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2 ‘Strong Buy’ stocks with a 7% dividend yield

You can get whiplash and try to follow the fluctuations in the market these days. Right now, volatility rules apply as investors pull out of big tech – a move that is pushing general markets down. The bearish sentiment comes when the number of new COVID cases drops along with weekly jobless claims. Both are positive news for the economy and will help justify increased economic openness. At the same time, a Congressional COVID bailout dragging its way through the legislative process promises a boost to consumer spending – and coupled with a recent surge in oil prices, this makes market watchers pause for thought about inflation. The result: The US Treasury Department’s 10-year bond has achieved a yield of 1.48%, a one-year high. So investor money is pulling out of stocks and moving to bonds. Overall, it’s a situation tailored for defensive stocks. High-yield dividend games are highly valued by Wall Street stock analysts and show high upside potential as investors get closer to them. These are the stocks that replenish a portfolio and provide a source of income that can offset a small increase in the value of the stocks. Using the TipRanks database, we found two dividend games that produce a return of just over 7%. If that’s not enough, all three have had enough Wall Street analyst support to earn a consensus rating of “Strong Buy”. Sixth Street Specialty Lending (TSLX) The financial sector is often a source of high yield dividend stocks, so it makes sense to look there. Sixth Street Specialty Lending is, as the name suggests, a player in the credit industry where it provides equity and credit financing to small and medium-sized businesses. These small and medium-sized businesses are the traditional engine of the American corporate sector and provide a large proportion of all the jobs created. Specialty finance firms like Sixth Street are critical to their success. Two trends were clearly evident in Sixth Street’s performance over the past year. First, the company posted a sharp drop in earnings as the corona hit, followed by a strong rebound in Q2 20. EPS has since fallen back in line with historical norms. Second, the stock’s share price has slowly but steadily increased in value since it bottomed out in late March. A quick look at the numbers confirms this. TSLX posted a loss in earnings in the first quarter of last year, but the 79 cents per share posted in the fourth quarter, which declined 34% sequentially, was still up 41% year over year. The stock has also regained its share price, up 112% from the bottom of the “Covid Panic”. Sixth Street stock rose briefly earlier this month as it announced fourth quarter results and the latest dividend statement. The company’s earnings and sales were in line with expectations, with management declaring a base dividend of 41 cents per common share and a special dividend of $ 1.25. In the past, special dividends were used on Sixth Street to supplement the basic payment. At the current base rate, the dividend is a robust 7.5%. Raymond James analyst Robert Dodd is impressed with the overall performance of Sixth Street but particularly likes the dividend potential here. He writes, “With its recurring additions, a huge special offer and over-earning the base dividend, we believe TSLX is well positioned in a market where it is becoming increasingly difficult to find returns …” Dodd rates TSLX as outperforming (i.e. buying ) and its target price of $ 23.50 suggest the stock will grow by 8% in the coming year. (To see Dodd’s track record, click here.) Overall, it’s clear Wall Street agrees with Dodd on the quality of Sixth Street. The stock has 5 recent ratings and all are for buy, making the consensus rating for strong buy unanimous. The stock is trading at $ 21.67, and its recent appreciation has left just 6% upside below the average price target of $ 23. (See TSLX stock analysis on TipRanks) Barings BDC, Inc. (BBDC) Next up is Barings BDC, a business development company. Like Sixth Street, Barings provides financial services to medium-sized companies. Barings’ services include capital access and asset management. The company invests in debt, equity and fixed income assets. The company had an investment portfolio valued at $ 1.12 billion as of the end of the third quarter of 20, as reported in the most recent quarter. In this final quarter of the report, Barings also outperformed earnings expectations. The EPS of 17 cents increased sequentially by 21%. Net assets from operating activities rose to 90 cents per share, a huge gain compared to the 10 cents reported in the same metric a year earlier. The company had $ 7.1 million in cash at the end of the third quarter. Coupled with his secure financial position, Barings has seen his stake regaining the value it lost when the coronavirus first emerged. The share hit its lowest point on March 18 last year; since then, stocks have rallied 91%. That was all Q3. In the fourth quarter, Barings completed a merger with MVC Capital. Under the share agreement, Barings shareholders will own 73.4% of the combined company (which will use the Barings name) while MVC shareholders will own the remaining 26.6%. The expanded barings are expected to have $ 1.5 billion in assets under management. The 4Q20 report due in March will give the details. Barings’ dividend reflects the company’s steady growth. Over the past two years, management has increased the quarterly dividend payment from 3 cents per share to 19 cents, which was announced earlier this month for payment in March. At 19 cents per common share, the dividend gives a yield of 7.8%. In his comment on the stock for Compass Point, analyst Casey Alexander showed his clear approval of the dividend announcement: “BBDC has expected NQ for fourth quarter 20 of $ 0.19 per share versus our estimate of $ 0.16 and consensus estimates of Announced $ 0.17. This was clearly due to improved profitability on the Barings platform … ”Furthermore, Alexander sees that the company is making steady business profits even without taking into account the MVC merger, and writes:“ Apart from the assets acquired from MVC Capital, BBDC has 528 million . USD makes new investment commitments during the quarter. Those commitments were split between 24 new borrowers and 17 existing borrowers … “Alexander’s bullish comments are complemented by a buy rating on the stock and his target price of $ 10.25 implies an uptrend of 5% for the next 12 months. (To see Alexander’s track record, click here.) This is another stock with a consensus analyst rating for Strong Buy based on a unanimous view. All three current ratings are buy-side. BBDC’s shares sell for $ 9.66, and the average price target of $ 11 suggests a year-long upward movement of 13%. (See BBDC 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 analysts presented. 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.

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