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2 Dividend shares that buy strongly yield 8%
The Nasdaq made a sharp turnaround this week, which led to the boom in the markets and swung into a positive area again for the year. The prospect of a $ 1.9 billion stimulus package, steady rates, economic growth and a receding pandemic are all reasons for optimism. The question on everyone’s lips is: does the turnaround indicate that the bull market can officially resume? Not so fast, says RBC Capital’s head of US equities strategy, Lori Calvasina. “Our work with positioning suggests that the great technological relaxation is at least halfway, but not finished,” Calvasina noted. In that case, a safe first approach may be a prudent solution; investors can seek refuge in a defensive play that will provide some income in the portfolio. Dividend shares are a common choice; if the return is high enough, it can offset losses elsewhere. Keeping this in mind, we use the TipRanks database to zero in on two stocks with a high dividend yield – on the order of 8%. Each stock also has a strong buy consensus rating; let’s see what makes them so attractive to Wall Street analysts. BlackRock TCP Capital (TCPC) We start with BlackRock, a specialty finance company that focuses on providing capital and credit access to mid-market companies. BlackRock is regulated as a business development company, and since its inception in 1999, it has had more than $ 20.4 billion in loans to more than 500 client companies. Three-quarters of the company’s current portfolio consists of loans with first lien; the rest is divided between second lending loans (15%), equity (8%) and unsecured loans (2%). BlackRock managed to maintain a strong performance, despite the interruptions felt during the ‘corona year’. In the company’s recent Q4 earnings report, it generated a net investment income of 35 cents per share – which is more than enough to cover the 30 percent per share regularly paid out in the quarter. It was the 35th consecutive quarter that the dividend was covered directly by earnings. At the end of 2020, BlackRock owned total assets of $ 1.7 billion, with a net asset value per share of $ 13.24, which rose successively by 4.2%. The company had $ 342.5 million of liquid assets available by the end of the year. These positive results are reflected in the share price, which is 24% higher than the previous year. At the same time as announcing the earnings report, the company’s management also declared the Q1 dividend. At 30 cents per ordinary share, the payment remains the same from the fourth quarter; at $ 1.20 on an annualized basis, it yields a solid 8.52%. This is 4x higher than the average on the broader markets. Robert Dodd, a 5-star analyst at Raymond James, covers this stock – and he was recently impressed to upgrade his position from Perform (ie Neutral) to Outperform (ie Buy). “Credit trends at TCPC appear to have outperformed the BDC group over pre-COVID levels in general, with non-accruals being essentially equal, PIK revenue lower and the net net worth now modestly higher. We also predict a further modest growth in the net asset value / shares due to the excess earnings of the dividend in 2021 and 2022. We consider the risk / reward at the current level to be attractive, ‘said Dodd. Along with its positive outlook, Dodd sets a price target of $ 14 on the stock, although the recent rise of the stock has slowed in the upward one-year. (To view Dodd’s record, click here.) The strong buy consensus rating of this stock is supported by 4 reviews, which includes 3 buys against a single Hold. The average price target is $ 13.94, which is commensurate with where the stock is currently trading. The real return here is the dividend yield. (See TCPC stock analysis on TipRanks) Ares Capital Corporation (ARCC) And now we turn to Ares Capital, also a business development and asset management company, and also focused on a middle class corporate clientele. Ares provides cash, capital, credit and financing services to companies that do not necessarily have access to those in the ordinary money and credit market; it is an important role that helps keep small and medium businesses running. Ares has a portfolio worth $ 15.5 billion and consists of 350 companies. Of the total portfolio, approximately 72% consists of loans with a first and second lien. The company’s portfolio boasts a healthy diversification between geographical regions and composition of the industry. Last month, Ares reported 4Q20 earnings, with a GAAP net profit of 89 cents. This was an increase of 85% on an annual basis and was more than enough to maintain the company’s dividend. At 40 cents a share, the dividend gives an annual payout of $ 1.60, and a strong return of 8.32%. Ares has kept the dividend steady for the past five quarters, after reducing it by 42 cents in the first quarter when the corona crisis hit. Among the bulls is Wells Fargo analyst Finian O’Shea, who wrote: ‘ARCC’s origins and depth of capital structure, including off-balance-sheet financing vehicles, allow the BDC to deliver increased earnings. This translates into a structure that can provide the earnings alpha of a specialist lender and the stability of a large capital operator. ‘O’Shea added:’ ARCC sometimes turned yesterday’s lemons into today’s lemonade. Recently, Singer Sewing, which became a holding company of ARCC through a restructuring, flourished in the post-pandemic period and is now being transported at a premium of $ 86 million on the ARCC cost basis … ‘O’Shea ARCC shares are overweight (ie buy) and its $ 20 price target on the stock implies an upward potential of 7%. (To see O’Shea’s record, click here) ARCC gets Wall Street’s unanimous support; All 11 recent reviews are Buys, which provides a consensus rating from Strong Buy analysts. Shares are currently priced at $ 18.52, and the recent valuation has pushed it almost to the average price target of $ 18.79, and there is little room for further upside. As with TCPC above, the high dividend yield currently offers the return potential. (See ARCC stock analysis on TipRanks.) To find great ideas for dividend stocks trading at attractive valuations, visit TipRanks ‘best-selling stocks, a newly introduced tool that unites all of TipRanks’ insights. Disclaimer: The opinions expressed in this article are solely those of the proposed analysts. The content is for informational purposes only. It is very important to do your own analysis before investing.