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2 “Strong buy” dividend shares with a yield of at least 7%
A number of factors come together in the market picture and indicate a possible change in conditions over the medium term. These include increases in commodity prices, especially oil prices, which have recently recovered. Additionally, January’s employment figures, released earlier this month, were disappointing at best – and grim at worst. However, they increase the chances that President Biden and the Democratic Congress will push through a large-scale COVID relief program. These factors are likely to pull in different directions. Rising oil prices suggest an imminent tightening of supply, while the possibility of further stimulus bodes well for lovers of market liquidity. These developments, however, indicate a possible climate of price reflation. Against this backdrop, some investors are looking for ways to rebuild and defend their portfolios. And that will bring us to dividends. By providing a steady stream of income regardless of market conditions, a reliable dividend-paying stock provides a buffer for your investment portfolio when the stock stops appreciating. So we opened up the TipRanks database and extracted the details of two high yielding stocks – at least 7%. Better yet, these stocks are seen as solid buys by Wall Street analysts. Let’s see why. Williams Companies (WMB) The first stock we’ll look at is Williams Companies, an Oklahoma-based natural gas processing company. Williams controls pipelines for natural gas, natural gas liquids, and oil gathering, in a system stretching from the Pacific Northwest, through the Rockies to the Gulf Coast and across the south to ‘in the middle of the Atlantic. Williams’ core business is the processing and transportation of natural gas, with crude oil and power generation being secondary operations. The company’s footprint is huge – it handles nearly a third of all natural gas consumption in the United States, both residential and commercial. Williams will release its 4Q20 results at the end of this month – but a look at the Q3 results is instructive. The company reported $ 1.93 billion on the top line, down 3.5% year-over-year but up 8.4% quarter over quarter, and the Highest quarterly revenue to date released for 2020. Net income was 25 cents per share, stable from Q2 but up 38% year-over-year. The report was widely seen as meeting or exceeding expectations, and the headline gained 7% within two weeks of its release. In a move that could point to strong fourth-quarter earnings on the way, the company declared its next dividend, due on March 29. The payment of 41 cents per common share is up 2.5% from the prior quarter and annualizes to $ 1.64. At this rate, the dividend pays 7.1%. Williams has a 4 year history of growing and sustaining dividends, and typically increases payout in the first quarter of the year. Covering the stock of RBC, 5-star analyst TJ Schultz wrote: “We believe Williams can hit the low end of its EBITDA guidance for 2020. While we expect near-term growth in the Northeast to moderate, we believe WMB should benefit from less than expected Permian associated gas. Given our long-term view, we believe that Williams can comfortably stay within investment grade credit parameters throughout our forecast period and keep the dividend intact. To that end, Schultz rates WMB outperforming (ie, buying), and his price target of $ 26 suggests a 13% rise over the next 12 months. (To look at Schultz’s track record, click here) With 8 recent reviews on record, including 7 purchases and only 1 wait, WMB has achieved its Strong Buy analyst consensus rating. While the stock has gained in recent months, hitting $ 23, the average price target of $ 25.71 implies that it still has room for about 12% growth this year. (See WMB stock market analysis on TipRanks) AGNC Investment (AGNC) The next step is AGNC Investment, a real estate investment trust. It’s not surprising to find a REIT as a dividend champion – these companies are required by tax codes to return a high percentage of profits directly to shareholders and frequently use dividends as a means of compliance. Maryland-based AGNC focuses on MBS (Mortgage Backed Securities) with backing and guarantees from the US government. These securities represent approximately two-thirds of the company’s total portfolio, or $ 65.1 billion out of a total of $ 97.9 billion. AGNC’s most recent quarterly returns, for 4Q20, showed net income of $ 459 million and net earnings per share of $ 1.37. Declining year-over-year, EPS was the highest on record for 2020. For the full year, AGNC reported $ 1.68 billion in total revenue and $ 1.56 per share paid in dividends. The current dividend, 12 cents per common share paid monthly, will annualize to $ 1.44; the difference from last year’s higher annualization rate is due to a dividend cut implemented in April in response to the coronavirus crisis. At the current rate, the dividend offers investors a robust 8.8% return and is easily affordable for the company given current revenues. Among AGNC’s bulls, analyst Maxim Michael Diana wrote: “AGNC has maintained a competitive return on book value compared to other mortgage REITs (mREITS), even though it has exceeded its dividends and repurchased its shares. As the turmoil in the mortgage markets at the end of March resulted in losses and lower book values for all mortgage REITs, AGNC was able to meet all of its margin calls and, most importantly, take relatively fewer realized losses and thus retain more profit power after the turmoil. “Based on all of the above, Diana rates AGNC a buy, with a price target of $ 18. This figure implies upside potential by about 10% from current levels. (To view Diana’s balance sheet, click here) Wall Street is on the same page. In the past two months, AGNC has received 7 buys and a single Hold – all of them add to a Strong Buy consensus rating. However, the average price target of $ 16.69 suggests stocks will remain limited in the range for the foreseeable future. (See AGNC’s stock analysis on TipRanks) find good ideas for stock trading at d ividends at attractive valuations, visit the best stocks to buy from TipRanks, a newly launched tool that brings together all the information about TipRanks stocks. 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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