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2 mandatory dividend shares yielding at least 8%; Oppenheimer says ‘buy’
The crises of the past year – the COVID pandemic, the social oppression, the economic shock – are on the wane, and they are good. However, the post-mortem crisis is rolling in. It is natural to compare the current economic crisis with the ‘Great Recession’ of 12 years ago, but as Oppenheimer’s main investment strategy John Stoltzfus remarked: ‘Taking into account the differences in what the’ Great Financial Crisis of ‘ a little over twelve years ago … and the current crisis … it’s no wonder that as good as it is compared to this time last year, much remains to be revealed about the outcome and legacy of the pandemic crisis will take shape … ”Stoltzfus is also of the opinion that the economic data, although there are some setbacks, are generally resilient. The markets are rising, and this, as Stoltzfus says, “seems to us more likely than risk to investors who have suitable tolerance for risk and who exercise patience.” Considering Stoltzfus’ prospects, we want to take a closer look at two stocks that deserve an applause from Oppenheimer’s stock analysts. Using TipRanks’ database, we learned that both share a profile: a strong buy-consensus rating from Street’s analyst corps and a reliable dividend yield of at least 8%. Let’s see what Oppenheimer has to say about them. Owl Rock Capital (ORCC) We start with Owl Rock Capital, one of the many specialty finance companies in the financial industry. These companies usually live in the mid-market financing sector, where they make capital available for acquisitions, recapitalisations and general operations to mid-market enterprises that do not necessarily have access to other sources of credit. Owl Rock’s portfolio consists of investments in 119 companies, totaling $ 11.3 billion. Of these investments, 96% are senior secured loans. Owl Rock reported its 4Q20 and full year results at the end of February. The company posted a net income of $ 180.7 million in the fourth quarter, which was 46 cents a share. This was an increase of 36 cents per share in 4Q19, an increase of 27%. Investment income also increased by $ 221.3 million for the quarter by 9% year-on-year. Investment income for the full year was $ 803.3 million, up 11% from 2019. In addition, the company ended 2019 with more than $ 27 billion in assets under management. Of particular interest to dividend investors, the board of Owl Rock declared a dividend of 31 percent per ordinary share for the first quarter. It is payable in mid-May and is in line with the company’s previous ordinary dividend payments. The annual rate of $ 1.24 returns 9%. Also important for Owl Rock’s dividend, the company paid out the sixth and final special dividend – related to the launch of the 2019 IPO – in December. In 2019, ORCC paid out special dividends of 80 cents, along with the usual dividend payments. The company has kept its dividend reliable and complied with the regular and special payments since it became known in the summer of 2019. Owl Rock attracts the attention of Oppenheimer’s Mitchel Penn, who sees the company as a solid investment with the potential to beat the estimates. “We estimate the EPS of $ 1.22 and $ 1.34 in 2021 and 2022 for an ROE of 8% and 9% respectively. We plan for Owl Rock to earn an ROE of 8.5%, and given ‘ “With an estimated cost of capital of 8.5%, we calculate a fair value of $ 15 / share or 1.02x book value,” Penn noted. “To achieve an ROE of 8.5%, ORCC will have to increase its portfolio return from 8.4% to 9.0% or increase its leverage from 1x to 1.2x. It is also possible that it ‘ a bit of both. Our model is responsible for the 75 bps expense expense increase to a base fee of 1.5% on assets and an incentive fee of 17.5% on income. ‘Penn rates this stock as a better performance (ie a buy), and its price target of $ 15 indicates an upward potential of 7% from current levels, however, the dividend yield is the real attraction here (Click here to see Penn’s record.) ORCC shares have pulled three recent reviews, and it’s all for sale – which makes Strong Buy’s consensus rating unanimous. This stock sells for $ 13.98 per share and has an average price target of $ 14.71. (See ORCC stock analysis on TipRanks.) Fidus Investment Corporation (FDUS) If we stick to the mid-market financing sector, we look at Fidus Investment. companies, such as Owl Rock, provide capital access to smaller businesses, including access to debt solutions. Fidus has a portfolio based primarily on senior secured debt, along with intermediates. The company in which Fidus invested is valued at between $ 10 million and $ 150 million. In the fourth quarter, which ended in 2020, Fidus invested in seven companies that were new to its portfolio, investing a total of $ 103.9 million in the investments. The company’s portfolio generated adjusted net investment income of $ 10.7 million or 25 cents a share for that quarter. This is 3 cents, or 13% higher than in the year-on-year. For the full year 2020, adjusted net income reached $ 38 million, compared to $ 35.3 million in 2019. Per share, the $ 1.55 of 2020 increased by 7.6%. Fidus’ shares have been rising steadily over the past year. Since April last year, the stock has risen an impressive 153%. This gives FDUS a solid share valuation to supplement the dividend yields. These dividends are substantial. The company declared its 1Q21 payment in February and paid out on March 26th. The regular payment, at 31 cents per ordinary share, yields 8% with an annual payout of $ 1.24. In addition to this regular payment, Fidus also declared a special dividend of 7 cents per share, almost double the special payment of 4 cents in the previous quarter. If we now look at the Oppenheimer coverage on Scam, we find that 5-star analyst Chris Kotowski is happy with this company, enough to rate a better performance (i.e. buy) with a price target of $ 18. This figure indicates a 15% upward one year. (To see Kotowski’s record, click here) “The basics [are] stable with debt investments at the end of the year, essentially stable and interest income in line with both the previous quarter and our estimate … What we are very happy about is that we ended the year with only one small non-accrual amount . There was a significant loss during the year on one credit, which crystallized in 4K20, but there were also stock gains in the first quarter of 20 years, which offsets this, and in our minds, the fact that we have a year like this with minimal net losses ends FDUS business model. “Of Fidus’ dividend policy, maintaining a base payment with special dividends added if possible, Kotowski writes simply: ‘We think a variable dividend makes a world sense.’ Like ORCC above, it is a stock with a unanimous consensus rating from Strong Buy, based on 3 recent positive reviews, with Fidus’ shares selling for $ 15.70 and their average price target of $ 17.17 indicating an upward potential of 9% from that level. (See FDUS stock analysis on TipRanks) To find great ideas for trading dividend stocks at attractive valuations, visit TipRanks’ best stocks for sale, a newly launched tool that shares all the insights of TipRanks 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.