Looking for a dividend yield of at least 8%?  Analysts recommend 3 dividends to buy

Looking for a dividend yield of at least 8%? Analysts recommend 3 dividends to buy

What is happening in the markets lately? Since the beginning of this year, we have seen a prolonged downtrend and now a cycle of high volatility. Investors can be forgiven for feeling a bit confused, or even whiplash, trying to follow the rapid ups and downs of recent weeks.

However, one important fact stands out. Over the past three months, since mid-June, we’ve seen rallies and falls – but the markets haven’t seriously challenged that mid-June low. Looking at the situation from research firm Fundstrat, Tom Lee draws some extrapolations from this 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 rate this high is a sign that the market has bottomed out — and he goes on to note that S&P bottoms typically come shortly after a peak in the inflation rate.

Which brings us to Lee’s second point: Annual inflation in June came in at 9.1%, and in both published readings since then, it has eased 0.8 points to 8.3%.

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 is, if headline CPI has peaked, June 2022 equity lows should be durable.”

Some Wall Street analysts seem to agree, at least in part. They recommend some stocks as “Buys” right now – but recommend stocks with high dividend yields of 8% or better. Such a high yield will provide real protection against inflation, providing a cushion for cautious investors – those in the inflationista group. We used the TipRanks database to gather some details about these recent picks. here it is, along with analyst commentary.

Rhythm Capital Corp. (rhythm)

We’re talking about dividends here, so we’ll 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 defensive portfolio deals. Rithm Capital is the new name and branding of an older, established company, New Residential, which became an internally managed REIT effective August 2nd.

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

In total, Rithm has $35 billion in assets and $7 billion in equity. The company has paid out more than $4.1 billion in total dividends since it was first incorporated in 2013 and, as of 2Q12, had a book value per common share of $12.28.

In the same quarter, its final quarter operating as New Resi, the company showed two key metrics of interest to investors. First, earnings available for distribution totaled $145.8 million. and second, of that total, the company distributed $116.7 million through a common stock dividend, for a payment of 25 cents per share. This was the fourth consecutive quarter that the dividend was paid at this level. Annual payment, $1, yields 11%. This is more than enough, under the current circumstances, to ensure a real rate of return for common shareholders.

RBC Capital’s Kenneth Lee, a 5-star analyst, cites several reasons behind this name: “We view RITM’s available cash and liquidity position favorably given potential growth in attractive opportunities. We favor the continued diversification of its business model from RITM and its ability to allocate capital to strategies and diversified asset creation capability… We have an Outperform rating on RITM shares given the potential benefit to BVPS from rising interest rates.”

This Outperform (i.e. Buy) rating is supported by a $12 price target, suggesting a one-year gain of 33%. Based on the current dividend yield and expected price appreciation, the stock has a ~44% potential total return profile. (To follow Lee’s history, Click here)

While only three analysts track this stock, they all agree it’s a buy, making it a unanimous consensus Strong Buy rating. Shares are selling for $9 and the average price target of $12.50 suggests an upside of ~39% over the next year. (See RITM Stock Prediction on TipRanks)

Omega Healthcare Investors (OHI)

The second company we’ll look at, Omega, combines characteristics of both healthcare providers and REITs, an interesting niche that Omega has filled well. The company owns 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.

Omega’s portfolio generated net income of $92 million for 2Q12, up 5.7% from $87 million in the prior quarter. On a per-share basis, that came to 38 cents EPS in 2Q12, versus 36 cents a year ago. 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, FFO included funds available for distribution (FAD) of $172 million. Again, this was down from 2Q11 ($197 million), but was enough to cover current dividend payments.

This dividend was declared on common stock at 67 cents per share. That dividend amounts to $2.68 on an annualized basis and yields a strong 8.4%. The last dividend was paid in August. In addition to dividend payments, Omega supports its share price through a share repurchase program, and in the second quarter the company spent $115 million to buy back 4.2 million shares.

Reviewing Omega’s second-quarter results, Stifel analyst Stephen Manaker believes the quarter was “better than expected.” The 5-star analyst writes, “Headwinds remain, including the impact of COVID on occupancy and high costs (especially labor). But occupancy is increasing and should improve further (assuming no recurrence of 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 2023 AFFO, we expect 3.7% growth in 2023 and the balance sheet remains a source of strength.” We also believe that OHI will maintain its dividend as long as the recovery continues at an acceptable pace,” the analyst summarized.

Manaker follows his comments with a Buy rating and a $36 price target that shows his confidence in a 14% upside over a one-year horizon. (To follow Manaker’s history, Click here)

Overall, the street is split in half on this one. based on 5 Buys and Holds each, the stock has a consensus rating of Moderate Buy. (See OHI stock forecast on TipRanks)

SFL Corporation (SFL)

For the last stock, we’ll move away from REITs and into marine transportation. SFL Corporation is one of the world’s largest shipping companies, with a fleet of approximately 75 vessels – the exact number may vary slightly as new vessels are acquired or old vessels are retired or sold – ranging in size from giant 160,000 ton Suezmax barges and tankers on 57,000 ton dry bulk carriers. The company’s ships can carry almost any commodity imaginable, from bulk cargo to crude oil to completed cars. The vessels owned by SFL are operated through charters and the company has an average outstanding charter in 2029.

Long-term fixed charters from carriers are big business and in 2Q22 brought in $165M. 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 boats.

Investors should note that SFL’s vessels have an extensive charter backlog, which will keep them in operation for at least the next 7 years. The charter backlog totals over $3.7 billion.

We mentioned fleet turnover, another important factor for investors to consider, as it ensures that SFL operates a sustainable fleet of modern ships. During the second quarter, 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 scheduled to be delivered in the third quarter.

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

DNB 5-star analyst Jorgen Lian is positive on this shipping company, seeing no particular downside. He writes, “We believe there is significant long-term support for the dividend without factoring in any potential benefit from strengthening offshore markets. If we include our estimated earnings from West Hercules and West Linus, the potential for distributable cash flow could be closer to $0.50/share, in our view. We see plenty of upside, while the outstanding contract supports the current valuation.”

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

Some stocks slip under the radar, garnering few analyst reviews despite sound performance, and this is one. Lian’s is the only current review recorded for this stock, which is currently priced at $10.38. (See SFL Stock Prediction on TipRanks)

To find good ideas for trading stocks at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that brings together all of TipRanks’ stock information.

Disclaimer: The views expressed in this article are solely those of the selected 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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