TipRanks 'Perfect 10' List: These 2 Stocks Send a Bullish Signal

Making the right decision in the investment market is not an easy task. What investors need here is a way to cut through the noise, take the raw stream of stock data and reduce it to a pattern, a usable data point that can point to potential winners in the markets. This is where Smart Score on TipRanks comes a data tool that fills just that niche.

Smart Score takes the collected data from the stock market and puts it to work, collecting it into categories and scoring each stock on a series of 8 factors. Each factor is known to correlate with positive performance. Through the Smart Score algorithm, all 8 factors are brought together and distilled into a single score on a scale of 1 to 10 that gives a clear signal to investors.

Now combine this with the classic defensive position during times of market volatility, the dividend stock. High-yielding dividends offer a measure of protection against market downturns and an inflationary economic environment, making them a popular choice for defensively minded investors.

We’ve opened up the platform to find stocks that offer the best of both worlds – a Smart Score ‘Perfect 10’ and a dividend that yields over 7%. Are these the right stocks to go all in? A look at the data and analyst commentary will lead us to an answer.

Chord energy (HAPPY BIRTHDAY)

The first “perfect 10” stock we’ll look at is Chord Energy, a mid-cap company in the hydrocarbon exploration sector. This company operates in the Williston Basin in North Dakota and Montana, where it focuses on organic drilling activities and horizontal fracking to release crude oil reserves. Chord is the lead producer at Williston and generated 172,500 barrels of oil equivalent per day in 3Q22.

Strong production led to rising revenues. Chord brought in a total of $1.19 billion in the top line in Q3, up about 50% sequentially and an impressive 196% year-over-year. After all, at $7.20 per diluted share, the figure more than doubled the $3.16 diluted earnings per share reported in 3Q21. However, it was below the forecast of $8.35.

As cash assets, Chord reported net income from continuing operations of $941.6 million and $783.6 million in net cash from operations. The company’s cash balance as of September 30 was $658.9 million; this exceeded the company’s $400 million in debt.

A solid balance sheet enables Chord to engage in a strong capital return program for investors. The company repurchased 1.2 million shares in the third quarter for a total of $125 million and declared a basic plus variable dividend for common shareholders. The declared dividend of $3.67 per share includes $1.25 base and $2.42 variable. The underlying dividend grows annually to $5 and yields 3%; with variable, it flattens year-over-year to $14.68 and yields a more robust 9.3%.

These shares caught the attention of 5-star analyst Neil Dingman of Truist, who wrote: “We predict that Chord will continue to be the leader among E&P shareholders with a total percentage payout that rivals any of the major producers… The Deployment Strategy of CHRD’s FCF is leveraged to return cash flow back to its shareholders, resulting in the recently declared variable dividend of $3.67/sh. We believe there is further opportunity for CHRD to continue with a sustainable share buyback plan consisting of a basic dividend of at least $1.25/sh and potentially higher than the aforementioned variable dividend. Additionally, while the company’s $125 million in buybacks in 3Q22 was opportunistic, we fully expect this program to continue through 2023.”

Dingman’s comments support his Buy rating on the stock, while his $214 price target suggests upside of 38% over the next 12 months. (To watch Dingmann’s record, Press here)

Chord Energy has 5 recent analyst reviews recorded and they are unanimously positive with the consensus analyst rating of Strong Buy on the stock. The average target price here is $197.60, suggesting a 27% upside from the current trading price of $155.05. (See CHRD stock analysis at TipRanks)

Hess Midstream Operations (HESM)

Next up is a mid-sized company, Hess, another operator in the Williston Basin. However, while Chord above is a production company, Hess operates in the transportation of hydrocarbon products from the wellhead to the distribution points – the middle sector. Hess’ assets include crude oil, natural gas and water gathering pipelines, along with a variety of natural gas and crude oil processing and storage facilities and export terminal facilities.

Hess saw a jump in volume in 3Q22, and this was reflected in the company’s financial results. Topline revenue came in at $334.8 million, up 10% year-over-year, and led to net income of $159.4 million, while net cash from operations came in at $234.7 million. In the end, net income attributable to Hess Midstream Partners LP totaled $23.2 million, or 53 cents per share. EPS was up 39% year-on-year.

In October, the company announced its dividend of $0.5627 per common share for Q3. That’s up from a modest 1.2% from the second quarter and 5% from the year-ago period. On an annualized basis, the dividend pays $2.25 per common share and yields 7.9%. The last dividend was paid on November 14.

In Hess Midstream’s coverage of JPMorgan, analyst Jeremy Tonette finds the company solidly positioned to deliver returns to investors. He writes: “HESM has solid long-term fee-based contracts backed by MVC and built-in fee recalculation mechanisms to compensate for any volume shortfalls. Producer sponsor HES has a broad position in the Bakken core with deep well reserves and plans to increase production to ~200 mboed (and stabilize thereafter). HESM has demonstrated a continued commitment to returning cash to shareholders through share buybacks from sponsors and a commitment to ~5% annual distribution growth through at least 2024.”

Moving forward from this position, Thonet rates the stock as Overweight (Buy) and sets a price target of $34 to indicate 19% upside potential over the next year. (To watch Thonet’s record, Press here)

This mid-cap midstreamer received 3 reviews from Street analysts and all of them are positive, supporting the consensus rating of a strong buy on the stock. HESM has a current price of $28.63 and an average price target of $35, for a 22% upside potential over the next 12 months. (Check out the HESM stock forecast at TipRanks)

Keep up with the best intelligence score on TipRanks has to offer.

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.

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