2 compelling dividend stocks that yield at least 8%; Oppenheimer says “buy”
The crises of the past year – the COVID pandemic, the social blockades, the economic shock – are decreasing, and that is a good thing. However, the post-mortems of the crisis are rolling in. It is only natural to compare the current economic crisis with the “great recession” 12 years ago, but as Oppenheimer’s chief investment strategist John Stoltzfus emphasizes: “Given the differences in the cause of the Great Financial Crisis a little over 12 years ago … and the current one Crisis… it’s no wonder that compared to this time last year, so much remains to be revealed of what the exit and legacy of the pandemic will be like crisis will take shape… ”Stoltzfus also believes that the economic data, despite some setbacks suffer, are generally resilient. The markets are rising and, as Stoltzfus says, “… we believe that it probably offers more opportunities than risks for investors who have a reasonable tolerance for risk and are patient.” Given Stoltzfus’ outlook, we wanted to take a closer look at two stocks that were greeted with applause by the stock analysts von Oppenheimer. Using TipRanks’ database, we learned that they both share a common profile: a strong buy consensus rating from the street analyst corps and a reliable dividend of at least 8%. Let’s see what Oppenheimer has to say about it. Owl Rock Capital (ORCC) We start with Owl Rock Capital, one of the countless specialty finance companies in the financial industry. These firms typically operate in the midsize financial sector, where they provide capital for acquisitions, recapitalizations, and general operations to midsize businesses that do not necessarily have access to other sources of credit. Owl Rock’s portfolio consists of investments in 119 companies valued at $ 11.3 billion. 96% of these investments are senior secured loans. Owl Rock announced its fourth quarter and full year results in late February. The company posted net income of $ 180.7 million for the fourth quarter, equivalent to 46 cents per share. That was a 27% increase from 36 cents per share in the fourth quarter of 19. There was also an increase in investment income, up 9% year over year to $ 221.3 million for the quarter. The investment income for the full year was $ 803.3 million, up more than 11% from 2019. Additionally, the company ended 2019 with over $ 27 billion in assets under management. Of particular interest to dividend investors, Owl Rock’s board of directors declared a dividend of 31 cents per common share for the first quarter. This is payable in mid-May and corresponds to the company’s previous regular dividend payments. The annualized rate of $ 1.24 gives a return of 9%. Also of interest to Owl Rock’s dividend, the company paid the sixth and final special dividend in connection with its 2019 IPO last December. In 2019, ORCC paid out 80-cent special dividends in addition to the regular dividend payments. The company has reliably held its dividend since going public in the summer of 2019, meeting both regular and special payments. Owl Rock caught the attention of Oppenheimer’s Mitchel Penn, who sees the company as a solid investment with the potential to beat estimates. “We estimate earnings per share of $ 1.22 and $ 1.34 in 2021 and 2022 for ROE of 8% and 9%, respectively. We estimate Owl Rock will achieve a ROE of 8.5% can, and at an estimated cost of equity of 8.5%, calculate a fair value of $ 15 / share, or 1.02 times book value, “stated Penn. “To get an ROE of 8.5%, ORCC must either increase its portfolio return from 8.4% to 9.0% or increase its leverage from 1x to 1.2x. It is also possible that it could do a little of both Our model takes the fee into account. The cost increases from a flat 75 basis points to a base fee of 1.5% on assets and an incentive fee of 17.5% on income. “Penn rates this stock as outperforming (i.e. buying) , and its target price of $ 15 suggests upside potential of 7% from current levels. The dividend yield is the real draw here, however. (To see Penn’s track record, click here.) ORCC stock recently received three ratings, and all are for Buy – making the consensus strong Buy rating unanimous. This stock retails for $ 13.98 per share and has an average price target of $ 14.71. (See ORCC stock analysis on TipRanks.) Fidus Investment Corporation (FDUS) We stick with the midsize financial sector and take a look at Fidus Investment. Like Owl Rock, this company provides access to capital, including access to debt solutions, to smaller businesses. Fidus has a portfolio that is primarily based on senior secured debt as well as mezzanine debt. The company Fidus has invested in is valued between $ 10 million and $ 150 million. In the fourth quarter that rounds 2020, Fidus invested in seven companies that are new to its portfolio, putting a total of $ 103.9 million in the investments. The company’s portfolio had adjusted net investment income of $ 10.7 million, or 25 cents per common share, for the quarter. That was an increase of 3 cents, or 13%, over the previous year. For the full year 2020, adjusted net income reached $ 38 million, up from $ 35.3 million in 2019. Per share, the $ 1.55 per share in 2020 was up 7.6% year over year. Fidus shares have risen steadily over the past year. Since last April, the stock has gained an impressive 153%. This gives FDUS a solid appreciation for the stock to add to dividend yield. These dividends are substantial. The company announced its payment for the first quarter of February 21 and paid it out on March 26th. The regular payment of 31 cents per common share yields an 8% return on an annualized payout of $ 1.24. In addition to this regular payment, Fidus declared a special dividend of 7 cents per share, almost twice as much as the special payment of 4 cents made in the previous quarter. Now when we turn to Oppenheimer’s coverage of Fidus, we find that 5-star analyst Chris Kotowski is happy with this company, enough to rate it as an outperform (i.e. buy) with a target price of $ 18. This number indicates an upward trend of 15% for a year. (To see Kotowski’s track record, click here.) “The Basics [are] stable with debt investments at the end of the year essentially stable and interest income both in line with the previous quarter and according to our estimate…. What we’re most happy about is that we ended the year with just one small provision. During the year there was a significant loss on a loan that crystallized in the fourth quarter of 20, but there were also equity gains in the first quarter of 20 to make up for this, and in our opinion, the fact that we have a year like this corroborated with minimal Ending net losses, the FDUS business model. “About Fidus’ dividend policy of maintaining a base payment with special dividends, Kotowski simply writes:” We think that a variable dividend makes a world of sense. “As with ORCC above, it is a share with A unanimous Strong Buy consensus rating based on 3 recent positive reviews. Fidus’ stock is selling for $ 15.70 and its average price target of $ 17.17 indicates upside potential of 9% from that level (See FDUS – Share Analysis on TipRanks.) To find great ideas for trading dividend stocks at attractive valuations, visit TipR anks ‘Best Stocks to Buy, a newly introduced tool that brings together all the insights into TipRanks’ stocks. Disclaimer: The opinions expressed in this article are solely those of the presented analysts. The content is intended to be used for informational purposes only. It is very important that you do your own analysis before making any investment.