Looking for at least 8% Dividend Yield?  Analysts Recommend Buy 3 Dividend Stocks

Looking for at least 8% Dividend Yield? Analysts Recommend Buy 3 Dividend Stocks

What’s going on in the markets lately? Since the beginning of this year, we have seen a long bearish trend, and now a cycle of high volatility. Investors can be forgiven for feeling some confusion, or even whiplash, as they try to navigate the rapid ups and downs of recent weeks.

One important fact stands out, however. Over the past three months, since mid-June, we’ve seen rallies and declines – but the markets haven’t really challenged that mid-June low. As research firm Fundstrat examines the situation, Tom Lee makes several extrapolations from that observation.

First, Lee points out that about 73% of S&P-listed stocks are in a true bear market, having fallen more than 20% since their peak. Historically, he notes, a high percentage is a sign that the market is bottoming – and he notes that S&P bottoms usually come shortly after a peak in the inflation rate.

Which brings us to Lee’s second point: Annual inflation in June was registered 9.1%, and in the two readings published since then, it has fallen by 0.8 points, to 8.3%.

Getting to the bottom line, Lee advises investors to ‘buy the dip,’ saying, “Even for those in the ‘inflationista’ camp or even the ‘we’re in a long-term bear’ camp, the fact of the matter is, if headline CPI. after peaking, June 2022 equity lows should be permanent.”

Some Wall Street analysts seem to agree, at least in part. They are currently recommending certain stocks as ‘Buys’ – but they are recommending stocks with high dividend yields, around 8% or better. Yield will provide high inflation protection, providing a cushion for cautious investors – those in the ‘inflationista’ group. We used the TipRanks database to pull up some data on recent picks; here they are, along with the analytical commentary.

Rhythm Capital Corp. (RHYTHM)

We’re talking dividends here, so let’s start with a real estate investment trust (REIT). These companies have long been known for their high and reliable dividends, and are often used in portfolio protection arrangements. Rithm Capital is the new name and branding of an established company, New Residential, which changed to an internally managed REIT with effect last August 2.

Rithm generates returns for its investors through smart investments in the real estate sector. The company provides both capital and services – that is, loan and mortgage services – to both investors and consumers. The company’s portfolio includes loan originations, real estate securities, real estate and residential mortgage loans, and MSR-related investments, with the majority of the portfolio, approximately 42%, in mortgage servicing.

In total, Rithm has $35 billion in assets, and $7 billion in equity investments. The company has paid out over $4.1 billion in total dividends since it was first established in 2013, and, as of 2Q22, had a book value of $12.28 per common share.

In that same Q2, the last operating as New Resi, the company revealed two key metrics of interest to investors. Initially, the earnings available for distribution amounted to $145.8 million; and second, of that total, the company distributed $116.7 million through its common stock dividend, at a payment of 25 cents per share. This was the fourth consecutive quarter with the dividend paid at that level. The annual payment, $1, yields 11%. That, under current conditions, is sufficient to ensure a real rate of return for common shareholders.

Kenneth Lee of RBC Capital, a 5-star analyst, outlines several reasons why he is behind this name: “We view RITM’s cash and liquidity position favorably due to potential deployment in attractive opportunities. We favor RITM’s continued diversification of its business model and its ability to allocate capital across strategies, and its ability to establish differentiated assets… We have an Outperform rating on RITM shares given the potential benefit of BVPS from rising rates.”

That Outperform (ie, Buy) rating is supported by a price target of $12, implying a one-year gain of 33%. Based on the current dividend yield and expected price appreciation, the stock has a potential yield profile of ~44%. (To view Lee’s record, Click here)

Although only three analysts have followed this stock, they all agree it is a buy, giving it a unanimous Strong Buy consensus rating. The shares are selling at $9 and their average price of $12.50 suggests ~39% upside for the year ahead. (See RITM stock forecast on TipRanks)

Omega Healthcare Investors (OHI)

The second company we will look at, Omega, combines aspects of both health care providers and REITs, an interesting niche that Omega has filled competently. The company has a portfolio of skilled nursing facilities (SNFs) and senior housing facilities (SHFs), with investments totaling approximately $9.8 billion. The portfolio leans towards SNFs (76%), with the remainder in SHFs.

