Making investments pay out for the long term is the true challenge in today’s market environment. The series of headwinds piling up – from persistently high inflation to rising interest rates to slowing demand to bureaucratic bloat – are rising to hurricane force, and renewing investors’ attention to defensive stocks.
It’s only logical. The classic defensive stock, the dividend payer, ensures an income stream no matter how the markets move, and if the yield is high enough, these stocks can also generate a real rate of return despite inflation.
Knowing all this, wouldn’t you like to own find great dividend stocks? Of course you would!
Using the TipRanks database, we’ve looked up two stocks that are offering dividends of at least 10% yield – that’s more than 4x higher the average yield found in the markets today. Each of these is Strong Buy-rated, with some positive analyst reviews on record, and best of all, they all offer investors a low cost of entry, under $10 per share. Let’s take a closer look.
Oaktree Specialty Lending (OCSL)
First up on our short list, Oaktree Specialty Lending, is a provider of credit and loan products for mid-market enterprises, the small business segment that long been the engine of American ingenuity and economic success. Oaktree, which has a market cap of $1.14 billion and annual revenues above $230 million, generates its income through the success of its investment portfolio.
As of June 30 this year, Oaktree’s investment portfolio includes 151 companies, into which Oaktree has put more than $2.6 billion. Oaktree’s portfolio is primarily made up of floating-rate investments, which compose 88% of the total. More than 15% of Oaktree’s investment are in the application software segment, with other segments, including pharmaceuticals, data processing, biotech, and health care, making up smaller shares of the total.
It’s a profitable portfolio, and Oaktree’s most recent quarterly financial release, from Q3 of fiscal year 2022 – the quarter ending on June 30 – showed that the company generated solid earnings. By GAAP measures, net investment income was $40.4 million for the quarter, or 22 cents per share, up 10% year-over-year, and well above the 18-cent forecast.
Of particular interest to dividend investors, Oaktree had cash and liquid assets totaling $34.3 million at the end of the quarter, and had undrawn credit up to $455 million. This cash backing made it possible for management to raise the dividend in the Q3 declaration, bumping it up 3% to 17 cents per common share. This was the 9th quarter in a row that the dividend was raised, and the new rate was paid out on September 30.
The dividend annualizes to 68 cents per common share – and while that sounds modest, it represents a solid yield of 10.9%.
Also of note to investors, Oaktree Specialty Lending has entered into an agreement to merge with Oaktree Strategic Income II, subject Board approvals. The merger will create a combined entity, using the OCSL name and stock ticker, with a portfolio valued at more than $3 billion, and with improvements in market cap and credit quality.
JMP analyst Kevin Fultz has delved into this merger, and writes, “We believe the rationale is sound and view the merger as favorable to shareholders of OCSL as the combined company will benefit from: 1) the increased scale of $3.3B of total assets, which would create a top ten publicly traded BDC by total assets; 2) a larger market capitalization which could lead to greater trading liquidity and institutional ownership; 3) the combination of two known, complimentary investment portfolios with significant investment overlap, which we think will result in a seamless portfolio integration; 4) the larger scale of OCSL may improve access to more diverse, lower cost sources of debt capital…”
To this end, Fultz rates OCSL an Outperform (i.e. Buy) along with an $8.50 price target. If achieved, his target could offer a potential total return of ~48% with price appreciation of 37% and an annual yield of 10.9%. (To watch Fultz’s track record, click here)
While this small-cap specialty finance provider has only picked up 3 Wall Street reviews recently, these analysts all agree that this is a stock to buy, giving OCSL a Strong Buy consensus rating. The shares are priced at $6.22 and the $8 average target suggests ~29% upside on the one-year horizon. (See OCSL stock forecast on TipRanks)
Lument Finance Trust (LFT)
Next up is Lument Finance Trust, a micro-cap firm in the real estate investment trust (REIT) niche, investing in various forms of real estate, real property debt, and mortgage loans, primarily in the commercial property market. The company’s portfolio emphasizes mid-market multi-family assets, and includes other commercial property investments, such as mezzanine loans, preferred equity, and commercial MBSs. Lument looks to build a portfolio based on high-quality commercial real estate, and bases its time frame on three-year terms with options for two one-year extensions.
The quality portfolio has brought Lument generally rising revenues over the past two years. In the most recent quarter reported, 2Q22, the company had a top line of $12.6 million, which supported an income attributable to shareholders of $2.15 million – and a total distributable income of $2.45 million.
The distributable income matters to dividend investors, because it’s the metric that supports the quarterly dividend payment. As a REIT, Lument is required by tax regulations to return a high percentage of earnings directly to shareholders, and dividends are the usual mode of compliance. For Lument’s shareholders, this means a reliable long-term payment, with occasional adjustments to keep it affordable for the company. The last dividend declaration, from September 15, was for 6 cents per share, to be paid on October 17. At this rate, the annualized dividend is 24 cents per common share and yields 11.6%.
