2 large dividend stocks at 7%; Analysts say ‘buy’
Let’s talk about defending your wallet. It’s a common impulse for most investors when the economy starts to take a turn for the worse. We are currently in a growth phase, with economic activity rebounding strongly after the corona crisis stops, and with the reopening starting at full speed, economists are forecasting GDP growth of up to 8% this year. But there are clouds on the horizon. Inflation is rising and the April jobs report was, in simple terms, a disaster. The Biden administration is pushing trillion-dollar spending plans that are likely to spur inflation, while increased unemployment benefits give the unemployment rate an artificial increase. But with all this, the Federal Reserve signaled that it had no intention of raising interest rates. Written by investment banking firm Canaccord, analyst Tony Dwyer acknowledges volatile market conditions. âWhile major stock indexes remain near record highs, there has been incredible volatility below due to confusion around the trajectory of inflation and the Federal Reserve’s insistence that it is transient. We expect rotational volatility to continue over the next few weeks, with investors debating the inflation outlook ahead of the latest economic data in early June as the Fed enters its period of calm ahead of the FOMC meeting of 15 and June 16, âDwyer noted. . This all adds up to a market environment that lends itself to defensive equity games, such as a hedge against uncertainty. And that, of course, brings us to dividend-paying stocks. These are the classic defensive games, giving investors a dual path to returns, both from stock appreciation and dividend payouts. Wall Street analysts have done some of the legwork for us, identifying dividend paying stocks that have maintained high returns, at least 7% to be exact. By opening up the TipRanks database, we take a look at the details behind two of these stocks to find out what makes them compelling buys. Black Stone Minerals (BSM) We will start with a hydrocarbon exploration and development company, Black Stone Minerals. This company owns rights to more than 20 million acres, spread over 60 production basins in 40 states. The lion’s share of operations are spread from Texas to Alabama, but Black Stone also owns hydrocarbon rights and production in Montana and North Dakota, West Virginia and Pennsylvania, as well as the United States. of the Rockies. Black Stone released its financial results for 1Q21 in early May. The results showed that the company still hasn’t fully rebounded from the COVID pandemic – revenues and profits are still declining year over year. On a positive note, revenues have posted three consecutive quarters of sequential increases. Revenue was $ 87.1 million, and net profit was $ 16 million. The company reaffirmed its borrowing capacity through its revolving credit facility during the quarter at $ 400 million. During the quarter, Black Stone entered into several new development agreements, on properties in Texas, and acquired mining and royalty rights, for $ 20.7 million in cash and shares, in the northern part. of the Midland Basin. Also during the quarter, Black Stone declared a dividend of 17.5 cents per common share. At the current rate, the common stock dividend pays 7.07% and carries an annualized payment of 70 cents per common share. Raymond James analyst John Freeman is impressed with Black Stone’s Q1 development deals, and writes of the company: âBSM had an incredibly strong first quarter where it … announced another series of development contracts in Austin Chalk & Shelby Trough as well as its first acquisition since the pandemic. We have already seen phenomenal results in the very early development of the Austin Chalk and we expect more significant near-term well catalysts, this time from the Shelby Troughâ¦ âThe analyst summed up:â Due to the significant progress, we are increasing our production estimate for 2021 to the top of BSM’s guide (up 3%), and now model a return to growth in 2022 (up around 4% from the previous model in decrease of about 1%). Along with a production profile that will soon be growing, BSM offers an attractive distribution yield and a rock solid balance sheet. Unsurprisingly, Freeman rates the stock as a strong buy and sets a price target of $ 15 suggesting a rise of around 50% for the coming year. (To see Freeman’s track record, click here) Together, Black Stone has caught the attention of 5 Wall Street analysts, whose critics break down 2-3 buys versus holds and give the stock a moderate buy consensus rating. $ 90; they have an average price target of $ 11.40, indicating a 15% upside margin over the next 12 months. (See BSM market analysis on TipRanks) Blackstone Mortgage Trust (BXMT) If we’re looking at dividend-paying stocks, we’ll naturally be drawn to real estate investment trusts (REITs). These companies, straddling property managers and financials, are known for their high dividend yields and long-term reliability Both stem from a regulatory requirement s according to which the REITs must return a certain percentage of the profits directly to the shareholders. Dividends are a convenient mode for compliance. Blackstone Mortgage focuses on secured senior mortgages in the North American, European and Australian markets. The company has a real estate portfolio of more than $ 368 billion in global value and a total of $ 649 billion in assets under management. Total assets under management include $ 196 billion in real estate assets. While BXMT’s revenue recently posted sequential declines, first-quarter revenue was still $ 185.75 million, and EPS, at 54 cents per share, was up dramatically from the loss of 39 cents reported in the last year’s quarter. During the first quarter, Blackstone closed $ 1.7 billion in new home loans, surpassing its total loan initiations in 2020. The company also declared $ 1.1 billion in available cash. The good results supported the dividend payment of 62 cents per common share. The dividend has been paid at this rate since 2H15 and the company has maintained reliable payments for the past 8 years. At the current rate, the dividend annualizes to $ 2.48 per share and gives an impressive yield of 7.74%. BTIG analyst Tim Hayes takes a bullish stance on Blackstone, noting: âThe pipeline is robust and management expects earnings to benefit from continued portfolio growth and increased revenue from commissions as initiations / refunds normalize. ROEs on new creations are expected to be in line with pre-pandemic levels, with lower funding costs offsetting the pressure on asset returns. Credit performance remains solid and continues to trend in the right directionâ¦. BXMT recognized 100% interest recovery in 1Q21, 98% of loans in progress [sic]â¦ âThe analyst concluded:â We believe that stocks are attractively valued, are currently trading at a discount to historical multiples, and offer a dividend yield of 7.7% – a variation of ~ 600bp from historical multiples. the yield on 10-year US Treasury bills compared to the 2-year. average prepandemic spread of ~ 475 bp. Based on the above, Hayes values ââBXMT shares a buy with a price target of $ 35. Based on the current dividend yield and expected price appreciation, the stock has a total return profile. potential of around 16%. (To see Hayes’ track record, click here) Like BSM above, BXMT has 5 analyst reviews, with 2 to buy and 3 to hold, for a moderate buy analyst consensus rating (See BXMT Stock Market 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.