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3 “Strong Buy” dividend shares yielding approximately 7%
Over the past 12 months, the S&P 500 has had its best performance ever – an 80% gain at the end of March. But are the good times winding up? Some historical data suggests the bulls will keep running. Since 1950, the market has seen 9 sustained one-year runs with a rolling return of 30% or better on the S&P 500. These periods have seen a one-year average gain of 40% (the median was 34%) – and none of the these bull markets has ended sometime in its second year. But according to Callie Cox, a senior investment strategist at Ally Invest, investors shouldn’t expect the same skyrocketing returns in the next 12 months as they have in the past 12 months. “[I]It’s typical of the bull market to lose a little bit of steam in the second year … Expectations are starting to rise and making it harder for the market to … exceed everyone’s expectations. And that leaves a greater chance of disappointment. And just to be clear, again, we’re not calling for doom and gloom. We just think the market needs a breather in the next two quarters, “Cox opined. For yield-oriented investors, the prospect of lower sustained gains in equity appreciation will of course prompt a look at dividend stocks.” a second income stream, to complement the appreciation of the stock and ensure a solid return for investors.With this in mind, we used TipRanks’s database to locate three stocks that match a profile: a Strong Buy rating of Wall Street analysts and a dividend yield of approximately 7% Trinity Capital (TRIN) We start with Trinity Capital, a venture capital company that provides capital to start-ups. Trinity’s investment portfolio totals $ 494 million, divided into 96 companies, the public markets earlier this year, and concluded the IPO in early February amen 8.48 million shares available for trading and more than $ 105 million was raised net of expenses. In the 4Q20 report – the first Quarterly Report as a public entity, covering the last quarter as a private company – Trinity showed net investment income of $ 5.3 million, with income per share of 29 cents. This was more than enough to fund the dividend, which was paid in December at 27 cents a share. Since then, Trinity has announced its 1Q21 dividend, increasing the payment by one cent to 28 cents per common share. Trinity has announced a policy to pay out between 90% and 100% of its taxable quarterly income in the dividend. At the current rate, the annual payment is $ 1.12 per share and yields a return of 7.6%. This is significantly higher than the average return of 1.78% found among peers in the financial sector. In his note on the stock, Compass Point analyst Casey Alexander says he believes Trinity has a clear path to profitable returns. “TRIN operates within the attractive, growing venture capital debt ecosystem. As such, we expect strong net portfolio growth, followed by improved NII and increasing dividend payments, with potential upside from equity / warrant investments, ”noted Alexander. To that end, Alexander is assessing TRIN a Buy, and its price target of $ 16.75 implies a ~ 14% rise for the next 12 months. (Click here to view Alexander’s track record) This new public stock has already garnered 5 analyst reviews – and it’s broken down into 4 Buys and 1 Hold, for a Strong Buy consensus rating. Trinity shares are selling for $ 14.74; their average price target of $ 16.46 suggests the stock has ~ 12% upside potential. (See TRIN Stock Analysis on TipRanks) Energy Transfer LP (ET) With our second stock, Energy Transfer, we move into the energy midstream universe. Midstream is the necessary sector connecting hydrocarbon exploration and production with the end markets; midstreamers control the transportation networks that move oil and gas products. ET has a network of assets in 38 states connecting three major oil and gas regions: North Dakota, Appalachia, and Texas-Oklahoma-Louisiana. The company’s assets include pipelines, terminals and storage facilities for both crude oil and natural gas products. The big news for Energy Transfer in recent weeks comes from two sources. First, reports came out on April 9 that the U.S. Army Corps of Engineers is unlikely to recommend closing the Dakota Access Pipeline (DAPL). This project, when completed, will move oil from the Alberta oil sands region through the US to the Gulf Coast; the Biden government wants to shut it down for environmental reasons, but the industry is fighting to keep it. And second, two of Enable Midstream’s largest shareholders 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 earnings per share of 19 cents a share, on income of $ 509 million. While this year-over-year was below earnings per share of 38 cents reported in 4Q19, the recent result was a strong reversal of the 29 cent net loss reported in the third quarter. The company’s income supports the current dividend of 15.25 cents per common share. On an annual basis, this comes to 61 cents, and gives a yield of 7.7%. The company has paid a quarterly dividend since the second quarter of 2006. Commenting on this stock for Credit Suisse, analyst Spiro Dounis says, “We updated our model to reflect the completion of the Enable Midstream acquisition in mid-2021. We see the deal as a positive contribution and see additional potential as a result of operational / commercial synergies. ET highlighted potential synergies around both ENBL’s natural gas and NGL assets, noting that gas synergies can be realized quite quickly, while NGL opportunities are more long-term as legacy contracts roll. More than ~ $ 100mm of NGL rise in the coming years does not seem unreasonable to us. Dounis also notes that the main risk to the company stems from DAPL, which may still be closed by the Biden administration. Still, he rates the stock as outperforming (i.e. buying), with a $ 11 price target indicating up 39% in one year. (To view Dounis’ track record, click here) Wall Street analysts can be a lot controversial, but agreeing on a stock is a positive sign for investors to get there This is the case here as all the recent reviews are on ET Buys, making the consensus assessment a unanimous strong buy The analysts have set an average price target of $ 11.60, indicating a ~ 47% rise. relative to the current share price of $ 7.94. (See ET Stock Analysis on TipRanks) Oaktree Specialty Lending (OCSL) Last but not least is Oaktree Specialty Lending. rs that make mid-range loans and credits available to smaller companies that would otherwise have difficult access to capital. Last month, Oaktree Specialty Lending completed a merger with Oaktree Strategic Income Corporation (OCSI). The combined company, using the OCSL name, has more than $ 2.2 billion in assets. Oaktree’s investment portfolio totals more than $ 1.7 billion, primarily in first and second liens, which represent 85% of the company’s investment allocations. Oaktree closed 2020 with its fiscal first quarter ending December 31. In that quarter, the company increased its dividend payment by 9%, to 12 cents a share, or 48 cents a share on an annual basis. At this rate, the dividend yields 7.25% – and the third quarter in a row marks a dividend increase. Oaktree has provided reliable dividend payments for over three years. One of the bulls is Kyle Joseph, a 5-star analyst at Jefferies, who places a Buy rating and a price target of $ 8 on this stock. Its target implies room for 20% upside potential in the next 12 months. (To view Joseph’s track record, click here) “OCSL’s conservative strategy over the years has finally paid off as the BDC uses dry powder for higher yield investments. Credit performance remained solid during the MRQ, while fundamentals are encouraging … We believe the BDC has sufficient liquidity to support near-term opportunities and believe the company is positioned to take advantage of the recent economic volatility, which highlighted by the recent 9% increase in quarterly distribution… Longer term, we think OCSL is an attractive investment, ”wrote Joseph. In all, OCSL has received 3 recent Buy reviews, leading the analysts to rate the consensus of a Strong Buy. The stock is currently trading at $ 6.66 and the $ 7.33 average price target indicates a ~ 10% rise from that level. (See OCSL Stock Analysis on TipRanks) To find great ideas for dividend stocks trading at attractive valuations, check out TipRanks ‘Best Stocks to Buy, a recently launched tool that brings together all of TipRanks’ insights on stocks. Disclaimer: The opinions expressed in this article are solely those of the recommended analysts. The content is provided for informational purposes only. It is very important to conduct your own analysis before making an investment.