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Dividend Lovers Are Flying Into These 'Strong Buy' 7% or More Yielding Stocks
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If you believe some of the top Wall Street strategists, the 2023 rally is almost over. J.P. Morgan said last weekend that the current rally is likely to be the high point for this year, while Morgan Stanley’s Mike Wilson, who made a strong bearish call last year, feels that lows for stocks will come in the spring, noting that risk-reward for investors now is “as poor as it has been.”
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With inflation falling but still well above the Federal Reserve’s target, and the prospects for a terminal (or ending) federal funds rate now as high as 6% and remaining in place well into 2024, investors should shift to safer, high-dividend stocks that provide the best total return proposition for the rest of 2023.
We screened our 24/7 Wall St. equity/income universe for stocks that pay at least a 7% dividend, are Buy rated by top banks and brokerage firms, and offer investors the best total return potential. Six top companies made the cut, but it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Altria
This maker of tobacco products offers value investors a great entry point now as it has been hit as cigarette sales have slowed. Altria Group Inc. (NYSE: MO) is the parent company of Philip Morris USA (cigarettes), UST (smokeless), John Middleton (cigars), Ste. Michelle Wine Estates and Philip Morris Capital. PMUSA enjoys a 51% share of the U.S. cigarette market, led by its top cigarette brand Marlboro.
Altria also owns over 10% of Anheuser-Busch InBev, the world’s largest brewer, which some feel is worth more than $10 billion and may be a segment of the company that could be sold. Altria posted outstanding fourth-quarter results and also announced a shareholder-friendly $1 billion stock buyback plan.
Shareholders receive a 7.96% dividend. Stifel has a $50 target price on Altria stock, and the consensus target is $49.65. The shares closed on Wednesday at $47.65.
Energy Transfer
This top master limited partnership (MLP) is a safe way for investors looking for energy exposure and income. Energy Transfer L.P. (NYSE: ET) owns and operates one of the largest and most diversified portfolios of energy assets in the United States, with a strategic footprint in all the major domestic production basins.
The company is a publicly traded limited partnership with core operations that include complimentary natural gas midstream, intrastate and interstate transportation and storage assets; crude oil, natural gas liquid (NGL) and refined product transportation and terminalling assets; NGL fractionation; and various acquisition and marketing assets.
After the purchase of Enable Partners in 2021, Energy Transfer owns and operates more than 114,000 miles of pipelines and related assets in all the major U.S. producing regions and markets across 41 states, further solidifying its leadership position in the midstream sector.
Through its ownership of Energy Transfer Operating (formerly known as Energy Transfer Partners), the company also owns Lake Charles LNG, as well as the general partner interests, the incentive distribution rights and 28.5 million common units of Sunoco and the general partner interests, and 39.7 million common units of USA Compression Partners.
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Investors receive a 9.32% distribution. Morgan Stanley has set its price target at $18. Energy Transfer stock has a $16.50 consensus target, and shares closed on Wednesday at $13.14.
FS KKR Capital
This very well-known name on Wall Street is offering a solid entry point at current levels. FS KKR Capital Corp. (NASDAQ: FSK) is a business development company specializing in investments in debt securities. It seeks to purchase interests in loans through secondary market transactions or directly from the target companies as primary market investments.
The company also seeks to invest in first lien senior secured loans, second lien secured loans and, to a lesser extent, subordinated or mezzanine loans. In connection with the debt investments, the firm also receives equity interests, such as warrants or options, as additional consideration. It also seeks to purchase minority interests in the form of common or preferred equity in our target companies, either in conjunction with one of the debt investments or through a co-investment with a financial sponsor.
On an opportunistic basis, the fund may invest in corporate bonds and similar debt securities. The fund does not seek to invest in start-up companies, turnaround situations or companies with speculative business plans. It seeks to invest in small and middle-market companies based in the United States. The fund seeks to invest in firms with annual revenue between $10 million and $2.5 billion. It seeks to exit from securities by selling them in a privately negotiated over-the-counter market.
