Connect with us


2 Big Dividend Stocks Yielding at Least 7%; Wells Fargo Says ‘Buy’



What do you think of roller coasters? We may be in for one in 2022, with the markets showing higher volatility – and perhaps a lower net gain – than last year. Headwinds include rising inflation, the Fed’s likely actions to tighten monetary policy in response, and increased labor costs. Tailwinds may include that same Fed action, as it carries potential to blunt a ‘stagflationary’ period, and a likely political shift waiting in the fall.

Writing from Wells Fargo, senior equity strategist Christopher Harvey is expecting that the market will experience a correction, that is, a drop of 10%, by mid-year: “Pullbacks will likely be more frequent in this choppier equity market. Ultimately, the bend-but-not-break market mentality finally fails investors in 2022 in our view.”

Harvey’s view includes several causative factors, which he lists clearly, writing, “Labor costs accelerate as retirements accelerate and white-collar workers capitalize on the relatively low friction associated with working from home for another employer… Earnings continue to move higher, but multiples do not. A combination of decelerating growth, hawkish Fed, peak pricing, and a belief that longer term US growth has not improved drives multiple compression and frustrates bulls.”

At the same time, Harvey points out that the mid-term elections – which usually favor the party out of power – are setting up to be a smash-up for the Democrats and writes, “The GOP will gain control of Congress, adding perhaps two Senate seats and 25-30 House seats… This sets up a late-year rally as SPX history has favored Republican Senate control…”

For investors, the prospect of an uncertain and volatile market climate gives a clear impetus toward defensive positions, and that will naturally get them looking to dividend stocks. These are the classic plays to protect the portfolio from market pullbacks and volatility, and for good reason. A reliable dividend provides a steady income stream no matter where the market goes.

Using TipRanks’ database, we’ve pulled up the info on two dividend stocks that have gotten the thumbs-up from Harvey’s colleagues at Wells Fargo. These are high-yield payers – in the range of 7% or better – high enough to stay attractive even when the Fed starts raising rates. Here are the details.

Black Stone Minerals (BSM)

We’ll start with Black Stone Minerals, a hydrocarbon exploration and development company – which is really just a fancy way to say Black Stone buys land holdings in regions rich in oil and natural gas, and profits from the exploitation of those resources. The company’s land holdings encompass over 20 million acres across 60 production basins in 40 states, giving Black Stone a flexible portfolio of active assets.

The value of the holdings can be seen from the steadily rising top line. Black Stone has seen five consecutive quarters of sequential revenue gains, with the recent 3Q21 result, over $137 million, the highest in the past two years.

In production terms, Black Stone reported 33 million barrels of oil equivalent per day (MBoe/d) in Q3 royalty volume, up from 31.1 million in the year-ago quarter. Total production was reported at 38 MBoe/d.

The company’s solid production and royalty foundation gives it confidence to maintain its dividend payment. The most recent declaration, at 25 cents per common share, annualizes to $1 per share and gives a yield of 7.4%. This compares favorably to average div yield on the broader markets, which stands between 1.5% and 2%. Critically important, the dividend payment was higher than had been expected; it was composed of a regular dividend and a special distribution. The dividend was paid out in November, with the next payment likely in February.

Well Fargo analyst Joseph McKay takes a bullish stand here, based in part on the company’s sound performance, upbeat outlook, and high dividend.

“We think BSM’s 3Q21 update and positive forward revisions (the result of a conservative approach from management coupled with robust commodity prices) should offer the sort of tangible positives that have been building over the past few quarters,” McKay noted.

“With our and consensus expectations already ~1 mboe/d above the implied target and robust natural gas prices and an acceleration of development activity in the Haynesville setting up an attractive risk/reward for volumes moving forward, we see forward results biased to the upside… With the balance sheet in solid shape, in our view and an ~18% improvement to net debt in October, we see increased potential for distribution growth moving forward,” the analyst added.