The Omega portfolio generated $92 million in net income for 2Q22, which was up 5.7% from $87 million in the year-ago quarter. On a per-share basis, this amounted to 38 cents EPS in 2Q22, versus 36 cents a year earlier. The company had adjusted funds from operations (adjusted FFO) of $185 million in the quarter, down 10% year over year from $207 million. Importantly for investors, the FFO included funds available for distribution (FAD) of $172 million. Again, this was down from 2Q21 ($197 million), but was enough to cover current dividend payments.

That dividend was declared for common stock at 67 cents a share. This dividend equals $2.68 annually and yields a solid 8.4%. The final dividend was paid in August. In addition to the dividend payments, Omega supports its stock price through a share buyback program, and in Q2 the company spent $115 million to buy back 4.2 million shares.

Assessing Omega’s Q2 results, Stifel analyst Stephen Manaker believes the quarter was ‘better than expected.’ The 5-star analyst writes, “There are still headwinds, including the effects of COVID on occupancy and high costs (especially labor). But occupancy is increasing and should improve further (assuming no relapse due to COVID) and labor costs appear to be increasing at a slower rate.”

“We continue to believe the stock is attractively priced; it trades at 10.2x our 2023 AFFO, we expect 3.7% growth in 2023, and the balance sheet remains a source of strength. We also believe OHI will maintain its dividend as long as the recovery continues at an acceptable pace,” the analyst summarized.

Manaker follows up his comments with a Buy rating and a $36 price target indicating he is confident of a 14% gain in the one-year period. (To view the Manager’s track record, Click here)

Overall, the Street is split down the middle on this one; based on 5 Buys and Holds, each, the stock receives a Moderate Buy consensus rating. (See OHI stock forecast on TipRanks)

SFL Corporation (SFL)

For the final stock, we’ll turn from REITs and over to ocean transportation. SFL Corporation is one of the world’s largest ocean transport operators, with a fleet of approximately 75 vessels – the exact number can vary slightly, as new vessels are acquired or old ones are retired or sold. vessels – ranging in size from huge 160,000 ton Suezmax freighters and tankers to 57,000 ton dry bulk carriers. The company’s ships can carry almost every commodity imaginable, from bulk cargo to crude oil to finished automobiles. Ships owned by SFL are operated through charters, and the company has an average charter backlog to 2029.

Long-term fixed charters from ocean carriers are big business, bringing in $165 million in 2Q22. In net income, SFL reported $57.4 million, or 45 cents per share. Of that net income, $13 million came from the sale of older vessels.

Investors should note that SFL vessels have an extensive charter backlog, which will keep them in service for at least 7 years. The charter backlog is over $3.7 billion.

We have mentioned fleet turnover, another important factor for investors to consider, as it ensures that SFL operates a viable fleet of modern vessels. During Q2, the company sold two older VLCCs (very large crude carriers) and one container ship, while acquiring 4 new Suezmax tankers. The first of the new vessels is due to be delivered in Q3.

In Q2, SFL paid its 74th consecutive quarterly dividend, a reliability record few companies can match. The payout was set at 23 cents per common share, or 92 cents per year, and yielded a strong 8.9%. Investors should note that this is the fourth consecutive quarter in which the dividend has been increased.

DNB 5-star analyst Jorgen Lian is bullish on this shipping company, and sees no particular downside. He writes, “We believe there is good long-term support for the dividend without any potential benefit from strengthening Offshore markets. If we factor in our estimated earnings from West Hercules and West Linus, the potential for distributable cash flow could approach USD0.5/share, in our view. We see a lot of upside potential, and the contract backlog supports the current valuation.”

Lian adds his numbers view with a $13.50 price target and a Buy rating. Its price target implies a one-year gain of 30%. (To view Lian’s track record, Click here)

Some stocks slip under the radar, picking up some analyst reviews despite sound performance, and this is one. Lian’s is the only current review on record for this stock, with a current price of $10.38. (See SFL stock forecast on TipRanks)

For great ideas on trading stocks at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unifies all of TipRanks’ equity insights.

Disclaimer: The views 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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