The company posted stellar results for the most recent quarter and announced a continuation of a huge stock buyback.
The dividend yield is 13.17%. Jefferies is the only Wall Street firm (out of 15) that has a Buy rating. Its $25 price target is higher than the $21.00 consensus target, and FS KKR Capital stock closed at $19.65 on Wednesday.
Gladstone Commercial
This stock has backed up nicely and offers the best entry point since November. Gladstone Commercial Corp. (NASDAQ: GOOD) is a top real estate investment trust (REIT) focused on acquiring, owning and operating net leased industrial and office properties across the United States.
As of June 30, 2021, Gladstone owns a diversified portfolio of 121 office and industrial properties located in 27 states and leased to 106 tenants. The company has grown the portfolio in a consistent, disciplined manner at a rate of 18% per year since the IPO in 2003. It matches long-term leased properties with long-term debt to lock in the spread to create a durable, stable cash flow stream to fund monthly distributions to shareholders. Current occupancy stands at 96.5% and occupancy has never dipped below 95.0% since the IPO.
Most importantly for investors, Gladstone has a track record of success, as exhibited by a history of strong distribution yields, a consistently strong occupancy rate and more than 10 years of paying monthly cash distributions.
Gladstone Commercial stock comes with a 7.28% distribution. E.F. Hutton’s $20 price target looks to be headed higher soon. The consensus target is $18.88, and Wednesday’s close was at $16.49.
Medical Properties Trust
This stock may be offering investors the best value at current price levels. Medical Properties Trust Inc. (NYSE: MPW) is a self-advised REIT formed in 2003 to acquire and develop net-leased hospital facilities.
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From its inception in Birmingham, Alabama, the company has grown to become one of the world’s largest owners of hospitals with 431 facilities and roughly 43,000 licensed beds in nine countries and across four continents on a pro forma basis. Its financing model facilitates acquisitions and recapitalizations and allows operators of hospitals to unlock the value of their real estate assets to fund facility improvements, technology upgrades and other investments in operations.
With a growing portfolio and a versatile business model, the company continues to rank high across Wall Street. Top analysts have noted that the company’s acute care hospitals’ rent coverage has increased nicely and the company attributed the increase to better cost controls and higher patient admissions.
Shareholders receive a 9.43% distribution. Medical Properties Trust stock has a $17 price target at Barclays. The consensus target is $15.38, and Wednesday’s $13.12 closed was up almost 9% for the day on the news of a very positive leasing deal.
24/7 Wall St.New Fortress Energy
While it is somewhat off the radar, top Wall Street analysts are very bullish on this company over the next few years. New Fortress Energy Inc. (NASDAQ: NFE) operates as an integrated gas-to-power infrastructure company that provides energy and development services to end-users worldwide.
New Fortress operates in two segments. The Terminals and Infrastructure segment engages in natural gas procurement and liquefaction, as well as shipping, logistics, facilities and conversion or development of natural gas-fired power generation. The Ships segment offers floating storage and regasification units, and liquefied natural gas (LNG) carriers, which are leased to customers under long-term or spot arrangements.
New Fortress Energy operates LNG storage and regasification facility at the Port of Montego Bay, Jamaica; marine LNG storage and regasification facility in Old Harbour, Jamaica; landed micro-fuel handling facility in San Juan, Puerto Rico; marine LNG storage and regasification facility in Sergipe, Brazil; and LNG receiving facility in La Paz, Mexico, as well as Miami facility.
Investors receive an 8.25% dividend. BofA Securities recently upgraded the stock, and its $67 target price compares with a $60.82 consensus target. New Fortress Energy stock ended Wednesday trading at $39.99.
These six top stocks, for a variety of reasons, are trading incredibly cheaply and offering investors very timely entry points. Still, it still may be very prudent to just start with buying partial positions, as the market faces a plethora of issues, not the least of which is the ongoing inflation burden and the continued rise in interest rates.
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