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2 large dividend shares yielding at least 7%; Raymond James says ‘buy’
For investors who want a strong dividend player, there are a few market segments known for their high-yield dividends, which makes them a logical place to start looking for reliable payers. The hydrocarbon sector, oil and gas production and mainstream, are one of them. The sector deals with essential products – our world uses oil and its by-products. And although the overhead costs for energy companies are high, they still have a market for their deliveries, leading to a ready cash flow – which can be used, among other things, to pay the dividends. All this has led investment firm Raymond James to the middle-class oil and gas companies looking for dividend stocks with growth potential. ‘We expect the [midstream] group will add about ~ 1 turn to its average EV / EBITDA multiple this year. This equates to a ~ 20-25% movement in equity value, “noted Raymond James analyst Justin Jenkins. Jenkins outlined a series of points that led to a recovery in midstream in 2021, which includes the shift from ‘lock-in’ to ‘reopen’ policies; a general boost for commodities as the economy grows, a political point that some of DC’s more traditional centralists are unlikely to favor in an anti-oil, Green New Deal policies will not work, and lastly, with relatively low inventory value, dividend yields are high, and a look at the TipRanks database reveals two midstream companies that came to Raymond James’ attention – for all the points mentioned above. These are stocks with a specific set of distinct characteristics: a dividend yield of 7% or higher and buy ratings MPLX LP (MPLX) MPLX, which was formed from Marathon Petroleum eight years ago as a separate midstream entity, acquires, owns and operates a range of drugs troom assets, including pipelines, terminals, refineries and river shipping. MPLXs The main operating areas are in the north of the Rocky Mountains, and in the Middle East and extend south to the Gulf of Mexico. Revenue reports during the ‘corona year’ of 2020 show the value potential of oil and gas in the midstream. The company reported $ 2.18 billion at the top in the first quarter, $ 1.99 billion in the second quarter and $ 2.16 billion in the third quarter; earnings were negative in the first quarter, but positive in both subsequent quarters. The Q3 report also generated $ 1.2 billion in net cash, more than enough to cover the company’s dividend payout. MPLX pays out 68.75 cents per ordinary share on a quarterly basis, or $ 2.75 on an annual basis, giving the dividend a high return of 11.9%. The company has a diversified range of midstream operations and strong cash generation, leading to Raymond James’ Justin Jenkins improving his position on MPLX from Neutral to Outperform (ie Buy). Its price target, at $ 28, implies an upward return of 22% for one year. (To see Jenkins ‘record, click here. Jenkins supports his position and writes:’ Given the number of ‘boxes’ that the story for MPLX can check, it’s no surprise that it was a debate. With the exposure to bending R&D trends, an expected refinement / refined recovery of product volume, hit the story many operational boxes – while also having several financial debates … We also think that solid financial results for 2020 should have confidence in the longer term give … ‘from the street, it seems that other analysts are usually on the same page. With the purchase of 6 stocks and 2 stocks in the last three months, the consensus rating is a strong buy. In addition, the average price target of $ 26.71 upside down at ~ 17%. (See MPLX stock analysis on TipRanks) DCP Midstream Partners (DCP) The next stock is in Denver, Colorado, one of the country’s largest natural gas midstream operators. DCP controls a network of gas pipes idings, hubs, storage facilities and plants stretching between the Rocky Mountain, Midcontinent and Permian Basin production areas and the Gulf Coast of Texas and Louisiana. The company also operates in the Antrim Gas Region of Michigan. In the most recent quarter – 3Q20 – DCP collected and processed 4.5 billion cubic feet of gas per day, along with 375 thousand barrels of natural gas liquids. The company also generated $ 268 million in net cash, of which $ 130 million was free cash flow. The company reduced its debt burden by $ 156 million during the quarter and a 17% reduction in operating expenses on an annual basis. All this enabled DCP to maintain its dividend at 39 cents per share. Early in the corona crisis, the company had to cut payments – but only once. The recently announced 4Q20 dividend is the fourth in a row with 39 cents per ordinary share. The annual rate of $ 1.56 yields a respected return of 7.8%. This is another stock being upgraded from Raymond James. Analyst James Weston boosted this stock from Neutral to Outperform (ie Buy), while setting a target price of $ 24 that would imply 20% growth on the one-year horizon. ‘[We] DCP expects another solid quarter to take place over successive improvements in NGL prices, volatility in the NGL market and positive upward trends … we do not capitalize on current propane prices and expect a solid but more normalized price regime during the next 12-18 months. “In our opinion, it will create a favorable operating environment for DCP cash flow that is not currently reflected in Street estimates,” Weston said. Overall, the consensus rating of the analysts’ moderate purchase on DCP is based on 7 recent reviews, which hold 4 to 3 buys versus. Shares are priced at $ 19.58 and the average target of $ 23 indicates a rise of ~ 15% from the level. (See DCP stock analysis on TipRanks) To find great ideas for dividend stocks trading at attractive valuations, visit TipRanks ‘best stocks to buy, a newly introduced tool that unites all the insights of TipRanks’ stocks. 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.