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3 “Strong Buy” stocks with a dividend yield of over 9%
The markets ended 2020 on a high level and started 2021 on a bullish course. All three major indices recently rose to all-time highs as investors seemingly looked beyond the pandemic for signs of a swift recovery. The veteran strategist Edward Yardeni sees a slowdown in the economic recovery. As the COVID vaccination program allows for further economic opening and more people back to work, Yardeni predicts a wave of pent-up demand, rising wages and rising prices – in short, a recipe for inflation. “In the second half of the year we could be looking for some consumer price inflation that would not be good for overvalued assets,” noted Yardeni. The red flag for higher returns in the government bond market are. If the Fed eases the low interest rate policy, Yardeni sees government bonds reflect the change first. A situation like this is tailored for defensive stock games – and that will of course lead investors to look at high yield dividend stocks. When we opened the TipRanks database, we found three stocks that have a hat trick with positive signs: a strong buy rating, dividend yields of 9% or better – and a recent analyst rating that indicates a double-digit upward trend. CTO Realty Growth (CTO) We start with CTO Realty Growth, a Florida-based real estate company that made an exciting decision for dividend investors last year: the company announced that it would change its tax status to that of a real estate mutual fund (REIT) for the tax year ending December 31, 2020. REITs have long been known for their high dividend yields, a product of tax regulations that require these companies to return a large percentage of their profits directly to shareholders. Dividends are the usual way of getting that return. With this in mind, CTO has a diverse portfolio of real estate investments. The holdings include 27 income properties in 11 states totaling more than 2.4 million square feet, as well as 18 rental billboards in Florida. The income properties are mostly shopping malls and retail stores. During the third quarter, according to the latest report, CTO sold approximately 3,300 acres of vacant land for $ 46 million, acquired two high-income properties for $ 47.9 million, and collected ~ 93% of contracted base rents. The company also approved a one-time special distribution related to the move to REIT status. The aim was to bring the company into compliance with the income return regulation in the 2020 tax year. The one-time distribution was in cash and shares and was $ 11.83 per share. The regular dividend paid in the third quarter was 40 cents per common share. That was raised to $ 1 in the fourth quarter, a jump of 150%; This was done again to bring the company in line with the requirements of REIT status. At the current dividend rate, the yield is 9.5% and thus well above the average of comparable companies in the financial sector. B. Riley’s analyst Craig Kucera believes CTO has numerous options in the future to add to its portfolio through acquisitions: “CTO’s upper end of expected divestment guidance was $ 33 million in Q4 20, which YTD said Disposals increased to nearly $ 85 million. The largest divestment involved a tenant exercising an option to buy a building from CTO’s Aspen, CO, valuation of> $ 30 million in cash and restricted cash for additional acquisitions, and we expect CTO to be active again in 1H21 will be. “To this end, Kucera rates CTO with a Buy and a target price of $ 67. At the current level, its target implies an upside potential of 60% for a year. (To see Kucera’s track record, click here.) In total, CTO has 3 ratings from Wall Street analysts, and everyone agrees that this stock is a buy, making Strong Buy’s analyst consensus unanimous. The share price is $ 41.85 and an average target price of $ 59.33 suggests ~ 42% growth for the coming year. (See CTO stock analysis on TipRanks) Holly Energy Partners (HEP) The high-cash flow energy sector is also known for its high-paying dividend stocks. Holly Energy Partners is a midstream transportation company in the sector providing pipeline, terminal and storage services to producers of crude oil and petroleum distillate products. Holly operates primarily in the Colorado-Utah and New Mexico-Texas-Oklahoma regions. In 2019, the last full year for which numbers are available, the company had total sales of $ 533 million. The company’s 2020 revenue declined in the first and second quarters, but rebounded in the third quarter to total $ 127.7 million. Holly reported $ 76.9 million in distributable cash flow from which dividends will be paid, an increase of more than $ 8 million year over year. This supported a dividend payment of 35 cents per regular share, or $ 1.40 on an annual basis. At this rate, the dividend is a hefty 10%. Far Fargo analyst Michael Blum wrote: “Our model suggests that the payout at this level is sustainable [lost revenue] This is offset by inflationary escalators in HEP’s pipeline contracts and contributions from the Cushing Connect JV project. Approximately 80% of the distribution from HEP is tax deferred. “Blum gives HEP a target price of USD 20 and an overweight rating (ie buy rating). His target implies an upward trend of 38% for the next 12 months. (To see Blum’s success story, click here.) “Our rating primarily reflects the stable, chargeable cash flows, robust returns and conservative balance sheet of the partnership,” added Blum. Wall Street largely agrees with Blum’s view of HEP. This shows 6 ratings, divided into 5 to 1 buys versus hold. The average target price of $ 18.67 suggests the stock has room for ~ 29% growth this year. (See HEP stock analysis on TipRanks) DHT Holdings (DHT) Midstreaming is only part of the oil industry’s global transportation network. Tankers are another part that carries crude oil, petroleum products and liquefied natural gas in bulk in bulk around the world. DHT in Bermuda operates a fleet of 27 crude oil tankers, all rated VLCC (very large crude oil carriers). These ships are 100% owned by the company and range in tonnage from 298,000 to 320,000. VLCCs are the workhorses of the global oil tanker network for four quarters of sequential revenue growth Even during the “corona half” of 1H20, DHT saw revenue decline sequentially from 2Q20 to 3Q20. Revenue for the quarter fell from $ 245 million to $ 142 million. It’s important to note, however, that third-quarter sales earnings were still up 36.5% year over year. The 32 cents EPS was a dramatic reversal from the 6 cents loss in Q3 19th, and DHT has historically adjusted its dividend as needed to keep it in line with earnings. The company did so in the third quarter, and paying 20 cents per regular share was the first dividend cut in five quarters. The general policy is positive for dividend investors, however, as the company hasn’t missed a dividend payment for 43 consecutive quarters – an admirable record. At 80 cents per share on an annual basis, the dividend is an impressive 14%. Kepler analyst Petter Haugen covers DHT and sees potential for higher returns in the company’s contract plan. Haugen noted, “With 8 out of 16 ships ending their TC contracts by the end of Q1 2021, we believe DHT is well positioned if we expect freight rates to increase in the second half of 2021E.” More details adds Haugen:[The] The main underlying drivers are still intact: fleet growth will be modest (averaging 1% over 2020-23E), and the US will continue to be a net exporter of crude oil at sea, further export growth due to the demand for tankers in the US has the consequence. We assume that spot prices will improve again in 2021E shortly after oil demand normalizes. We expect average VLCC rates of $ 41,000 / day in 2022E and $ 55,000 / day in 2023E. “In accordance with his comments, Haugen rated DHT a Buy. Its target price of $ 7.40 suggests this stock can grow 34% in the coming months. (To see Haugen’s track record, click here.) The rest of the street gets on. 3 buy and 1 hold assigned in the last three months result in strong analyst consensus. Additionally, based on the average target price of $ 6.13, the potential target price is ~ 11%. (See DHT 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 the insights into TipRanks’ stocks. 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.