(BofA) – Morgan Stanley Upgrades Diamondback Vitality, Valero Vitality, Sees ‘Sustained Rally’ For Oil Stocks
3 ‘Strong Buy’ Stocks with Over 7% Dividend Yield
It’s been up, up, and away for the markets because the finish of September. Each the NASDAQ and S&P 500 are buying and selling inside 3% of their current file excessive ranges, after counting for day by day fluctuations. It’s a transparent signal of a bullish temper amongst traders.And that bullish temper is discovering fertile soil amongst Wall Street’s stock analysts, who usually are not hesitant to make buy-side calls. There are some indications that the analysts are hedging their bets, nevertheless, as among the many current Purchase evaluations revealed a number of additionally provide sturdy dividend yields.Return-minded traders can discover a diploma of security in high-yielding equities. The benefit of such a essentially defensive technique is clear: stocks which might be rising now will deliver the quick features of share appreciation, whereas sturdy dividends will present a gradual earnings stream no matter market circumstances.Utilizing the info out there within the TipRanks database, we’ve pulled up three stocks with excessive yields – from 7% to 9%. Even higher, these stocks are seen as Sturdy Buys by Wall Street’s analysts. Let’s discover out why.Vitality Switch LP (ET)First up is Vitality Switch, a significant title in North America’s hydrocarbon midstream sector. The corporate’s main community of belongings covers 38 states and hyperlinks three main oil and gasoline manufacturing areas – within the Midwest-Appalachian and Texas-Oklahoma-Louisiana areas, together with North Dakota. Vitality Switch has smaller belongings within the Colorado Rockies, Florida, and northern Alberta. These belongings embrace pipelines, terminals, and storage tanks for pure gasoline and crude oil. The value of ET’s providers is obvious from the corporate’s $18 billion market cap and $54 billion in annual revenues.That value, together with the results of the well being and financial crises of 2020, are additionally clear from the corporate’s current third quarter earnings launch. On the adverse aspect, revenues had been down 26% from the year-ago quarter, whereas EPS was down 18%. In absolute numbers, the highest line got here in at $9.96 million whereas the underside line was reported at 30 cents per share. Each figures beat the forecasts by a large margin.Beating the forecasts was a constructive be aware. On one other, the corporate reported $400 million in price financial savings year-to-date, as a consequence of initiatives to manage and streamline bills. Complete debt long-term debt remained steady at $54 million.In an announcement on the finish of October, Vitality Switch declared its Q3 dividend, at 15.25 cents per frequent share. This was a 50% discount from earlier funds, and carried out for a number of causes. Chief amongst these causes is releasing cash for debt discount. The dividend discount additionally retains the dividend yield according to historic values (with the shares down this yr, the yield was artificially inflated), and reasonably priced at present earnings ranges. The brand new dividend fee annualizes to 61 cents per frequent share, and – even after the discount – offers a excessive yield of 8.8%.Protecting the stock for Raymond James, analyst Justin Jenkins famous, “We still see ET’s top-tier integrated midstream footprint as a big positive, but risks are high and will remain so. Ultimately, we believe the core business and long-term free cash flow generation (which will improve dramatically in 2021) will help ET differentiate itself within the midstream space… ET’s large valuation discount to peers is unlikely to completely narrow in the near-term, we see the risk/reward as skewing positive in most scenarios.”According to these feedback, Jenkins charges ET a Sturdy Purchase, and his $9 price goal suggests it has room for 26% development within the yr forward. (To observe Jenkins’ observe file, click on right here)Wall Street seems to be in broad settlement with Jenkins, as ET shares keep a Sturdy Purchase score from the analyst consensus. There have been Eight current evaluations, together with 7 Buys and a single Maintain. The stock’s $9.29 common price goal is barely extra bullish than the Raymond James place, implying ~31% upside potential from the $7.09 buying and selling price. (See ET stock evaluation on TipRanks)Omega Healthcare (OHI)REITs are often recognized for high-yielding dividends, as tax laws require these firms to return a minimal share of earnings again to traders. Omega Healthcare, an actual property funding belief, isn’t any totally different from its friends in that regard, but it surely does provide traders a twist. The corporate’s portfolio consists of expert nursing amenities and senior housing amenities, in an 83% to 17% cut up. The portfolio is valued at greater than $10 billion. It totals 957 amenities in 40 states plus the UK.On the high line, Omega reported declines in Q3 revenues. The $119 million reported was down 53% sequentially and 16% year-over-year. That was the dangerous information. Adjusted funds from operations (FFO), a standard metric used to evaluate REITs’ earnings