McKay’s bullish comments support his Overweight (i.e. Buy) rating here, and his $14 price target suggests an upside of ~30% for the year ahead. (To watch McKay’s track record, click here)

Overall, Wall Street is ready to buy this stock. BSM has 5 recent reviews, featuring a 3 to 2 breakdown of Buy over Hold to back a Moderate Buy consensus view. The average price target of $16 is somewhat higher than the Wells Fargo view, and implies a one-year upside of 37% from the current share price of $10.80. (See BSM stock analysis at TipRanks)

Oaktree Specialty Lending (OCSL)

The second stock we’ll look at is a finance provider, facilitating loans and credit in the mid-market enterprise segment. This customer base frequently has difficulty accessing tradition sources of capital and banking services; Oaktree’s important role is to fill that gap.

Oaktree currently has a $2.3 billion portfolio, invested in 135 client companies. Of the total, 68% of the portfolio is made up of first lien loans, and another 19% is second lien. The portfolio is broad and diversified, with a slight lean toward the tech sector – the two largest segments of the portfolio are in Application Software (14.3%) and Data Processing (7.1%).

In November, Oaktree reported its fiscal 4Q21 results, as well as full year results for fiscal 2021. For the quarter, the company showed $63.8 million in total investment income, down slightly from the previous quarter. The full year’s total investment income came to $209.4 million, up 46% year-over-year. Earnings were positive, at 16 cents per share for the quarter – although this was down 15% sequentially. Full-year earnings were up yoy, gaining 25% to reach 64 cents.

On the dividend, Oaktree declared a payment of 15.5 cents per common share. This was a 7% increase from the previous quarter, and better yet, was the sixth quarter in a row that the dividend was raised. At 62 cents per common share annualized, the payment yields a robust 8.2%.

Covering this stock for Wells Fargo, analyst Finian O’Shea wrote: “OCSL’s business has considerable momentum entering FY2022, in our view, as the BDC ended FY21 with net leverage of 0.94x, the highest since Oaktree took over the adviser contract, and ~24ppts above its average under Oaktree’s stewardship…. OCSL’s earnings profile was highly-sensitive to deployments, as incremental assets would be funded with its low-cost revolver, thus creating operating leverage from lower average funding costs.”

O’Shea gives Oaktree an Overweight (i.e. Buy) rating along with an $8 price target indicating room for a modest 6.5% upside. Based on the current dividend yield and the expected price appreciation, the stock has ~15% potential total return profile. (To watch O’Shea’s track record, click here)

Judging by the consensus breakdown, opinions are anything but mixed. With 3 Buys and no Holds or Sells assigned in the last three months, the word on the Street is that OCSL is a Strong Buy. (See OCSL stock analysis 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.

Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published.


Teladoc Tumbled 38% After Big First-Quarter Loss. Is It Just a Pandemic Play?



Text size

Source link

Continue Reading


After pandemic drop, Canada’s detention of immigrants rises again By Reuters



© Reuters. FILE PHOTO: Two closed Canadian border checkpoints are seen after it was announced that the border would close to “non-essential traffic” to combat the spread of novel coronavirus disease (COVID-19) at the U.S.-Canada border crossing at the Thousand Isla

By Anna Mehler Paperny

TORONTO (Reuters) – Canada is locking up more people in immigration detention without charge after the numbers fell during the pandemic, government data obtained by Reuters shows.

Authorities cite an overall rise in foreign travelers amid easing restrictions but lawyers say their detained clients came to Canada years ago.

Canada held 206 people in immigration detention as of March 1, 2022 – a 28% increase compared with March 1 of the previous year. Immigration detainees have not been charged with crimes in Canada and 68% of detainees as of March 1 were locked up because Canada Border Services Agency (CBSA) fears they are “unlikely to appear” at an immigration hearing, according to the data.

The rise puts Canada at odds with Amnesty International and other human rights groups that have urged Ottawa to end its use of indefinite immigration detention, noting CBSA has used factors such as a person’s mental illness as reason to detain them.

