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Inflation Still Highest in 40 Years: 7 Hot Stocks That Yield Up to 13% Help Investors Fight Back
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The market rally last week and Monday’s follow-through have provided the best results that beleaguered stock investors have seen since late last year. The venerable S&P 500 finished its fourth consecutive positive week, as stocks extended their longest winning streak since last November. The excitement for the risk-off crowd was the lower reported numbers for the consumer and producer price indexes.
However, lower energy prices were the biggest reason for the backup, and most on Wall Street feel that not only can energy prices stay elevated and perhaps go much higher, but food and other cost-of-living items like rent could continue to remain at generational highs through the rest of the year and into 2023.
What do investors do to fight the debilitating effects from inflation and rising interest rates? Buy stocks that have hard-asset plays and real estate investment trusts (REITs) that also pay double-digit yields. We found seven top companies that are Buy rated across Wall Street and are very solid ideas during these volatile times.
It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
AFC Gamma
This off-the-radar idea offers outstanding total return potential. AFC Gamma Inc. (NASDAQ: AFCG) originates, structures, underwrites and invests in senior secured loans and other types of loans and debt securities for established companies operating in the cannabis industry in states that have legalized medicinal or adult-use cannabis.
The company primarily originates loans structured as senior loans secured by real estate, equipment and licenses or other assets of the loan parties to the extent permitted by applicable laws and the regulations governing such loan parties. AFC Gamma has elected and qualified to be taxed as a REIT for the U.S. federal income tax purposes under the Internal Revenue Code of 1986.
The company posted stellar second-quarter results that topped earnings and revenue expectations. AFC Gamma has beaten consensus revenue estimates three times over the past four quarters.
Investors receive a 12.38% distribution. JMP Securities has a $25 price target on the stock, while the consensus target is $23.15. The shares closed Monday at $18.61, up over 2% on the day.
AGNC Investment
This company has paid solid dividends for years. AGNC Investment Corp. (NASDAQ: AGNC) operates as a REIT in the United States. It invests in residential mortgage pass-through securities and collateralized mortgage obligations for which the principal and interest payments are guaranteed by U.S. government-sponsored enterprises or agencies.
The company funds its investments primarily through collateralized borrowings structured as repurchase agreements. The company has elected to be taxed as a REIT under the Internal Revenue Code of 1986 and would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders.
AGNC Investment stock investors receive an 11.36% distribution. Keefe Bruyette’s $13.25 price target compares with the $12.40 consensus target and Monday’s closing price of $12.79.
Annaly Capital Management
This stock is trading well under $10, which gives aggressive investors a chance to really load up on the shares. Annaly Capital Management Inc. (NYSE: NLY), a diversified capital manager, engages in mortgage finance and corporate middle market lending.
The company invests in agency mortgage-backed securities, mortgage-servicing rights, agency commercial mortgage-backed securities, non-agency residential mortgage assets, residential mortgage loans, credit risk transfer securities, corporate debts and other commercial real estate investments. It has elected to be taxed as a REIT.
The company posted massive second-quarter earnings and revenue results that beat analyst expectations. Trading at a tiny 2.6 times earnings, it offers aggressive investors a huge opportunity.
Shareholders receive a 12.90% dividend. Barclays has set a $7 target price. The consensus target for Annaly Capital Management stock is $6.54, and shares closed on Monday at $6.79.
Broadmark Realty
Similar to a mortgage REIT, this top company is an investor in what is known as deed of trust loans. Broadmark Realty Capital Inc. (NYSE: BRMK) engages in the underwriting, funding, servicing and managing a portfolio of short-term and first deed of trust loans to fund the construction, development and investment in residential or commercial properties in the United States.
The company also provides short-term and first deed of trust loans secured by real estate to fund the construction and development and investment in residential or commercial properties. The company has elected to be taxed as a REIT. As a result, it is not subject to corporate income tax on that portion of its net income that is distributed to shareholders.
Investors receive a 12.43% distribution. The $9 B. Riley Securities target price is higher than the $8.17 consensus target and Monday’s $7.00 close.
24/7 Wall St.GreenTree Hospitality
This very off-the-radar Chinese stock is risky, but it offers aggressive income investors a very interesting play, especially if tensions with China cool off. Greentree Hospitality Group Ltd. (NYSE: GHG) develops leased-and-operated and franchised-and-managed hotels under the GreenTree brand in the People’s Republic of China.
As of December 31, 2021, it operated 66 leased-and-operated hotels with 7,064 rooms. It also had franchised-and-managed hotels network consisting of 4,593 hotels with 330,089 rooms covering 367 cities in China, as well as an additional 1,225 hotels with 91,887 rooms that were contracted for or under development.
Top Wall Street analysts feel that the company expects profit to more than double over the next couple of years, and the future seems bright for GreenTree Hospitality. With higher cash flow expected for the stock, that positive metric should push into a higher share valuation.
The dividend yield is 13.68%. The BofA Securities price target is $9.20. The stock has traded as high as $9.49 in the past year but closed most recently at $3.97 after retreating over 4% on the day.
Rio Tinto
This mining giant could be a huge winner going forward, as demand for all commodities continues to storm higher. Rio Tinto PLC (NYSE: RIO) engages in exploring, mining and processing mineral resources worldwide. The company offers aluminum, copper, diamonds, gold, borates, titanium dioxide, salt, iron ore and lithium. It also owns and operates open pit and underground mines, mills, refineries, smelters, power stations and research and service facilities.
The company recently completed the sale of a royalty it holds on an area including the Cortez mine operational area and the Fourmile development project in Nevada to RG Royalties, a subsidiary of Royal Gold, for $525 million in cash. Rio Tinto obtained the royalty as partial consideration for the sale of its 40% interest in the Cortez Complex to Barrick in 2008.
Rio Tinto stock comes with an 11.36% dividend. At $85, the BofA Securities target price signals plenty of upside from Monday’s close at $58.51. The consensus target is $75.64.
Two Harbors Investment
This off-the-radar small-cap company could provide the biggest total return capability to investors now. Two Harbors Investment Corp. (NYSE: TWO) operates as a REIT that focuses on investing in, financing and managing residential mortgage-backed securities (RMBS), non-agency securities, mortgage servicing rights and other financial assets in the United States.
The company’s target assets include agency RMBS collateralized by fixed-rate mortgage loans, adjustable-rate mortgage loans and hybrid adjustable-rate mortgages and other assets, such as financial and mortgage-related assets, including non-agency securities and non-hedging transactions.
Last week, Two Harbors announced that its subsidiary Matrix Financial Services has entered into a definitive stock purchase agreement to acquire RoundPoint Mortgage Servicing from Freedom Mortgage. Matrix has agreed to engage RoundPoint as a subservicer prior to the closing date and expects to begin transferring loans to RoundPoint in the fourth quarter of 2022. The parties expect to close the transaction in 2023, subject to the satisfaction of customary closing conditions and the receipt of required regulatory and government-sponsored entity approvals.
Investors take home a 13.20% distribution. The JMP Securities target price of $5.50 may head higher soon. The $5.21 consensus target is a bit lower, and Monday’s closing print for Two Harbors Investment stock was $5.17.
These seven top companies pay gigantic dividends, and their stocks are solid ideas in an inflationary and rising interest rate environment. They may not be suitable for conservative income investors, but for those with a higher risk tolerance, these are outstanding total-return stocks that make sense in a very difficult investing and low interest rate environment.
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