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3 main dividend-paying stocks with growth opportunity; Goldman Sachs says ‘Buy’
Investing is all about finding profits, and investors have long seen two main routes to this goal. Growth stocks, stocks that will give a return based primarily on the appreciation of stock prices, is one avenue. The second route is through dividend-paying stocks. These are stocks that return a percentage of profits to shareholders – a dividend, usually sent quarterly. Payouts vary widely, from less than 1% to over 10%, but the average, among stocks listed on the S&P 500, is around 2%. Dividends are a nice addition for a patient investor because they provide a steady stream of income. Goldman Sachs analyst Caitlin Burrows has taken an interest in the real estate trust segment, a group of stocks long known for their high and reliable dividends – and she sees plenty of reason to expect a strong growth in three stocks in particular. As we scoured the TipRanks database, we learned that all three have been applauded by the rest of the street as well, as they boast of a ‘Strong Buy’ analyst consensus. Broadstone Net Lease (BNL) First, Broadstone Net Lease is an established REIT that went public last September in an IPO that raised over $ 533 million. The company put 33.5 million shares on the market, followed by more than 5 million other underwriters’ repossessions. It was considered a successful opening, and BNL now has a market cap of over $ 2.63 billion. Broadstone’s portfolio comprises 628 properties in 41 US states plus the Canadian province of British Columbia. These properties have 182 tenants and are worth a total of $ 4 billion. The best feature here is the long-term nature of the leases – the weighted average remaining lease is 10.8 years. In the third quarter, the most recent with full financial data available, BNL reported net income of $ 9.7 million, or 8 cents per share. Income was mainly derived from rents and the company said it received 97.9% of rents due during the quarter. Going forward, the company expects $ 100.3 million of real estate acquisitions in the fourth quarter and an increase in the rent collection rate of 98.8%. Broadstone’s high income and rents support a dividend of 25 cents per common share, or $ 1 per year. It’s an affordable payment for the business and offering investors a 5.5% return. Goldman’s Burrows considers the company’s acquisition moves to be the most important factor here. Profitable acquisitions are the main driver of Broadstone’s earnings … As management halted acquisitions following COVID-induced market uncertainty (BNL did not make any acquisitions in 1H20) and prior to its IPO , we are convinced that acquisitions will accelerate in 2021, starting with 4Q20 activity … We estimate that BNL achieves a positive investment spread of 1.8%, leading to 0.8% profit growth (on 2021E FFO) for every $ 100 million in acquisitions (or 4.2% of our 2021E acquisition volumes), ”Burrows expressed his opinion. To that end, Burrows values BNL a buy, and its price target of $ 23 implies a hike of around 27% for the coming year. (To view Burrow’s history, click here) Wall Street generally agrees with Burrows on Broadstone, like The 3 positive reviews the stock has garnered in recent weeks. These are the only criticisms recorded, which makes the consensus rating of analysts a very unanimous buy. The shares are currently priced at $ 18.16, and the suggested average price target of $ 21.33 is a year-over-year increase of ~ 17%. (See BNL stock market analysis on TipRanks) Realty Income Corporation (O) Realty Income is a major player in the REIT field. The company has a portfolio worth more than $ 20 billion, with more than 6,500 properties located in 49 states, Puerto Rico and the United Kingdom. Annual revenues topped $ 1.48 billion in fiscal 2019 (the latest with full data) and maintained a monthly dividend for 12 years. Looking at the current data, we see that O reported income per share of 7 cents in 3Q20, along with total income of $ 403 million. The company collected 93.1% of its contractual rents during the quarter. Although relatively low, an analysis of monthly values shows that rental collection rates have been increasing since July. As noted, O pays a monthly dividend, and has done so regularly since its stock market listing in 1994. The company increased its payout in September 2020, marking the 108th increase during that time. The current payout is 23.45 cents per common share, which annualizes to $ 2.81 cents – and gives a return of 4.7%. Based on the above, Burrows put this stock on its Americas condemnation list, with a buy note and a price target of $ 79 for the next 12 months. This target implies a 32% increase over current levels. Supporting his position, Burrows noted, “We estimate 5.3% annual growth in FFOs over the period 2020E-2022E, compared to an average of 3.1% for full REIT coverage. We expect key profit drivers to include a continued pickup in acquisition volumes and a gradual improvement in theater rents (in 2022). The analyst added, “We assume that O makes $ 2.8 billion in acquisitions in 2021 and 2022, compared to consensus expectations. $ 2.3 billion. [We] believes our acquisition volume assumptions may in fact be conservative because, eight days after 2021, the company has already made or agreed to make $ 807.5 million in acquisitions (or 29% of our estimate for 2021 ). “Overall, Wall Street is taking a bullish position in Realty Income stocks. 5 buys and 1 hold issued in the past three months make the stock a strong buy. Meanwhile, the average price target of $ 69.80 suggests an increase of around 17% from the current share price. (See O share analysis on TipRanks) Essential Properties Realty Trust (EPRT) Last up, Essential Properties, owns and manages a portfolio of single-tenant commercial properties across the US There are 214 tenants in over 1,000 properties in 16 areas including car washes, convenience stores, medical services and restaurants. Essential Properties has a high occupancy rate of 99.4% for its properties. In 3Q20, the company saw its turnover increase by 18.2% year-on-year to reach $ 42.9 million Critical Properties F ended the quarter with an impressive $ 589.4 million s available liquidity, including cash, cash equivalents and available credit. The strong cash position and higher income allowed the company to increase its dividend before the fourth quarter. The new dividend payment is 24 cents per common share, up 4.3% from the previous payment. The current rate annualizes to 96 cents and gives a return of 4.6%. The company has been increasing its dividend regularly for two years. In his review for Goldman, Burrows focuses on the recovery Essential Properties has made since the height of the COVID panic last year. “When the shelter mandates in place came into effect in early 2020, only 71% of EPRT properties were open (fully or on a limited basis). This situation improved in the months that followed and now only 1% of the EPRT portfolio is closed… We expect that future growth in EPRT’s earnings will be driven by the acceleration of acquisitions and estimate potential growth. 2.8% profits from $ 100 million in acquisitions, ”Burrows wrote. In keeping with his bullish approach, Burrows gives EPRT shares a buy rating, along with a one-year price target of $ 26, suggesting a rise of 27%. In total, the EPRT has published 9 recent analyst reviews, and the breakdown of 8 buys and 1 sell gives the stock a Strong Buy consensus rating. The shares are priced at $ 20.46 and have an average price target of $ 22.89, giving potential upside of around 12% from current levels. (See EPRT Stock Analysis on TipRanks) For great ideas for dividend-paying stocks traded at attractive valuations, visit TipRanks Best Stocks to Buy, 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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