A CBSA spokesperson told Reuters that “when the number of entries (to Canada) goes up, an increase in detention is to be expected.” CBSA has said in the past it uses detention as a last resort.

A lawyer told Reuters her detained clients have been in Canada for years.

In the United Kingdom, too, immigration detention levels rose last year after dropping earlier in the pandemic, according to government statistics. Unlike Canada, the United States and Australia, European Union member states have limits on immigration detention and those limits cannot exceed six months.

The rise in detentions puts people at risk of contracting COVID-19 in harsh congregate settings, refugee lawyers say.

Julia Sande, Human Rights Law and Policy Campaigner with Amnesty, called the increase in detentions “disappointing but not surprising,” although she was reluctant to draw conclusions from limited data.

The number of immigration detainees in Canada dropped early in the pandemic, from a daily average of 301 in the fourth quarter (January through March) of 2019-20 to 126 in the first quarter (April through June) of 2020-21.


Detaining fewer people did not result in a significant increase in no-shows at immigration hearings – the most common reason for detention, according to Immigration and Refugee Board data.

The average number of no-shows as a percentage of admissibility hearings was about 5.5% in 2021, according to that data, compared to about 5.9% in 2019.

No-shows rose as high as 16% in October 2020, but a spokesperson for the Immigration and Refugee Board said this was due to people not receiving notifications when their hearings resumed after a pause in the pandemic.

Refugee lawyer Andrew Brouwer said the decline in detention earlier in the pandemic shows Canada does not need to lock up as many non-citizens.

“We didn’t see a bunch of no-shows. We didn’t see the sky fall … It for sure shows that the system can operate without throwing people in jail,” Brouwer said.

He added that detainees face harsh pandemic conditions in provincial jails – including extended lockdowns, sometimes with three people in a cell for 23 hours a day.

Refugee lawyer Swathi Sekhar said CBSA officials and the Immigration and Refugee Board members reviewing detentions took the risk of COVID-19 into account when deciding whether someone should be detained earlier in the pandemic but are doing so less now.

“Their position is that COVID is not a factor that should weigh in favor of release,” she said.

“We also see very, very perverse findings … [decision-makers] outright saying that individuals are going to be safer in jail.”

The Immigration and Refugee Board did not immediately respond to a Reuters request for comment.

Source link

Continue Reading


Nasdaq futures rise as market attempts comeback from April sell-off, Meta shares soar



Stock futures rose in overnight trading as the market shook off the April sell-off and investors reacted positively to earnings from Meta Platforms.

Futures on the Dow Jones Industrial Average added 70 points or 0.2%. S&P 500 futures gained 0.7% and Nasdaq 100 futures jumped 1.2%.

The moves came as shares of Meta surged more than 18% after hours following a beat on earnings but a miss on revenue, a sign that investors may see signs of relief in the beaten-up tech sector. Shares were down 48% on the year heading into the results.

Meanwhile, shares of Qualcomm gained 5.6% in extended trading on the back of strong earnings while PayPal rose 5% despite issuing weak guidance for the second quarter.

“I think a lot of people want to believe that earnings are going to pull us out of this, but earnings are not what got us into this,” SoFi’s Liz Young told CNBC’s “Closing Bell: Overtime” on Wednesday. “… But the reality is there are so many macro headwinds still in front of us in the next 60 days that the market is just hard to impress.”

The after-hour activity followed a volatile regular trading session that saw the Nasdaq Composite stoop to its lowest level in 2022, as stocks looked to bounce back from a tech-led April sell-off. The index is down more than 12% since the start of April.

In Wednesday’s regular trading, the tech-heavy Nasdaq ended at 12,488.93, after rising to 1.7% at session highs. The Dow Jones Industrial Average rose 61.75 points, or 0.2%, to 33,301.93 propped up by gains from Visa and Microsoft, while the S&P 500 added 0.2% to 4,183.96.

Investors await big tech earnings on Thursday from Apple, Amazon and Twitter, along with results from Robinhood. Jobless claims are also due out Thursday.

Source link

Continue Reading