (ORCC) We will start with Owl Rock Capital, one of the numerous specialized financial companies in the financial sector. These companies generally reside in the middle market financial sector, where they make capital available for acquisitions, recapitalizations and general operations for mid-market companies that do not necessarily have access to other sources of credit. Owl Rock’s portfolio consists of investments in 119 companies, totaling $ 11.3 billion. Of these investments, 96% are senior secured loans. Owl Rock released its 4Q20 and full year results at the end of February. The company posted fourth quarter net income of $ 180.7 million, which reached 46 cents per share. This amount was 36 cents per share in 4Q19, an increase of 27%. Investment income also increased, which by US $ 221.3 million in the quarter increased 9% year-over-year. Full-year investment income was $ 803.3 million, an increase of more than 11% over 2019. In addition, the company ended 2019 with more than $ 27 billion in assets under management. Of particular interest to dividend investors, Owl Rock’s board declared a dividend of 31 percent per common share for the first quarter. This is due in mid-May and corresponds to the company’s previous regular dividend payments. The annualized fee of $ 1.24 gives a 9% return. Also interesting about Owl Rock’s dividends, the company paid the sixth and final special dividend – related to the 2019 IPO launch – last December. In 2019, the ORCC paid special dividends of 80 cents, along with regular dividend payments. The company has maintained its reliable dividends, meeting regular and special payments, since its IPO in the summer of 2019. Owl Rock caught the eye of Oppenheimer’s Mitchel Penn, who sees the company as a solid investment with the potential to overcome estimates. “We estimate earnings per share of $ 1.22 and $ 1.34 in 2021 and 2022 for an ROE of 8% and 9%, respectively. We project that Owl Rock could earn an ROE of 8.5% and, given a cost estimated equity of 8.5%, we calculate a fair value of $ 15 / share or 1.02x the book value, “noted Penn. “In order to achieve an ROE of 8.5%, the ORCC will need to increase the return on its portfolio from 8.4% to 9.0% or increase its leverage from 1x to 1.2x. It is also possible that it will do a little of both Our model considers the rate of increase in expenses from 75 bps to a basic rate of 1.5% on assets and an incentive rate of 17.5% on revenue. “Penn evaluates this action as an Outperform (that is, a Purchase), and its target price of $ 15 suggests a potential 7% increase from current levels. Dividend yield, however, is the real draw here (to see Penn’s history, click here). ORCC’s shares have attracted 3 recent reviews, all of which are for purchase – which makes the consensus rating of the purchase strong unanimous. This stock is selling for $ 13.98 per share and has an average target price of $ 14.71. (See the ORCC stock analysis at TipRanks) Fidus Investment Corporation (FDUS) Staying in the mid-sized finance sector, we will take a look at Fidus Investment. That company, like Owl Rock, offers access to capital for smaller companies, including access to debt solutions. Fidus has a portfolio that is based mainly on senior secured debts, together with mezzanine debts. The companies in which Fidus has invested are valued at between $ 10 million and $ 150 million. In the fourth quarter, ending 2020, Fidus invested in seven new companies in its portfolio, placing a total of US $ 103.9 million in investments. The company’s portfolio for that quarter brought in adjusted net investment income of $ 10.7 million, or 25 cents per common share. That was 3 cents, or 13%, year on year. For the full year of 2020, adjusted net income reached US $ 38 million, up from US $ 35.3 million in 2019. Per share, the US $ 1.55 of 2020 increased 7.6% in the annual comparison. Fidus’ shares have risen steadily in the past year. Since last April, the stock has gained an impressive 153%. This gives FDUS a solid appreciation of its shares, to complement the return on dividends. These dividends are substantial. The company declared the payment for 1Q21 in February, and the payment occurred on March 26. The normal payment, at 31 cents per common share, yields 8% with an annualized payment of $ 1.24. In addition to this regular payment, Fidus also declared a special dividend of 7 cents per share, almost double the special payment of 4 cents made in the previous quarter. Moving now to the coverage of the Oppenheimer on Fidus, we found that 5-star analyst Chris Kotowski is satisfied with this company, enough to classify it as Outperform (ie Purchase) with a target price of $ 18. This figure suggests an increase of 15% in one year. (To see Kotowski’s history, click here) “The fundamentals [are] stable with debt investments at the end of the year essentially stable and interest income in line with the previous quarter and our estimate…. What we are most pleased with is that we ended the year with only a small non-provisioning. There was a significant loss during the year in a credit, which crystallized in 4Q20, but there were also equity gains in 1Q20 that offset this, and for us, the fact that we ended a year like this with minimal net losses validates the FDUS’s business model . “On Fidus’ dividend policy, maintaining a basic payment with special dividends added when possible, Kotowski simply writes:” We think a variable dividend makes a lot of sense. ” Like the ORCC above, this is an action with a strong unanimous purchase consensus rating based on 3 recent positive reviews. Fidus shares are selling for $ 15.70 and its average price target of $ 17.17 indicates a potential 9% increase from that level. (See FDUS 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 investments.