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3 Strong Buy dividend stocks with a yield of around 7%
Over the past 12 months, the S&P 500 has performed its best ever – an 80% gain at the end of March. But do the good times end? Some historical data suggests that bulls will continue to run. Since 1950, the market has experienced 9 sustained one-year cycles with a rolling return of 30% or more on the S&P 500. These periods have seen an average year-over-year gain of 40% (median was 34%) – and none of those bull markets ever ended in their second year. But investors shouldn’t expect the same sky-high returns over the next 12 months that they’ve just seen in the past few, according to Callie Cox, senior investment strategist at Ally Invest. “[I]It’s typical for the bull market to lose some steam in the second year … Expectations start to rise and it’s harder for the market to … exceed everyone’s expectations. And that leaves a greater risk of disappointment. And to be clear, again, we’re not calling for gloom and gloom. We just think the market should pick up in the next quarter or two, ”Cox said. For yield-oriented investors, the prospect of a smaller sustained gain in equity appreciation will naturally encourage them to look into dividend-paying stocks. Reliable, high-yield dividend payers provide a second source of income, to complement stock appreciation and ensure solid returns for investors. With that in mind, we used the TipRanks database to identify three stocks that fit a profile: a Strong Buy rating from Wall Street analysts and a dividend yield of around 7%. Trinity Capital (TRIN) We’ll start with Trinity Capital, a venture finance company that makes capital available to start-ups. Trinity’s investment portfolio is $ 494 million, spread across 96 companies. earlier this year, closing its IPO in early February. The opening saw 8.48 million shares become available for trading and raised more than $ 105 million after spending. Quarterly report as a public entity, covering the last quarter as a private company – Trinity posted net investment income of $ 5.3 million, with income per share of 29 cents. This was more than enough to fund the dividend, paid in December at 27 cents per share. Since then, Trinity has declared its 1Q21 dividend, bringing the penny payout to 28 cents per common share. Trinity has announced a policy of paying between 90% and 100% of quarterly taxable income as a dividend. At the current rate, the payout annualized to $ 1.12 per share and yields a 7.6% return. This is significantly higher than the average return of 1.78% seen among peers in the financial sector. In his stock review, Compass Point analyst Casey Alexander says Trinity has a clear path to profitable returns. “TRIN operates within an attractive and growing ecosystem of venture capital debt. As such, we expect strong net growth in the portfolio, followed by an improvement in the NII and an increase in dividend payouts, with the potential for increased equity / warrants investments, ”noted Alexander. To that end, Alexander rates TRIN a Buy, and his price target of $ 16.75 implies a ~ 14% rise for the next 12 months. (To see Alexander’s track record, click here) This newly public action has already garnered 5 analyst reviews – and those break down into 4 buy and 1 hold, for a Strong Buy consensus rating. Trinity shares sell for $ 14.74; their average price target of $ 16.46 suggests the stock has upside potential of around 12%. (See the analysis of the TRIN share on TipRanks) Energy Transfer LP (ET) With our second share, Energy Transfer, we enter the world of intermediate energy. The intermediate sector is the necessary sector linking the exploration and production of hydrocarbons to the end markets; intermediaries control the transportation networks that move oil and gas products. ET has a network of assets in 38 states, which connect three major oil and gas regions: North Dakota, Appalachians, and Texas-Oklahoma-Louisiana. The company’s assets include pipelines, terminals and storage facilities for crude oil and natural gas products. The big news for energy transfer in recent weeks has come from two sources. First, on April 9, reports were released that the U.S. Army Corps of Engineers would likely not recommend shutting down the Dakota Access Pipeline (DAPL). This project, when completed, will transport oil from the oil sands region of Alberta through the United States to the Gulf Coast of Mexico; the Biden administration wants to shut it down for environmental reasons, but the industry is fighting to keep it. And second, two major shareholders of Enable Midstream have approved a proposed merger, whereby ET will acquire Enable. The merger is expected to be worth $ 7 billion. Earlier this year, Energy Transfer reported 4Q20 EPS of 19 cents per share, on income of $ 509 million. Although down year over year from 38-cent EPS reported in 4Q19, the recent result has been a strong reversal from the 29-cent net loss reported in the third quarter. The company’s earnings support the current dividend of 15.25 cents per common share. This annualizes to 61 cents and gives a return of 7.7%. The company has paid a dividend quarterly since the second quarter of 2006. Covering this stock for Credit Suisse, analyst Spiro Dounis writes: “We have updated our model to reflect the mid-2021 completion of the Enable acquisition. Midstream. We view the transaction as accretive and see further upside potential resulting from operational / commercial synergies. ET highlighted potential synergies around ENBL’s natural gas and LGN assets, noting that gas synergies could be realized fairly quickly while LGN opportunities are longer term as existing contracts unfold. In our opinion, an increase of approximately 100 mm in NGLs over the next few years does not seem unreasonable. Dounis also notes that the main risk to the company comes from DAPL, which may still be shut down by the Biden administration. Even so, he rates the stock outperforming (i.e. buying), with a price target of $ 11 indicating a 39% year-over-year increase. (To look at Dounis’ track record, click here) Wall Street analysts can be very controversial – but when they agree on a stock, it’s a positive sign for investors to take note. This is the case here, as all of the recent reviews on ET are buyouts, making the consensus rating a strong unanimous buy. Analysts gave an average price target of $ 11.60, indicating an increase of about 47% from the current share price of $ 7.94. (See ET market analysis on TipRanks) Oaktree Specialty Lending (OCSL) Last but not least is Oaktree Specialty Lending. This company is one of several specialist finance providers, offering loans and credits in the middle market segment to small businesses that would otherwise have difficulty accessing capital. Last month, Oaktree Specialty Lending completed a merger with Oaktree Strategic Income Corporation (OCSI). The combined company, known as OCSL, has more than $ 2.2 billion in assets. Oaktree’s investment portfolio totals over $ 1.7 billion, primarily in first and second lien, which represents 85% of the company’s investment allocations. Oaktree ended 2020 with its first fiscal quarter, ending December 31. During that quarter, the company increased its dividend payout by 9%, to 12 cents per share, or 48 cents per share annualized. At this rate, the dividend is earning 7.25% – and marks the third consecutive quarter of dividend increases. Oaktree has maintained reliable dividend payments for over three years. Among the bulls is Kyle Joseph, a 5-star analyst at Jefferies, who puts a buy rating and a price target of $ 8 on this stock. Its objective suggests a margin of progress of 20% over the next 12 months. (To view Joseph’s track record, click here) “OCSL’s conservative strategy over the past few years has finally paid off, as BDC deploys dry powder in higher-yielding investments. Credit performance has remained strong at MRQ, while fundamentals are encouraging… We believe BDC has sufficient liquidity to support short-term opportunities and believe the company is positioned to take advantage of recent economic volatility, which was particularly highlighted by the recent 9% increase in quarterly distribution … Longer term, we think OCSL is an attractive investment, ”Joseph wrote. Overall, OCSL received 3 recent buy reviews, making the analyst consensus rating a strong buy. The stock is currently trading at $ 6.66 and its average price target of $ 7.33 indicates an increase of about 10% from that level. (See OCSL Stock Analysis on TipRanks) To find great ideas for trading dividend stocks at attractive valuations, visit Top Stocks to Buy from TipRanks, a newly launched tool that brings together all the information about stocks from TipRanks. Disclaimer: 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.