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2 ‘strong buy’ shares with 7% dividend yield
You can get a lash by trying to keep up with market fluctuations these days. Volatility rules for now, with investors exiting Big Tech – a move that is pushing markets in general down. The downturn comes at a time when the new numbers of COVID cases are falling, along with weekly unemployment claims. Both are positive news for the economy and will help to justify the increase in economic openness. At the same time, a Congressional COVID relief package that is making its way through the legislative process promises an incentive for consumer spending – and combined with a recent increase in oil prices, it makes market watchers think about inflation . Result: the 10-year US Treasury bond yielded 1.48%, a one-year high. Therefore, the investor’s money is going out of stocks and into bonds. Overall, it is a situation tailored to defensive actions. High-yield dividend games are receiving a lot of love from Wall Street stock analysts and are showing great potential for appreciation as investors move in their direction. These are the stocks that fill a portfolio, providing an income stream capable of offsetting the low valuation of the shares. Using the TipRanks database, we found two dividend plays that are yielding just over 7%. If that is not enough, all three received sufficient support from Wall Street analysts to earn a consensus rating of “Strong Buy”. Sixth Street Specialty Lending (TSLX) The financial sector is often a source of shares with high yield dividends, so it makes sense to look over there. Sixth Street Specialty Lending is, as its name suggests, a player in the credit sector, where it provides capital and credit financing for small and medium-sized companies. These small and medium-sized businesses are the traditional engine of America’s business sector, providing the majority of all jobs created, and specialist financial companies like Sixth Street are essential to its success. Last year, two trends became clear in the performance of Sixth Street. First, the company showed a sharp drop in profits when the corona hit, followed by a strong recovery in 2Q20, with the LPA value falling since then according to historical standards. And, secondly, the stock price slowly returned, but continuously, since it hit rock bottom in late March. A quick look at the numbers confirms this. TSLX showed a loss of earnings in the first quarter of last year, but the 79 cents per share reported in the fourth quarter, while falling 34% sequentially, still increased 41% year on year. The stock also recovered its price, rising 112% from its “covid panic”. Sixth Street shares saw a momentary rise earlier this month when it announced its fourth quarter results, along with the latest dividend statement. The company’s earnings and revenues met expectations, and management declared a basic dividend of 41 percent per common share, along with a special dividend of $ 1.25. Sixth Street has a history of using special dividends to supplement the basic payment. At the current base rate, the dividend yields a robust 7.5%. Raymond James analyst Robert Dodd is impressed by the overall performance of Sixth Street, but especially likes the potential for dividends here. He writes: “With its recurring supplements, a large special offer and exceeding the basic dividend, we believe that TSLX is well positioned to operate in a market where it is increasingly difficult to find income …” Dodd classifies TSLX as Outperform (or Buy), and its target price of $ 23.50 suggests room for an 8% share growth next year. (To see Dodd’s history, click here) Overall, it’s clear that Wall Street agrees with Dodd on the quality of Sixth Street – the stock has 5 recent reviews recorded and all are for Buy, making the Strong Buy consensus rating unanimous . The shares are quoted at $ 21.67, and their recent appreciation left room for just a 6% rise under the target $ 23 average price. (See TSLX stock analysis at TipRanks) Barings BDC, Inc. (BBDC ) Next is Barings BDC, a business development corporation. Like Sixth Street, Barings provides financial services to midsize businesses. Barings’ services include access to capital as well as asset management, and the company invests in debt, equity and fixed income assets. The company had an investment portfolio of US $ 1.12 billion at the end of 3Q20, reported the last quarter. In the last reported quarter, Barings also exceeded profit expectations. The 17-cent EPS increased 21% sequentially. Net assets from operations increased to 90 cents per share, a huge gain from the 10 cents reported in the same metric a year earlier. The company also showed $ 7.1 million in cash at the end of the third quarter. Along with its secure financial situation, Barings saw its share recover the amount lost when the coronavirus attacked for the first time. The stock reached its lowest point on March 18 of last year; since then, shares have recovered 91%. That was all in the third quarter. In the fourth quarter, Barings completed a merger with MVC Capital. The share transaction will leave Barings’ shareholders with 73.4% of the combined entity (which will use the Barings name), while MVC’s shareholders will retain the remaining 26.6%. The expanded Barings is expected to show $ 1.5 billion in assets under management; the 4Q20 report, which will be released in March, will provide details. The Barings dividend reflects the company’s steady growth. In the past two years, management has kept paying quarterly dividends growing, from 3 cents per share to 19 cents declared earlier this month for payment in March. At 19 cents per common share, the dividend yields 7.8%. In his note on Compass Point shares, analyst Casey Alexander showed his clear approval of the dividend announcement: “BBDC announced in advance the expected NII for 4Q20 of $ 0.19 per share against our estimate of $ 0.16 and consensus estimates of $ 0.17. This was clearly driven by the increased earnings power on the Barings platform … ”In addition, Alexander sees the company making steady business gains, even without accounting for the MVC merger, writing:“ In addition to the assets acquired from MVC Capital, the BBDC originated $ 528 million new investment commitments during the quarter. These commitments were distributed to 24 new borrowers and 17 existing borrowers … ”Alexander’s optimistic comments are complemented by a Purchase rating on the shares, and his target price of $ 10.25 implies a 5% rise in the next 12 months. (To see Alexander’s track record, click here) This is another action with a strong buying analyst consensus rating based on a unanimous view; all three recent reviews are on the buy side. BBDC shares are selling for $ 9.66, and the average target price of $ 11 suggests a 13% rise in one year. (See BBDC’s 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 brings together all TipRanks stock perceptions. 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.