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Merrill Lynch Has 4 Buy-Rated Stocks That Yield at Least 9%
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One good way for investors with a higher risk toleration to make money in the market is to buy stocks with higher dividends that can offer some growth as well. The good thing is, even if the stocks trade sideways, investors get the benefit of the strong yield. Plus, there is a good chance that if the dividends haven’t been cut by now, it is likely that they won’t be going forward.
We screened the Merrill Lynch stock research universe looking for companies that paid the highest yield but were also rated Buy. It should be noted that while some of these companies are rated Buy, the firm’s volatility risk on three out of the four is ranked as high. These all make good sense for aggressive income investors looking for dividends and a touch of growth potential.
Delek Logistics Partners
This is an energy master limited partnership (MLP) that could be a solid portfolio addition. Delek Logistics Partners L.P. (NYSE: DKL) owns and operates logistics and marketing assets for crude oil, and intermediate and refined products in the United States. It operates in two segments.
The Pipelines and Transportation segment consists of assets, including pipelines and trucks, and ancillary assets that provide crude oil gathering and crude oil, intermediate and finished products transportation and storage services primarily in support of the Tyler and El Dorado refineries, as well as offers crude oil and other products transportation services to third parties. This segment operates approximately 400 miles of crude oil transportation pipelines, 366 miles of refined product pipelines and approximately 600 miles of crude oil gathering and trunk lines with an aggregate of approximately 7.3 million barrels of active shell capacity.
The Wholesale Marketing and Terminalling segment offers marketing, transporting, storing and terminaling refined products and services to independent third parties. Delek Logistics GP serves as the general partner of the company.
Delek Logistics Partners investors are paid a huge 9.5% distribution. The Merrill Lynch price target for the stock is $32, and the Wall Street consensus price objective is listed at $31.60. The shares closed most recently at $26.53 apiece.
Frontier Communications
This is a rural local exchange carrier that the Merrill Lynch team has remained very positive on. Frontier Communications Corporation (NASDAQ: FTR) offers residential services, such as fiber-to-the-home and fiber-to-the-node broadband, as well as traditional copper-based broadband products; and commercial services, including Ethernet, dedicated Internet, multiprotocol label switching, time division multiplexing, data transport services, and optical transport services.
Frontier also provides the Frontier Secure suite of products for computer security, cloud backup and sharing, identity protection, equipment insurance and technical support. Its unified messaging services includes call forwarding, conference calling, caller identification, voicemail and call waiting services. It provides long distance network services and packages of communications services as well.
The company reported solid second-quarter earnings numbers and guided in line to ahead of Wall Street estimates on post-Verizon deal cash flow. Frontier is the highest yielding non-energy component in the S&P 500.
Frontier investors a paid a huge 9.25% dividend. The $7.50 Merrill Lynch price target for the stock is well above the consensus target of $5.85. The shares closed Thursday at $4.54. For those looking to buy before the dividend, the ex date is September 13.
Ellington Financial
The Merrill Lynch analysts are also positive on this top real estate partnership. Ellington Financial LLC (NYSE: EFC) operates as a specialty finance company in the United States. It primarily acquires and manages mortgage-related assets, including residential mortgage-backed securities (RMBS) backed by prime jumbo, Alternative A-paper, manufactured housing and subprime residential mortgage loans; RMBS for which the principal and interest payments are guaranteed by the U.S. government agency or the U.S. government-sponsored entity; residential mortgage loans; commercial mortgage-backed securities; commercial mortgage loans and other commercial real estate debt; mortgage servicing rights; and real property and mortgage-related derivatives.
The company also invests in corporate debt and equity securities and derivatives, consumer loans and asset-backed securities backed by consumer and commercial assets, and non-mortgage-related derivatives, as well as other financial assets, including private debt and equity investments in mortgage related entities.
Ellington Financial investors are paid a massive 11.66% distribution. Merrill Lynch has a $19 price target for the stock. The consensus price objective is at $20.08, and the shares closed most recently at $17.16.
Scorpio Tankers
This is a maritime shipping stock that the analysts have remained positive on. Scorpio Tankers Inc. (NYSE: STNG) provides seaborne transport of refined petroleum products worldwide, such as gasoline, heating oil and fuel oil. Product tankers move refined products from global refineries to points near consuming markets.
The Scorpio Tankers fleet consists of 78 wholly owned product tankers on the water (average age of 0.9 years) and 12 time chartered-in product tankers, and it has contracts for 11 newbuild product tankers to be delivered in 2016 and 2017. The company largely operates in the spot shipping markets.
The company posted inline second-quarter numbers, and while business has slowed, the analysts are looking at a market in which product tanker order book is declining rapidly and the demand outlook improving.
Scorpio Tankers investors are paid a huge 10.48% dividend. The Merrill Lynch price objective is $7. The consensus target price is posted at $6.82. The stock closed Thursday at $4.77 per share.
Again, it is important to remember these are very aggressive income plays, only suitable for very aggressive accounts. Also, distributions from MLPs can contain return of capital.
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