Among the bulls is Raymond James’s 5-star analyst Stephen Laws, who takes a bullish stance on LFT shares.
“We continue to expect distributable earnings to benefit from 1) increasing interest rates given the floating rate loan portfolio and 2) replenishing loan repayments in the CLO with newly originated, higher spread loans. We are maintaining our Outperform rating given the attractive portfolio characteristics, such as the high mix of multifamily, the floating rate portfolio, and the portfolio financing consisting entirely of CLO debt,” Laws wrote.
That Outperform (i.e., Buy) rating is backed by a $3.25 price target, suggesting a one-year gain of 57%. Based on the current dividend yield and the expected price appreciation, the stock has ~68% potential total return profile. (To watch Laws’ track record, click here)
All in all, five of the Street’s analysts have chimed in on LFT, and their reviews include 4 to Buy and 1 to Hold, for a Strong Buy consensus. The average price target of $3.20 implies ~55% upside from the current trading price of $2.06. (See LFT stock forecast on TipRanks)
To find good ideas for dividend stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
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.
How to Make $1,000 in Dividends Every Month
Dividends are the bread and butter of income investors. You don’t need to sell your assets or spend hours every day managing your accounts. Instead, dividend stocks simply generate income on their own. Putting together a portfolio that generates at least … Continue reading → The post How to Make $1,000 a Month in Dividends appeared first on SmartAsset Blog.
1 REIT You’ll Wish You Bought In October 2022
The stock market is reeling from the pressures of a potential global recession, and central banks around the world are gearing up for the most aggressive interest rate hikes in history. The United Nations recently warned that the world is “on the edge of a recession,” which will likely be worse than the pandemic-driven recession in 2020 or the global financial crisis of 2008. Understandably, U.S. equities have taken a hit, with the S&P 500 index registering the worst monthly performance in Septe
These 3 REITs Could See Dividend Increases Soon
In the midst of a bear market, with rising interest rates and the threat of a prolonged recession in the air, real estate investment trust (REIT) stocks have endured tremendous price declines. Given this, it isn’t easy to find REITs that could see dividend increases soon. Two questions come to mind. Why would a company raise its dividend when the yield is already increasing with each drop in price? And how do you find REITs with the dividend well-covered by funds from operations (FFO) and with s
Yahoo Finance Video
Yahoo Finance Presents: Home Depot Co-Founder Bernie Marcus
Yahoo Finance’s Brian Sozzi sits down with Home Depot Co-Founder, Bernie Marcus, as they discuss Bernie’s book, ‘Kick Up Some Dust’, the state of the economy, capitalism, and difficulties facing small businesses in the U.S.
Where Will Block Be in 5 Years?
Block (NYSE: SQ), the well-known fintech innovator headed by tech genius Jack Dorsey, has experienced a slowdown in recent quarters. Where could Block be five years from now, and is the stock a buy today? Block has come a long way from selling those little white squares that small merchants plugged into their smartphones to accept card payments.
What’s Going on With Tesla Stock?
It’s never a dull time analyzing Tesla’s (NASDAQ: TSLA) stock. The innovative electric-car company always seems to have something interesting going on. In this video, we take a beginner-friendly walk-through of Tesla’s second-quarter earnings transcript.
Can Investors Trust AT&T’s Juicy 7% Dividend?
Currently, AT&T sports a high 7.4% dividend yield, which means the company will pay an estimated 7.4% of its stock price to shareholders each year. This number constantly fluctuates because it is calculated using the annual dividend payout divided by the stock price. The yield rises if the dividend goes up and the stock price stays the same.
The Stock Market’s Rebound Fizzled Again. Why a Real Bottom Could Form Soon.
Investors seemingly can’t stop trying to pick a stock market bottom, no matter how bad the news—and it continues to backfire. Consider: This past Thursday, September’s consumer inflation report came in much hotter than expected, with the core CPI hitting a 40-year high. The initial response was exactly what you’d expect—the traded down as much as 2.4%—but then it started rallying…and rallying.
There’s no rush to buy I-bonds
This week’s worse-than-expected inflation report led to turmoil in more than one market, but you only read about one of them. What got far less attention was the flurry of excitement that the inflation report caused in the normally-staid I-bond market.
2 Warren Buffett Stocks to Buy Hand Over Fist and 1 to Avoid
Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) owns a massive stock portfolio with about 50 different investments and a total market value of more than $308 billion. Here are two Buffett stocks in particular that could be worth a closer look right now, and one that has limited upside potential and is best to avoid. Many financial sector stocks have been beaten down lately, and it’s easy to understand why.
Nasdaq Bear Market: 5 Colossal Growth Stocks You’ll Regret Not Buying On the Dip
Things have been even worse for the technology stock-driven Nasdaq Composite (NASDAQINDEX: ^IXIC). Historically, every double-digit percentage decline in the major U.S. stock indexes, including the Nasdaq, has eventually been placed in the rearview mirror by a bull market rally. This makes every bear market a surefire buying opportunity for patient investors.