The markets have kicked off September with a reprise of the swoon we saw in early August, making it clear that investors normally usually are not quite as sanguine since the politicians would like on this election yr.
Bad news from the roles reports is fueling fears that a recession may thoroughly be on the best way by which; the July numbers included a downward revision of greater than 800,000 for the past yr, and the August numbers missed expectations, coming in just at maintenance level.
The commodity markets are also down in recent weeks, with oil losing all of the gains it saw earlier throughout the yr. The drop in oil prices could signal potential economic trouble ahead, since it reflects weakened global demand and industrial slowdown – key indicators that a recession is also looming.
Watching the situation from JPMorgan Asset Management, portfolio manager Priya Misra says, “I feel no market is completely pricing in a reasonable probability of a recession, nonetheless the totality of information suggests that risks of a recession are growing. While there’s so much hand-wringing a few 25bp or 50bp cut from the Fed in September, all markets will move if a recession is upon us. It will take a while for rate cuts to filter through into the economy.”
A smart investor will in any respect times have a plan for the worst case – and this scenario will naturally draw attention to dividend stocks. These shares generate an income stream regardless of how the market rises or falls.
With this in mind, we’ve opened up the TipRanks database, and positioned div stocks with ‘Strong Buy’ rankings from the analysts which may be yielding on the very least 10%, a solid return at any time. Listed listed here are the most important points on two of them.
MFA Financial (MFA)
The first stock we’ll take a have a look at is MFA Financial, a corporation throughout the specialty finance realm acting as an actual estate investment trust (REIT). These corporations operate on the earth of real property and mortgage financing, investing in property purchases directly or in financing loans on real properties. MFA Financial invests mainly in residential real estate assets, primarily residential mortgage loans and residential mortgage-backed securities. The company is internally managed and publicly traded.
As of the tip of Q2 this yr, June 30, the company had an entire residential whole loan balance of $9.2 billion and an entire securities portfolio price $863.3 million. During Q2, the company made $688.2 million in loan acquisitions and added $175.5 million in agency mortgage-backed securities to its holdings.
Through the identical period, MFA generated $53.49 million in net interest income, a figure that was up 20% year-over-year and beat the forecast by $330,000. The company’s non-GAAP earnings per share, at 44 cents, was up 10% from the prior yr quarter and was 6 cents per share higher than had been anticipated.
For dividend investors, the necessary thing point here is that MFA’s earnings fully covered the 35-cent common stock dividend. The dividend was declared on June 11, and paid out on July 31; at its current rate, the payment annualizes to $1.40 per common share and offers a forward yield of 11.4%. We should always note that MFA has paid out $4.7 billion in cumulative dividends since going public in 1998.
For five-star analyst Jay McCanless, of Wedbush, this stock is emerging from a transformative period and is primed for near-term gains. The analyst, who’s rated in the very best 1% of his peers by TipRanks, may be very impressed by the dividend here, and writes of the shares, “MFA performed near the middle of pack in our mREIT screen, as the company was not immune from the pressures impacting the final group over the last few years. Nevertheless, we imagine that MFA has since been able to successfully rebuild itself on several fronts, and we imagine that this positive transformation is being seen in additional moderen financial results, as the company has covered its dividend on an EAD basis for the last couple of years and up to now into 2024. We also view MFA’s current valuation as relatively attractive, given its ~11.5% dividend yield on what we view to be a fairly stable ongoing dividend.”
Overall, McCanless rates the stock as Outperform (Buy) with a $14 price goal meaning a 14%-plus upside for the approaching yr. With the dividend, that adds as much as an entire potential return of greater than 25%. (To watch McCanless’ track record, click here)
While there are only 4 recent analyst reviews of this stock on file, they include 3 Buys to easily 1 Hold, for a Strong Buy consensus rating. The stock has a trading price of $12.26 and a median price goal of $13.13, implying a one-year upside of seven%. (See MFA stock forecast)
Golub Capital BDC (GBDC)
Next up on our list is a business development corporation, or BDC. Golub Capital provides the needed mixtures of capital, credit, and financial services that keep the small- to mid-sized enterprise sector – the conventional driver of the American economy – afloat. These corporations that make up Golub’s potential customer base normally usually are not in any respect times able to access financial services through the important thing banks, and firms like Golub pick up the slack.
That’s to not say that Golub operates at a small scale. Earlier this yr, the company completed an approved merger with a sister firm, GBDC 3, under which the two corporations combined their business and portfolio activities under the Golub Capital’s name and stock ticker. The merger was completed in June of this yr, and the combined entity has roughly $8.8 billion in total assets, at fair value, and investments in 367 portfolio corporations.
Golub’s portfolio is concentrated heavily on senior loans. 86% of the company’s investments are in first lien traditional senior loans, and 7% are in first lien one-stop instruments. The remaining 7% of the portfolio is in equity investments. Of Golub’s loan portfolio, 99% is in floating rate loans.
Essentially probably the most crucial aspect of Golub’s business is generating total returns for its investors. The company builds the inspiration for this by cultivating a portfolio of high-quality clients, with repeat business. Golub is an experienced credit asset manager and understands the importance of not only constructing a portfolio at scale, but of maintaining the usual of the investments.
Throughout the second quarter of this yr, the quarter during which Golub completed its GBDC 3 acquisition, the company reported an entire investment income of $171.27 million while the adj. investment income per share came in at 48 cents.
The company’s earnings greater than covered the regular dividend payment, which was declared on August 5 for payment this coming September 27. The dividend, at 39 cents per common share, annualizes to $1.56 and yields ~10.6% going forward.
This stock caught the eye of Paul Johnson, from KBW, who’s impressed by the final quality of the company. He writes of Golub, “We imagine Golub Capital is actually certainly one of the absolute best quality BDCs throughout the sector, and the management team has deep experience in the middle market. We expect the portfolio at GBDC may be of upper quality than many BDC peers resulting from their give attention to more senior debt assets. GBDC’s cost structure is top-of-the-line throughout the sector with low fees, lower operating expenses, and significant shareholder protections.”
Quantifying his stance, Johnson puts an Outperform (Buy) rating on GBDC, with a price goal of $16.50 implying an upside of 12% in the next 12 months. Add throughout the forward dividend yield, the return may thoroughly be greater than 22.5%. (To watch Johnson’s track record, click here)
That’s one other stock with 4 recent analyst reviews and a 3 to 1 split favoring Buy over Hold for a Strong Buy consensus rating. The shares are priced at $14.76 and their $16.50 average price goal matches the KBW view. (See GBDC stock forecast)
To search out good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed on this text are solely those of the featured analysts. The content is supposed to be used for informational purposes only. It’s slightly vital to do your individual evaluation before making any investment.