Just when it looked like time to throw in the towel, the market pulled through and delivered a win. A better-than-expected reading of the consumer price index last week has boosted hopes that the Federal Reserve would slow the pace of its interest rate increases.
Looking at the situation for Morgan Stanley, equity strategist Michael Wilson, one of the past year’s bigger bears, is turning a bit more upbeat, saying, “We think we will now enter the final stages of the bear market…”
At the same time, Wilson acknowledges that the bear is still with us. Looking at overall conditions right now, and the outlook heading into 2023, he writes, “We recommend investors stay defensively positioned… We would argue the past 12 months have been pretty boring because a bear market was so likely we simply set our defensive strategy and stayed with it…”
The classic defensive play, of course, is the dividend stocks – and if investors should stay defensive for the present, then we can look into the high-yield div payers. Using the TipRanks platform, we’ve found two such stocks, equities with at least an 8% dividend yield, and a Buy rating from the Street. Interestingly, both of these stocks have slipped under the radar. Let’s take a closer look.
Global Partners LP (GLP)
The first dividend stock we’ll look at is a stand-by of the energy industry. Global Partners operates as an energy wholesaler, with a wide ranging network of energy delivery infrastructure, including oil and gas terminals, retail locations, and gas stations, located mainly in the Northeast but extending to the Midwest, Southeast, and Gulf states. The company’s deliverable products include crude oil, diesel oil, heating oil, kerosene, and gasoline. In addition to hydrocarbon fuels, Global Partners also markets numerous brands of pre-packaged to-go foods through convenience stores.
By the numbers, Global Partners has an impressive network. The company owns and operates 24 petroleum bulk product terminals, and has 10 million barrels worth of storage capacity. The company sells more than 369,000 barrels of fuel products daily, and owns, leases, or supplies approximately 1,700 gas stations.
Rising prices recently have bumped up Global Partners’ top line, and the company’s 9-month revenue for 2022, at $14.45 billion, already exceeds the $13.24 billion revenue from the whole of 2021. The company’s 3Q22 sales came in at $4.6 billion, up 39% year-over-year. Net income rose sharply from 3Q21, to $111.4 million from $33.6 million, an impressive increase of 231%. Per share, the gain was even stronger; diluted EPS rose 262% y/y, from 86 cents to $3.12. The company has raised its quarterly dividend payment 8 times in the last three years.
Global Partners’ last dividend payment was made on November 14 this year, at 62.5 cents per common share. This annualizes to $2.50 per share and gives an 8.15% yield. With the recent dip in the annualized rate of inflation to 7.7% for October, this means investors will realize a real rate of return from GLP’s dividend payment.
Global Partners’ solid position and performance caught the attention of Stifel analyst Selman Akyol, who saw fit to upgrade the stock from Hold to Buy.
Backing his bullish stance, Akyol writes, “We expect Global to use recent outperformance to expand its footprint and benefit from increased volumes and scale advantages. There may be headwinds in 2023 depending on how the commodity picture evolves but we would highlight GLP has been able to deliver exceptional performance this year amidst elevated commodity volatility. While we recognize 2022 results may not be repeated in 2023, GLP was able to use its elevated cash flows to invest in lower risk business lines, deleverage the balance sheet and increase the distribution. We believe these decisions are accretive to unit holders in the short and long term.”
Looking forward from these comments, Akyol set a price target of $35 on the stock, suggesting room for an upside of 12.5% in the year ahead. Based on the current dividend yield and the expected price appreciation, the stock has ~21% potential total return profile. (To watch Akyol’s track record, click here)
Some stocks slip under the radar, picking up few analyst reviews despite sound performance, and this is one. Akyol’s is the only recent analyst review on record here. (See GLP stock analysis on TipRanks)
NexPoint Real Estate Finance (NREF)
The next dividend stock on our list is a real estate investment trust, a REIT; these companies are well-known as high-yield dividend champs, so it’s unusual to find them slipping under investors’ noses – but that’s what’s happened here, with NexPoint Real Estate Finance. The company, which focuses its investments on mortgage loans for single-family and multi-family rental properties, as well as taking direct ownership of storage facilities and commercial office space, hasn’t picked up a lot of attention. But perhaps that should change.
To start with, the company’s portfolio is 92.9% stabilized, and has an average of 6.2 years remaining on lease terms. The firm’s portfolio is worth $1.7 billion, and is composed of 83 investments – and as of October 26 this year, there were no loans in default or forbearance in the portfolio. NexPoint’s earnings available for distribution (EAD) came to 48 cents per diluted share in the recent 3Q22 report. And of particular interest here, the company had, as of September 30, $11.2 million in cash available for distribution (CAD). This came to 50 cents per diluted share, and fully covered the dividend.
That dividend was last declared in October, for a December 30 payout – at 50 cents per common share. This dividend annualizes to $2 exactly, and gives a robust yield of 11.2%. This yield is more than 5x higher than the average dividend found in the broader markets. NexPoint has raised its dividend payment three times in the last three years, and is careful to keep the payment in line with its distributable cash.
5-star analyst Stephen Laws, of Raymond James, likes what he sees in this company, and writes in his recent note, “With the investment portfolio focused largely on SFR and multifamily assets and NREF’s use of primarily like-kind financing, we expect CAD to continue covering the dividend… Given our portfolio return estimates and with shares trading at a discount to book value, we are reiterating our Strong Buy rating.”
Laws’ Strong Buy rating comes with a $21 price target for NREF shares. If this target is achieved, investors could realize potential price appreciation of ~18% over NREF’s current share price. (To watch Laws’ track record, click here)
Overall, NREF has slipped under most analysts’ radar; the stock’s Moderate Buy consensus is based on just two recent ratings; Buy and Hold (i.e. Neutral). With shares trading at $7.64, the $8.13 average price target suggests room for a 6% upside. (See NREF stock analysis on TipRanks)
To find good ideas for dividend stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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