ranges, beat the forecast by 5%, coming in at 82 cents per share. In different constructive notes this yr, Omega has reported collected 99% of rents due in every quarter of 2020, and efficiently issued, this previous October, $700 million in Senior Notes at 3.375% and due in 2031. The corporate goals to make use of the funds raised to, first, repay current debt, and second, to cowl normal operations.Omega at the moment pays out a 67-cent dividend per frequent share, and as held that fee regular for practically three years. The corporate has a 6-year historical past of dependable dividend funds. The annualized fee is $2.68 per frequent share, making the yield 7.1%. This firm’s efficiency, together with the dependable dividend, prompted JMP analyst Aaron Hecht to price OHI an Outperform (i.e. Purchase). His $43 price goal signifies a 14% upside over the subsequent 12 months. (To observe Hecht’s observe file, click on right here)Backing his stance, Hecht writes, “We imagine COVID-19 vaccine deliveries will start to reach throughout the subsequent two weeks and expert nursing facility residents might be prioritized, primarily based on vulnerability. We view this as a significant constructive for OHI as the biggest proprietor of expert nursing amenities in the US. Though OHI’s tenants have usually carried out properly through the pandemic, a rise in demand can be a derisking occasion… We imagine OHI deserves a slight premium to its three-year, pre-pandemic comps given demand tailwinds. We’re patrons of the stock…” Within the meantime, OHI has a Sturdy Purchase score from the analyst consensus, primarily based on Eight evaluations breaking down to six Buys and a pair of Holds. Omega’s share price has risen 28% because the first week of November, within the wake of the Q3 earnings. This has pushed the stock’s buying and selling price, at the moment $37.69, barely above the $36.88 common price goal. (See OHI stock evaluation on TipRanks)Owl Rock Capital Company (ORCC)Final however not least is Owl Rock Capital, a specialty finance firm primarily based in New York. Owl Rock works within the middle-market finance sector, providing entry to capital for mid-market firms to make acquisitions, fund operations, and conduct recapitalizations. The corporate’s portfolio boasts $10.2 billion in complete belongings, of which 97% are senior secured belongings. Owl Rock has present investments in 110 firms.Owl Rock’s third quarter earnings got here in barely under expectations. EPS was 33 cents per share, down 3% sequentially and lacking the estimates by 2 cents. Web asset value per share elevated 1% quarter-over-quarter, from $14.52 on the finish of June to $14.67 on the finish of September. In a transfer to shore up liquidity, Owl Rock priced a public providing of $1 billion in 3.4% notes within the first week of December. The difficulty is due in 2026, and supplies funds to paydown current debt within the revolving credit score facility and to fund normal operations.Additionally within the first week of this month, Owl Creek confirmed that it’s discussions to amass Dyal Capital. The transfer would mix Owl Creek’s direct lending platform with Dyal’s entry to capital options.Owl Creek has an everyday share dividend fee of 31 cents quarterly, which has been supplemented since May 2019 by a sequence of 6 particular 8-cent dividend funds. Calculating the yield by the common dividend, we discover it at 9.6%, primarily based on an annualized price of $1.24 per frequent share. For comparability, the common dividend amongst S&P-listed firms stands at 2%.The overview right here was written by Devin Ryan, 5-star analyst with JMP Securities. Specializing in the Dyal Capital announcement, Ryan famous, “Whereas it is very important distinguish that this merger is between the administration firms, not the BDC instantly, and finally we don’t count on a lot change, we do suppose a transaction might signify a constructive end result for ORCC shareholders over time.””We proceed to view the chance in ORCC shares as engaging as a consequence of: 1) sturdy credit score efficiency and expectations; 2) a well-positioned steadiness sheet; 3) the earnings scale-up as leverage strikes to the goal 1.0x by 2H21; and 4) a rise within the yield profile of the portfolio by a better mixture of unitranche loans,” the analyst concluded. To this finish, Ryan charges Owl Creek’s shares an Outperform (i.e. Purchase), and his $14.50 price goal suggests a 13% upside within the coming yr. (To observe Ryan’s observe file, click on right here)Owl Creek’s Sturdy Purchase consensus score relies on 6 evaluations. These present a 5 to 1 cut up between Buys and Holds. ORCC is buying and selling at $12.78, and its $13.90 common price goal implies ~9% upside. (See ORCC stock evaluation on TipRanks)To seek out good concepts for dividend stocks buying and selling at engaging valuations, go to TipRanks’ Greatest Stocks to Purchase, a newly launched instrument that unites all of TipRanks’ fairness insights.Disclaimer: The opinions expressed on this article are solely these of the featured analysts. The content material is meant for use for informational functions solely. It is rather vital to do your individual evaluation earlier than making any funding.