Just when it looked like it was time to throw in the towel, the market succeeded and turned a profit. A better-than-expected consumer price index reading last week boosted hopes that the Federal Reserve will slow the pace of interest rate hikes.
Looking at the situation for Morgan Stanley, equity strategist Michael Wilson, one of the biggest bears of the past year, became a little more optimistic, saying: “We think we are now entering the final stages of a bear market…”
At the same time, Wilson acknowledges that the bear is still with us. Looking at the general conditions now and the outlook for 2023, he wrote: “We recommend that investors remain defensive… We would say that the last 12 months have been quite boring because a bear market was so likely that we simply set our defensive strategy and stick with it…”
The classic defensive play, of course, is dividend stocks – and if investors must remain defensive for now, then we can look at high-yield wild-card payers. Using TipRanks platform, we found two such stocks, stocks with at least an 8% dividend yield and a Street Buy rating. Interestingly, both stocks slipped off the radar. Let’s take a closer look.
Global Partners LP (GLP)
The first dividend we’ll look at is the energy industry standby. Global Partners operates as an energy wholesaler with an extensive network of energy delivery infrastructure, including oil and gas terminals, retail locations and gas stations, located primarily in the Northeast but extending into the Midwest, Southeast and the The Persian Gulf. The company’s supplied products include crude oil, diesel fuel, fuel oil, kerosene and gasoline. In addition to hydrocarbon fuels, Global Partners also markets numerous brands of prepackaged take-out foods through stores.
By the numbers, Global Partners has an impressive network. The company owns and operates 24 bulk petroleum product terminals and has 10 million barrels worth of storage capacity. The company sells more than 369,000 barrels of fuel per day and owns, leases or supplies approximately 1,700 service stations.
Rising prices have recently boosted Global Partners’ top line, and the company’s 9M 2022 revenue of $14.45 billion is now ahead of full-year 2021 revenue of $13.24 billion. The company’s 3Q22 sales stood at 4, $6 billion, up 39% year over year. Net income rose sharply from 3Q21 to $111.4 million from $33.6 million, an impressive 231% increase. Per share earnings were even higher; diluted EPS rose 262% year over year, from 86 cents to $3.12. The company has increased its quarterly dividend payout 8 times over the past three years.
Global Partners’ last dividend payment was made on November 14 of this year, at 62.5 cents per common share. This works out to $2.50 per share and yields 8.15%. With annual inflation recently falling to 7.7% for October, this means investors will realize a real rate of return from GLP’s dividend payout.
Global Partners’ solid position and performance caught the attention of the Stifel analyst Selman Akyolwho saw fit to upgrade the stock from Hold to Buy.
Backing up his bullish stance, Akyol wrote: “We expect Global to use the recent run-up to expand its footprint and take advantage of increased volumes and economies of scale. There may be headwinds in 2023 depending on how the commodity picture unfolds, but we would emphasize that GLP managed to deliver exceptional performance this year amid heightened commodity volatility. While we recognize that the results of 2022 may not be repeated in 2023, GLP has been able to use its increased cash flows to invest in lower risk business lines, reduce balance sheet leverage and increase distributions . We believe these decisions benefit unitholders in the short and long term.”
Looking ahead from these comments, Akyol set a $35 price target on the stock, suggesting a 12.5% upside over the next year. Based on the current dividend yield and expected price appreciation, the stock has a ~21% potential total return profile. (To watch Akyol’s record, Press here)
Some stocks slip under the radar, getting few analyst reviews despite solid performance, and that’s one thing. Akyol’s is the only recent analyst review recorded here. (See GLP stock analysis at TipRanks)
NexPoint Real Estate Financing (NREF)
The next dividend stock on our list is a real estate investment trust, REIT; these companies are well known as champions of high dividend yields, so it’s unusual to find them slipping under the noses of investors – but that’s what happened here with NexPoint Real Estate Finance. The company, which focuses its investments on mortgage loans for single-family and multi-family rental properties, as well as taking direct ownership of warehouse and commercial office space, has not attracted much attention. But maybe that needs to change.
To begin with, the company’s portfolio is stabilized at 92.9% and has an average of 6.2 years remaining on lease terms. The firm’s portfolio is worth $1.7 billion and consists of 83 investments – and as of October 26 of this year, the portfolio had no defaulted or forbearance loans. NexPoint’s earnings available for distribution (EAD) came in at a diluted 48 cents per share in its latest 3Q22 report. And of particular interest here, as of September 30, the company had $11.2 million in available for distribution (CAD). That came to 50 cents per diluted share and fully covered the dividend.
That dividend was last announced in October, payable on December 30 at 50 cents per common share. This dividend is annualized to the nearest $2 and yields a solid 11.2%. This yield is more than 5 times the average dividend found in the broader markets. NexPoint has increased its dividend payout three times in the past three years and is careful to keep the payout in line with distributable cash.
5 star reviewer Stephen Lawsof Raymond James likes what he sees in this company, writing in a recent note, “With the investment portfolio focused heavily on SFR and multifamily assets and NREF’s use of core financing of similar types, we expect CAD to continue to covers the dividend … Given our portfolio return projections and with the stock trading at a discount to book value, we reiterate our Strong Buy rating.”
Laws’ Strong Buy rating comes with a $21 price target on NREF stock. If this target is achieved, investors could realize a potential price upside of ~18% from NREF’s current share price. (To watch Laws’ record, Press here)
In general, the NREF slipped off the radar of most analysts; the moderate buy consensus on the stock is based on only two recent ratings; Buy and hold (ie neutral). (See NREF stock analysis at TipRanks)
To find good ideas for trading dividend stocks at attractive valuations, visit TipRanks’ The best stocks to buya tool that brings together all of TipRanks equity insights.
Rebuttal: 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.