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3 large dividend stocks that yield at least 9%; BTIG says “buy”
How important are dividends to a stock investor’s bottom line? Speaking to FINRA on October 15, 2007, investment guru John Bogle said of the case: “For the past 81 years … reinvested dividend income has accounted for approximately 95 percent of the long-term returns generated by the S&P companies 500. These astounding numbers seem to require mutual funds to emphasize the importance of dividend income. “In other words, dividends are pretty important! Of course, the average stock of the S&P 500 currently only pays a dividend yield of around 2%, which isn’t much. However, if you want to do better, the REIT sector is a great place to start your search for high yield dividend stocks. REITs are companies that acquire, own, operate and manage real estate portfolios, typically a combination of residential or commercial real estate or their associated mortgage loans and mortgage-backed securities. Tax law requires these companies to return profits directly to shareholders, and most of them choose dividends as their preferred means of compliance, often resulting in high dividend yields across the industry. The slowly waning COVID pandemic has been tough on property managers as tenants struggled to earn rents and owners struggled to rent vacant space. However, BTIG analyst Tim Hayes believes there are reasons to remain bullish on CRE real estate. “While we recognize headwinds for commercial real estate (CRE) fundamentals and the potential risk to equity / earnings power, we believe there are several reasons to be constructive, especially when the sector is at a discount to historical Level trades and offers attractive dividend yields with wide spreads at benchmark interest rates, “commented Hayes. With that in mind, we opened the TipRanks database to get the latest statistics on Hayes’ CRE choices. These are stocks for which the analyst has initiated buy ratings that indicate their high dividend yield. We are talking about at least 9%. Ares Commercial Real Estate (ACRE) The first dividend pick we’ll look at is Ares Commercial Real Estate, a company focused on the commercial real estate mortgage sector. Ares has a diversified portfolio of office space, apartments, hotels and mixed-use properties – mainly in the southeast and west. The company has invested over $ 2 billion in 49 separate loans, 95% of which are senior mortgage loans. In late October, the company released earnings for the third quarter of 20 (the last reported quarter) with total revenue of $ 22.4 million, up 13% year over year. Earnings per common share of 45 cents increased by 40% compared to the previous year. In addition, Ares entered into a commercial property secured loan commitment of $ 667 million with increased funding of 23 senior loans. On the dividend front, Ares announced its dividend for Q420 in December. The payment of 33 cents per common share was paid on January 15 – and is fully covered by current income levels. At current rates, the dividend annualizes to $ 1.32 for an impressive 10.50% return. Among the cops is Hayes, who wrote, “We believe stocks of ACRE are unfairly discounted compared to other commercial mREITs due to strong Ares sponsorship, a very healthy balance sheet and limited exposure to at-risk assets.” In his opinion, this means that the company is “well positioned to withstand the headwinds of COVID-19”. In line with these comments, Hayes is rating ACRE a buy and its target price of $ 13.50 implies a 10% uptrend from current levels. (To see Hayes’ track record, click here.) Only one other analyst recently published an ACRE rating that also gave the stock a buy. This makes the analyst consensus here a moderate buy. The stock is priced at $ 12.28, and the average target price of $ 12.75 suggests modest growth of ~ 4%. (See ACRE stock analysis on TipRanks) KKR Real Estate Finance Trust (KREF) Next, we have KKR, which operates in the commercial real estate sector with nearly half of its holdings in the states of New York, Illinois, Pennsylvania, and Massachusetts. The company owns and finances commercial real estate. 83% of its activities take place in residential buildings and offices in sought-after urban locations. The quality of KKR is evident in the company’s quarterly results. The liquidity position was strong – KKR reported $ 20,700.6 million at the end of the third quarter, which was reported in the most recent quarter. The EPS of 56 cents increased sequentially by 7% and compared to the previous year by 36%. Further evidence of KKR’s solid position came in early January when it was revealed that seven new commercial loans totaling $ 565.4 million had been closed in the fourth quarter. This level of activity is a clear sign that KKR is recovering from the pandemic-induced economic slowdown. The solid foundations put the company in a position to continue its four-year reliable dividend. The most recent December statement referred to a dividend of 43 percent per common share, which was paid in mid-January. That rate translates into an annual payment of $ 1.72 per common share and a robust return of 9.7%. With regard to KREF, Hayes is most impressed with the company’s return to proactive lending. He says: “We see the outsourcing of activities in Q4 20 in line with pre-pandemic production and show a shift from” defense “to” insult “as transaction activity has picked up and capital markets remain accommodative. We expect more capital to be deployed to support profitability and dividend coverage and could potentially justify a dividend increase if the macroeconomic outlook improves. To this end, Hayes is giving KREF a buy and setting a target price of $ 19.50, which indicates growth of ~ 6% from current levels. (To see Hayes’ track record, click here.) Wall Street has been silent about anything KREF-related, and the only other recent review recommends a buy as well. Taken together, the share has a moderate buy consensus rating. The average target price is 19.26 and implies a modest uptrend of ~ 5%. (See KREF stock analysis on TipRanks) Starwood Property Trust (STWD) For the third stock on Hayes’ shortlist, we turn to Starwood, a commercial mortgage REIT with a diverse portfolio of first mortgage and $ 50 million mezzanine loans $ 500 million reach. The company operates in the United States and Europe, has a market capitalization of $ 5.9 billion and offices in New York, London and San Francisco. Starwood’s high-end portfolio has delivered solid profits even during the 2020 “corona recession”. The company posted GAAP earnings of $ 152 million for the third quarter of 20, which was 53 cents per share, representing 8% consecutive and 6% annual earnings – over the year. Against this background, we can determine the company’s dividend, which has been constant at 48 cents per share for over two years. The last declaration was made in December and the dividend was paid on January 15th. At the current rate it is annualized to USD 1.92 and the yield is 9.23%. We’re again looking at a stock that Hayes recommends buy. “We see STWD as one of the few“ blue chips ”in the commercial mREIT sector because of its size, liquidity, world-class management team, strong balance sheet and diversified investment platform that has consistently achieved higher returns than comparable companies. To that end, STWD is one of the few commercial MREITs that has not restructured its liabilities with expensive rescue capital or cut its dividend since the beginning of COVID-19, “said Hayes. Overall, there is little action on the way from STWD right now, with only one other analyst getting involved to gauge the company’s prospects. An additional purchase rating means that STWD qualifies as a moderate purchase. However, the average target price of $ 21 suggests stocks will remain tied to the range for the foreseeable future. (See STWD 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 TipRanks’ stock insights. 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.
