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3 large dividend stocks with a yield of at least 9%; BTIG says ‘Buy’
How important are dividends to a stock investor’s earnings? Speaking to the Financial Industry Regulatory Authority (FINRA) on October 15, 2007, investment guru John Bogle exposed the case: “Over the past 81 years… reinvested dividend income has been around 95% of compound return. long term realized by the companies in the S&P 500. These startling numbers seem to require that mutual funds emphasize the importance of dividend income. So in other words, the dividends are pretty big! Of course, right now the average S&P 500 stock pays only a dividend yield of around 2%, which isn’t much. If you want to do better than that, the REIT industry is a great place to start your search for high yield dividend stocks. REITs are companies that acquire, own, operate and manage real estate portfolios, typically a combination of residential or commercial real estate properties, or their mortgages and mortgage-backed securities. Tax laws require these companies to return their profits directly to shareholders, and most of them choose dividends as the preferred means of compliance, resulting in high dividend yields common in the industry. The slowly declining COVID pandemic has been difficult for property managers as tenants struggled to make rents and landlords struggled to rent vacant spaces. However, BTIG analyst Tim Hayes believes there is reason to remain bullish on CRE properties in particular. “While we recognize the headwinds weighing on commercial real estate fundamentals (CRE) and the potential risk to equity / earnings power, we believe there are several reasons to be constructive, particularly with the sector trading below historical levels and offering attractive dividend yields. wide deviations from benchmarks, ”commented Hayes. In this context, we opened the TipRanks database to get the latest statistics on Hayes’ CRE picks. These are stocks the analyst has launched buy ratings on, highlighting their high dividend yield. We are talking about at least 9% here. Ares Commercial Real Estate (ACRE) The first dividend choice we are looking for is Ares Commercial Real Estate, a company specializing in the commercial real estate lending industry. Ares has a diverse portfolio – comprising offices, apartments, hotels and mixed-use properties – primarily in the South East and West. The company has invested more than $ 2 billion in 49 separate loans, 95% of which are first mortgage loans. At the end of October, the company released results for 3Q20 (the latest reported quarter), posting total revenue of $ 22.4 million, a 13% gain year-on-year. the other. Earnings of 45 cents per common share increased 40% from the previous year. In addition, Ares closed a $ 667 million commercial real estate secured loan obligation, with increased funding of 23 senior loans. On the dividend front, Ares declared its 4Q20 dividend in December. The payout, at 33 cents per common share, was made Jan. 15 – and is fully covered by current income levels. At current rates, the dividend annualizes to $ 1.32 and gives an impressive yield of 10.50%. Among the bulls is Hayes, who wrote: “We believe ACRE shares are unfairly discounted to other commercial mREITs given the strong sponsorship of Ares, a very healthy balance sheet and limited exposure to risk assets. . According to him, this leaves the company “well placed to face the headwinds of COVID-19”. Based on those comments, Hayes is pricing ACRE at Buy, and his price target of $ 13.50 implies a 10% rise from current levels. (To look at Hayes’ track record, click here) Only one other analyst posted a recent ACRE review, also noting the stock a buy, making the analyst consensus here a moderate buy. The shares are priced at $ 12.28, and their average price target of $ 12.75 suggests a modest growth margin of around 4%. (See ACRE stock market analysis on TipRanks) KKR Real Estate Finance Trust (KREF) Then we have KKR, which operates in the commercial real estate industry, with almost half of its stakes in the states of New York, Illinois, Pennsylvania and Massachusetts. The company owns and finances commercial properties; 83% of its activities concern apartments and offices located in desirable urban areas. The quality of KKR is reflected in the company’s quarterly results. The liquidity position was strong – KKR said $ 700.6 million available at the end of 3Q20, the latest quarter reported. EPS of 56 cents increased 7% sequentially and 36% year-on-year. Further proof of KKR’s good standing came in early January, when it announced that 7 new commercial loans were closed in the fourth quarter, totaling $ 565.4 million. This level of activity is a clear sign that KKR is recovering from the economic downturn associated with the pandemic. This solid foundation has enabled the company to maintain its dividend, which has remained reliable for four years now. The most recent statement, made in December, was of a dividend of 43 cents per common share paid in mid-January. This rate works out to an annual payment of $ 1.72 per common share and a robust return of 9.7%. Covering KREF, Hayes is very impressed with the company’s return to proactive loan origination, stating, “We consider the 4Q20 origination activity to be in line with pre-pandemic production and demonstrates a shift from ‘defense To “breach” as trading activity has resumed and financial markets remain accommodative. We anticipate an increase in capital deployment to support earning power and dividend coverage, and could potentially justify a dividend increase as the macro outlook improves. To that end, Hayes gives a buy to KREF and sets a price target of $ 19.50 which indicates growth of about 6% from current levels. (To look at Hayes’ track record, click here) Wall Street has been silent on all things KREF, and the only other recent review also recommends a buy. Together, the stock has a moderate buy consensus rating. Meanwhile, the average price target stands at 19.26 and involves a slight hike of around 5%. (See KREF stock review on TipRanks) Starwood Property Trust (STWD) For the third stock on Hayes’ list of picks, we turn to Starwood, a commercial REIT with a diverse portfolio of senior mortgages and from mezzanine loans, in the $ 50 million to $ 500 million range. The company operates in the United States and Europe, has a market capitalization of $ 5.9 billion, and has offices in New York, London and San Francisco. Starwood’s high-end portfolio brought it solid earnings, even during the ‘corona recession’ of 2020. The company recorded $ 152 million in GAAP profits for 3Q20, or 53 cents per share, for gains of 8 % sequentially and 6% per year – over the year. With that in the background, one can note the company’s dividend, which has been held at 48 cents per share for over two years. The last declaration was made in December and the dividend was paid on January 15. At the current rate, it annualizes to $ 1.92 and the yield is 9.23%. Once again, we’re looking at a stock Hayes recommends buying. “We consider STWD to be one of the few blue chips in the commercial mREIT industry given its size, liquidity, best management team, strong balance sheet and investment platform. diversified company that has consistently generated stronger ROEs than its peers. To that end, STWD is one of the few commercial mREITs that has neither restructured its liabilities with expensive bailout capital nor reduced its dividend since the onset of COVID-19, ”said Hayes. Overall, there is little action on the street in the direction of STWD at this time, with only one other analyst stepping in with a view on the outlook for the business. An additional purchase note means that STWD is considered a moderate purchase. However, the average price target of $ 21 suggests that stocks will stay in the range for the foreseeable future. (See STWD Stock Analysis on TipRanks) For great ideas for trading dividend stocks at attractive valuations, visit Top Stocks to Buy from TipRanks, a newly launched tool that brings together all the information about stocks from TipRanks. Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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