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3 top dividend stocks with growth opportunities; Goldman Sachs Says “Buy”
Investing is about making a profit, and investors have long seen two main paths towards that goal. Growth stocks, stocks that generate a return based primarily on the appreciation of the stock price, is one way. The second route is through dividend stocks. These are stocks that pay back a percentage of profits to shareholders – a dividend that is usually paid quarterly. Payments vary widely from less than 1% to more than 10%, but the average among stocks listed on the S&P 500 is around 2%. Dividends are a nice addition for a patient investor as they provide a steady stream of income. Goldman Sachs analyst Caitlin Burrows has looked into the real estate trust segment, a group of stocks long known for high and reliable dividends – and she sees many reasons to expect strong growth in three stocks in particular. As we led the trio through TipRanks’ database, we learned that all three were cheered on by the rest of the street as well, as they have an analyst consensus of “Strong Buy”. Broadstone Net Lease (BNL) First off, Broadstone Net Lease is an established REIT that went public last September and grossed over $ 533 million. The company launched 33.5 million shares, followed by another 5 million shares, which were acquired by subscribers. It was viewed as a successful opening and BNL now has a market cap of over $ 2.63 billion. Broadstone’s portfolio includes 628 properties in 41 states and the Canadian province of British Columbia. These properties have 182 tenants and are valued at $ 4 billion. The best feature here is the long-term nature of the leases – the weighted average remaining lease is 10.8 years. For the third quarter, the most recent with full financial data available, BNL posted net income of $ 9.7 million, or 8 cents per share. Most of its income came from rents, and the company said it collected 97.9% of rents due in the quarter. Looking ahead, the company expects property acquisitions of $ 100.3 million in the fourth quarter and an increased rent collection rate of 98.8%. Broadstone’s earnings and high rental income support a dividend of 25 cents per common share, or $ 1 a year. This payment is affordable for the company and offers investors a 5.5% return. Goldman’s Burrows sees the company’s acquisition moves as the most important factor. “Acquisitive acquisitions are the main earnings driver for Broadstone … While management stopped acquisitions after COVID-induced market uncertainties (BNL did not make any acquisitions in the first half of 20) and before going public, we are confident that the acquisitions will be in 2021 will begin activity in the fourth quarter of 20 … We estimate that BNL has a positive investment spread of 1.8%, resulting in earnings growth of 0.8% (to 2021E FFO) per $ 100 million acquisitions (or 4, To this end, Burrows rates BNL as a buy and their target price of $ 23 implies an uptrend of ~ 27% for the coming year. (Click to see Burrow’s track record You here.) Wall Street broadly agrees with Burrows on Broadstone, as evidenced by the 3 positive ratings the stock has received over the past few weeks the only ratings available to make the analysts’ consensus rating a unanimous strong buy. The shares are currently valued at $ 18.16 and the average target price is $ 21.33, which corresponds to a year-long upward trend of ~ 17%. (See BNL stock analysis on TipRanks.) Realty Income Corporation (O) Realty Income is a major player in the REIT space. The company has a portfolio valued at more than $ 20 billion with more than 6,500 properties in 49 states, Puerto Rico and the United Kingdom. Annual sales exceeded $ 1.48 billion in fiscal 2019 (the last with full data) and has held a monthly dividend for 12 years. If we look at the latest data, we find that O had earnings of 7 cents per share and total revenue of $ 403 million for the third quarter of 20. The company collected 93.1% of its contracted rents in the quarter. A drill down to the monthly values is relatively low, but shows that the rental collection rates have increased since July. As already mentioned, O pays a monthly dividend and has done so regularly since it was listed on the stock exchange in 1994. The company increased its payout in September 2020, marking the 108th increase in that time. The current payment is 23.45 cents per common share, which equates to an annual return of $ 2.81 – and a return of 4.7%. Based on the above, Burrows has placed this stock on their Americas Conviction List with a Buy rating and a target price of $ 79 for the next 12 months. This target implies an upward movement of 32% from the current level. Burrows reiterated their stance: “We estimate FFO growth of 5.3% per annum over the period 2020E-2022E versus an average of 3.1% for full REIT coverage. We assume that the main drivers of earnings will be a sustained recovery in acquisition volume and a gradual improvement in theater rents (in 2022). The analyst added, “We expect O to make acquisitions of $ 2.8 billion each in 2021 and 2022, which is the consensus expectation of $ 2.3 billion. [We] We believe our acquisition volume assumptions may actually turn out to be conservative, given that eight days after 2021, the company has already made or approved acquisitions worth $ 807.5 million (or 29% of our 2021 estimate). “Overall, Wall Street is taking a bullish stance on 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 indicates $ 69.80 on an upward movement of ~ 17% against the current share price (see O share analysis on TipRanks) Essential Properties Realty Trust (EPRT) Most recently, Essential Properties owns and manages a portfolio of single-tenant commercial properties in the US There are 214 tenants in more than 1,000 properties in 16 industries including car washes, convenience stores, medical services and restaurants. Essential Properties has a high occupancy rate of 99.4% for its properties. In the third quarter of 20, the company saw sales increase 18.2% over the Last year, reaching $ 42.9 million. Essential Properties F ended the quarter with an impressive amount of liquid available $ 589.4 million including cash, cash equivalents, and available credit. The strong cash position and rising sales left the company confident enough to raise its dividend for the fourth quarter. The new dividend payment is 24 cents per common share, 4.3% more than the previous payment. The current interest rate is 96 cents and gives a return of 4.6%. The company has been increasing its dividend regularly for the past two years. In her review for Goldman, Burrows focuses on the recovery Essential Properties has had since the peak of the COVID panic last year. “When protection mandates went into effect in early 2020, only 71% of EPRT’s properties were open (fully or to a limited extent). This situation has improved over the past few months and now only 1% of the EPRT portfolio is closed. We anticipate EPRT’s future earnings growth to be driven by acquisition gains and estimate 2.8% potential earnings growth from $ 100 million acquisitions, ”Burrows wrote. In keeping with their bullish approach, Burrow’s EPRT stock is rated buy and a price target of $ 26 for a year, indicating an upward trend of 27%. Overall, EPRT has 9 current analyst ratings, and the 8 buy and 1 sell breakdown gives the stock a strong buy consensus rating. The shares are priced at $ 20.46 and have an average price target of $ 22.89, which represents an upside potential of ~ 12% from current levels. (See EPRT stock analysis on TipRanks.) To find great ideas for trading dividend stocks at attractive valuations, visit TipRanks ‘Best Stocks to Buy, a newly launched tool that brings together all of TipRanks’ stock insights. Disclaimer: The opinions expressed in this article are solely those of the presented analysts. The content is intended to be used for informational purposes only. It is very important that you do your own analysis before making any investment.