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2 large dividend stocks yielding 10%; RBC says ‘buy’
Rising commodity prices, additional federal stimulus and rising government bond yields all add to the specter of inflation. In addition, there is growing concern that stocks – and tech companies in particular – now have a valuation that is separate from reality. Will the changing macro climate cause the bull market to retreat? Too early to say, but it does indicate that a more cautious approach to investing might be a good move at this point. And that will take us to dividend stocks. Investors want a cushion, something to protect their portfolio in the event of a market downturn, which is exactly what dividends offer. These profit-sharing payments to shareholders provide a steady stream of income that typically remains reliable even in a recession. RBC Capital analysts have done some of the footwork for us, tracking down dividend-paying stocks that have maintained high returns, just above 10%. By opening the TipRanks database, we investigate the details behind those payments to find out what makes these stocks even more attractive for purchases. Annaly Capital Management (NLY) First, Annaly Capital Management, is a real estate investment trust (REIT). Annaly has a portfolio of commercial real estate with a strong focus on retail (31%) and office space (29%). Other major investments include multi-family homes, hotels and healthcare real estate. The company has more than $ 100 billion in assets. In the company’s 4Q20 results, Annaly showed an economic return of 5.1% for Q4, much stronger than the 1.8% reported for 2020 as a whole. Earnings per share were 60 cents per common share and more than covered the regular quarterly dividend of 22 cents. This is the third quarter in a row with the dividend at that level; at the annualized rate of 88 cents per ordinary share, the dividend yields 10.7%. This is head and shoulder higher than the ~ 2% return found at comparable companies in the financial sector. Annaly has a long history of adjusting dividend payment to earnings making it a reliable payer. Also interesting for investors, Annaly closed the fourth quarter with $ 8.7 billion in unencumbered assets, including cash. The company used this deep pocket to authorize a $ 1.5 billion share buyback program in an effort to return capital to shareholders and bolster stock prices. RBC’s 5 star analyst Kenneth Lee likes what he sees in Annaly’s performance, writing, “We continue to prefer Annaly’s diversified business model, strong liquidity and portfolio skew to the agency’s MBS in the current macro context … Annaly has exposure to growth-oriented credit assets, including residential and corporate mortgage loans and mid-market lending. We believe that diversification should enable NLY to move between attractive investment opportunities. In line with these comments, Lee rates NLY as an Outperform (ie buy), along with a price target of $ 9.50. This figure implies a 14% rise for the coming year. (To view Lee’s track record, click here) In general, there is broad agreement on the quality of NLY on Wall Street, as evidenced by the 7 to 1 split between the analysts’ reviews, with Buy over Hold and the stock receiving a Strong Buy analyst consensus rating. at $ 8.22 and their average price target of $ 9 suggests upside potential of 9.5% from that level. (See NLY stock analysis on TipRanks) Sunoco LP (SUN) From REITs, we’re moving into the energy industry. Sunoco LP is the largest wholesaler of motor fuels in the US, serving more than 7,300 Sunoco gas stations in 33 states. The company’s products include gasoline, diesel fuel, heating oil, jet fuel, lubricating oils and kerosene – a full range of petroleum products, sold as both branded and non-branded products. Sunoco also operates 13 storage terminals that maintain secure supplies for retail delivery. To retailers, Sunoco supplies equipment to petrol stations – from pumps to payment services. This company’s diversified business allowed Sunoco to remain profitable during the corona pandemic. Earnings per share were negative in the first quarter, as demand fell at the height of the crisis, but recovered quickly in the second quarter, rising year-on-year every quarter since then. Earnings per share in the fourth quarter were 77 cents, compared to 75 cents in the same quarter a year ago. Distributable cash flow declined year-over-year from $ 120 million to $ 97 million in the quarter, and the company announced a quarterly dividend of 82.5 cents per common share. This has been kept stable from the previous quarter – and is basically stable at this level since November 2016. Sunoco has paid a reliable dividend for the past 8 years. The current payment is $ 3.30 per share on an annual basis and gives a return of 10.6%. Regarding SUN for RBC, analyst Elvira Scotto notes that the recent Arctic storm patterns in the continental US have negatively impacted sales volumes, but are still supported by other aspects. “SUN maintained its outlook for 2021 and noted an improvement in volumes in January. We do not expect recent weather to have a significant impact on SUN’s volumes in 2021, ”said the five-star analyst. “We believe SUN is showing significant current income to investors with an improved balance sheet. We expect SUN to maintain its distribution and expect distribution coverage to improve over time. Scotto rates SUN stock as an Outperform (ie Buy) and raised the price target from $ 36 to $ 38. The figure implies a 23% increase for the next 12 months. (To view Scotto’s track record, click here) Overall, SUN shares have an average buy rating by analyst consensus, based on a range of reviews including buy 5, hold 2 and sell 1. The stock has an average price target of $ 33.50, which has an upside potential of 8. % gives relative to the current trading price of $ 31. (See SUN Stock Analysis on TipRanks) To find great ideas for dividend stocks that trade at attractive valuations, visit TipRanks’ Best Stocks to Buy, a recently launched tool that covers all Insights in TipRanks on stocks. Disclaimer: The opinions expressed in this article are only those of the recommended analysts. The content is provided for informational purposes only. g important to conduct your own analysis before making an investment.