2 large dividend stocks that yield 7%; Analysts say “buy”
Let’s talk about defending your portfolio. It is a general stimulus for most investors when the economy starts to turn sour. We are now in a growth phase in which economic activity is recovering strongly from the closings of the corona crisis and the reopening is in full swing, economists forecast GDP growth of up to 8% for this year. But there are clouds on the horizon. Inflation is rising, and the April job report was, simply put, a disaster. The Biden administration is pushing billions of dollars in spending plans that are likely to boost inflation, while expanded unemployment benefits artificially boost the unemployment rate. But in all of this, the Federal Reserve has signaled that it does not intend to hike rates. In a letter from investment banking firm Canaccord, analyst Tony Dwyer acknowledges the turbulent market conditions. “While major market indices remain near record levels, there has been incredible volatility among them due to confusion over the inflation path and the Federal Reserve’s insistence that it is temporary. We expect rotational volatility to continue in the coming weeks as investors debate the inflation outlook ahead of the latest economic data in early June, while the Fed moves ahead of the FOMC’s June 15-16 meeting. June goes into its dormant phase, ”noted Dwyer. All of this leads to a market environment that is suitable for defensive stock prices as a hedge against uncertainty. And that, of course, brings us to dividend stocks. These are the classic defensive ways of playing that offer investors a dual path to return, both from stock appreciation and dividend payments. Wall Street analysts did some of the footwork for us, pinpointing dividend stocks that have held up their high yields, at least 7% to be precise. When we open the TipRanks database, we examine the details behind two such stocks to see what else makes them attractive buys. Black Stone Minerals (BSM) We’re starting out with a hydrocarbon exploration and development company, Black Stone Minerals. This company owns rights to more than 20 million acres across 60 productive pools in 40 states. The lion’s share of operations are spread from Texas through Alabama, but Black Stone also owns rights and hydrocarbon production in Montana and North Dakota, West Virginia and Pennsylvania, and the Rocky Mountain states. Black Stone released its financial results for the first quarter of 21 in early May. The results showed that the company has still not fully recovered from the COVID pandemic – sales and earnings are both still lower than last year. On a positive note, sales increased sequentially for three consecutive quarters. Revenues were $ 87.1 million and net income was reported at $ 16 million. The company confirmed its creditworthiness through its $ 400 million revolving credit facility during the quarter. During the quarter, Black Stone entered into several new property development agreements in Texas and acquired mineral and licensing rights for $ 20.7 million in cash and shares in the northern portion of the Midland Basin. Also in the quarter, Black Stone announced a dividend of 17.5 cents per common share. At the current price, the dividend yield on the common shares is 7.07% and the annual payout of 70 cents per common share. Raymond James analyst John Freeman is impressed with Black Stone’s development deals in the first quarter and writes of the company: “BSM had an incredibly strong first quarter of … the pandemic. We have already seen phenomenal results in the very early development of Austin Chalk and expect more useful downhole catalysts in the near future, this time from the Shelby Trough … “The analyst summarized:” Due to the strong progress we are increasing our production estimate for 2021 to the top of the BSM – Guide (up 3%) and are now modeling a return to growth in 2022 (offering an attractive .. dividend yield and rock-solid balance sheet. “Unsurprisingly, Freeman rates the stock as a strong buy and sets a price target of $ 15 which suggests an upside of ~ 50% for the coming year. (To see Freeman’s track record, click here) Overall, Black Stone has drawn the attention of 5 Wall Street analysts whose ratings break down 2 to 3 buys versus holds and give the stock a consensus rating of Moderate Buy, which sells for $ 9.90 and has an average K Price target of $ 11.40, which means room for 15% upside over the next 12 months. (See BSM stock analysis on TipRanks) Blackstone Mortgage Trust (BXMT) Of course, when we look at dividend stocks, we’re drawn to Real Estate Investment Trusts (REITs). Spreading the line between real estate managers and financial services providers, these companies are known for their high dividend yields and long-term dividend reliability. Both result from a regulatory requirement that REITs pay back a certain percentage of the profit directly to the shareholders. Dividends are a convenient mode of compliance. Blackstone Mortgage focuses on secured senior mortgage loans in the North American, European and Australian markets. The company has more than $ 368 billion in real estate portfolio worldwide and $ 649 billion in total assets under management. Assets under management include real estate assets of $ 196 billion. While BXMT’s revenue has been declining sequentially recently, revenue for the first quarter was still $ 185.75 million, and earnings per share of 54 cents per share were dramatically higher than the 39 cents loss for the year-ago quarter. In the first quarter, Blackstone completed $ 1.7 billion in new home loans, exceeding its total lending in 2020. The company also reported $ 1.1 billion in available liquidity. The solid 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 made steadfast payments for the past 8 years. At the current price, the dividend is annualized to $ 2.48 per share and gives an impressively high return of 7.74%. BTIG analyst Tim Hayes is bullish on Blackstone: “The pipeline is robust and management believes that earnings will benefit from continued portfolio growth and higher fee income as additions / repayments normalize. ROEs for new issues are expected to be in line with pre-pandemic levels as lower funding costs offset pressures on investment returns. Credit performance remains strong and continues to trend in the right direction…. BXMT recognized 100 percent interest collection in 1Q21, with 98% of the loans being successful [sic]… “The analyst concluded:” We think stocks are attractively valued, are currently trading at a discount to historical multiples and offer a dividend yield of 7.7% – a spread of ~ 600 basis points to the yield on US Treasuries at 10 years compared to the 2-year average pre-pandemic spread of ~ 475 bps. “Based on the above, Hayes rates BXMT stock with a Buy and a target price of $ 35. Based on the current dividend yield and expected price increase, the stock has a potential total return profile of ~ 16%. (To see Hayes’ track record, click here) Like BSM above, BXMT has 5 analyst ratings, including 2 for buy and 3 for hold, for an analyst consensus rating with moderate buy. (See BXMT stock analysis on TipRanks) To find great ideas for trading dividend stocks at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly introduced rth tool that brings together all of TipRanks’ stock insights. Disclaimer: The opinions expressed in this article are solely those of the analysts featured. The content is provided for informational purposes only. It is very important that you do your own analysis before making any investment.