Investors love dividend stocks, especially high-yield varieties, because they offer a significant income stream and have substantial total return potential. Total return includes interest, capital gains, dividends, and distributions realized over time. In other words, the total return on an investment or a portfolio consists of income and stock appreciation. For example, if you buy a stock at $20 that pays a 3% dividend, and it goes up to $22 in a year, your total return is 13%—10% for the increase in stock price and 3% for the dividends paid. Baby Boomers seeking a dependable income and some growth to combat inflation can count on four great companies trading below $20 per share.
We screened our 24/7 Wall St. high-yield dividend stock research database, looking for companies trading below the $20 level that offer investors enormous total return potential. While more suitable for growth and income investors with somewhat higher risk tolerance, all four of these stocks are solid ideas as we head into the fall. All are rated Buy at top Wall Street firms.
Why do we cover high-yield dividend stocks?
Since 1926, dividends have contributed approximately 32% of the total return for the S&P 500, while capital appreciation has contributed 68%. Therefore, sustainable dividend income and capital appreciation potential are essential for total return expectations.
AES
AES Corp.(NYSE: AES | AES Price Prediction ) is an American utility and power generation company. This conservative utility stock offers a substantial dividend and considerable upside potential, as it has been rumored to be a potential takeout candidate. AES operates as a diversified power generation and utility company in the United States and internationally.
The company owns and operates power plants to generate and sell power to customers, such as utilities, industrial users, and other intermediaries; owns and operates utilities to develop or purchase, distribute, transmit, and sell electricity to end-user customers in the residential, commercial, industrial, and governmental sectors; and generates and sells electricity on the wholesale market.
It uses various fuels and technologies to generate electricity, such as:
- Coal
- Gas
- Hydro
- Wind
- Solar
- Biomass
- Renewables, comprising energy storage and landfill gas
AES owns and operates a generation portfolio of approximately 34,596 megawatts and distributes power to 2.6 million customers.
Barclays has assigned an Overweight rating to the shares, accompanied by a $14 price target.
MidCap Financial Investment
This top company was acquired and is now managed by an entity controlled by Apollo Global Management, which was established in 2013. MidCap Financial Investment Corp. (NASDAQ: MFIC) is a closed-end, externally managed, diversified management investment company. The company’s investment objective is to generate current income and, to a lesser extent, long-term capital appreciation.
The company primarily invests in directly originated and privately negotiated first-lien senior secured loans to privately held United States middle-market companies, which the company generally defines as companies with less than $75 million in EBITDA, as adjusted for market disruptions, mergers and acquisitions-related charges, synergies, and other items.
To a lesser extent, it may also invest in other types of securities, including:
- First lien unitranche
- Second lien senior secured, unsecured, subordinated
- Mezzanine loans
- Equities in both private and public middle-market companies
MidCap Financial Investment has a low percentage of non-accrual loans, indicating strong portfolio health, and its floating-rate first-lien secured debt structure mitigates interest rate risk. The company’s merger with Apollo-managed funds has strengthened its balance sheet, and its payout ratio is sustainable. Analysts rate it favorably for its competitive fee structure and access to institutional-quality private credit.
Truist Financial has a “Buy” rating with a $15 price target.
Plains All American Pipeline
This stock has been locked in a tight trading range and appears poised to break out, while offering a dependable dividend yield. Plains All American Pipeline L.P. (NYSE: PAA) engages in the pipeline transportation, terminalling, storage, and gathering of crude oil and natural gas liquids (NGL) in the United States and Canada.
The company operates in two segments:
- Crude Oil
- Natural Gas Liquids (NGL)
The Crude Oil segment offers:
- Gathering and transporting crude oil through pipelines
- Gathering systems
- Trucks, barges, or railcars
- Terminalling, storage, and other facilities-related services and merchant activities
The Natural Gas Liquids segment provides:
- Gathering
- Fractionation
- Storage
- Transportation
- Terminalling activities
- Ethane, propane, normal butane, iso-butane, natural gasoline, and crude oil refining processes
UBS has a Buy rating with a target price of $25.
Rithm Capital
With a strong and secure dividend, this stock is a favorite among top Wall Street analysts. Rithm Capital Corp. (NYSE: RITM) is a global asset manager focused on real estate, credit, and financial services. The company makes direct investments and operates several wholly-owned operating businesses.
Its segments include
- Origination and Servicing
- Investment Portfolio
- Residential Transitional Lending
- Asset Management
The company’s businesses include Sculptor Capital Management, an alternative asset manager, as well as Newrez and Genesis Capital, mortgage origination and servicing platforms.
Sculptor Capital Management offers asset management services and investment products across credit, real estate, and multi-strategy platforms through commingled funds, separate accounts, and other alternative investment vehicles.
Genesis Capital specializes in originating and managing a portfolio of primarily short-term business-purpose mortgage loans to fund single-family and multi-family real estate developers, offering construction, renovation, and bridge loans.
Wedbush has an Outperform rating on the shares with a $14 target price.
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