Tag Archives: sell

Analysts: 2 Big 8% Dividend Stocks to Buy (And 1 to Sell)

Analysts: 2 Big 8% Dividend Stocks to Buy (And 1 to Sell)

Not all dividend stocks are created equal. The average dividend yield among S&P companies is only 2%, not much higher than a Treasury bond. Years of low-interest policy from the Fed has worked to push return rates down across the board, and dividend yields – on average – have simply lagged slightly.

Of course, that’s an average. You can still find high returns out there, and dividend stocks are a logical place to look. After all, while Fed rates may establish a cap for bond interest, dividends are only limited by the paying company’s overall profits. The sky’s the limit.

Plains GP Holdings (PAGP)‘ data-reactid=”14″>Plains GP Holdings (PAGP)

Our first stock is a holding company, whose subsidiaries operate in the oil industry. The company’s operational arms are involved in the crude oil midstream sector, including transport, storage, terminalling, and marketing, as well as the liquid petroleum gas (LPG) and natural gas storage segments. PAGP has a $3 billion market cap, a high upside potential, and a surprising low point of entry.

The stock is down 26% over the past 12 months, as the oil industry has faced a continuing low-price regime. While oil is a necessary commodity, that today’s economy cannot do without, a combination of high production and slack demand has put downward pressure on prices. WTI, the main US benchmark price, is down 6.6% in the past 12 months, and trading has been volatile in the oil markets.

Despite the headwinds in the oil markets, PAGP beat the revenue estimates in its Q4 earnings report, while missing on earnings. EPS was reported at 26 cents, down steeply year-over-year and only half what was expected. In better news, the company reported $9.15 billion to top-line revenue, 9.3% better than the $8.37 billion forecast.

With net-positive earnings and rising revenues, PAGP was able to maintain its 36-cent per share quarterly dividend, even while the payout ratio bumped up to a dangerous 136%. The company has been making reliable dividend payments since 2014, and has raised the payment modestly in the past two years. At $1.44 annualized, the yield is a generous 8.54%.

click here)’ data-reactid=”20″>Cho puts a $24 price target on PAGP, suggesting an upside of 42% behind her Buy rating. (To watch Cho’s track record, click here)

Ares Capital Corporation (ARCC)‘ data-reactid=”34″>Ares Capital Corporation (ARCC)

Moving on, we enter the investment management sector. Ares Capital is an asset manager with a focus on providing full-service financial solutions for middle-market companies. It has been traded publicly since 2014 and the stock has paid a reliable dividend ever since. ARCC has a market cap over $8 billion, and brings in over $1.5 billion in annual revenue.

In Q4, Ares met earnings expectation, with EPS reported on target at 45 cents. Quarterly investment income was up 12% year-over-year, to $386 million, but missed the forecast. Total investment income for 2019 was reported at $1.53 billion, in line with estimates and up 14.3% from 2018. While the earnings and revenue were generally seen as good, the company reported 28.7% higher expenses in Q4, a development that pushed stock prices down 1.4% since the release.

The quarterly figures were good enough to maintain ARCC’s dividend, which pays out 40 cents per share quarterly. The $1.60 annualized figure gives a yield of 8.42%, far above the broader market average. At 89%, the payout ratio indicates that Ares returns most of its profits to shareholders – but that it can afford to do so. ARCC has been slowing raising the dividend payment over the last few years.

click here)’ data-reactid=”39″>Chan gives this stock a Buy rating, and backs it with a $21 price target. Her target indicates an 11% growth potential in coming months. (To watch Chan’s track record, click here)

John Hecht. He wrote of the stock’s overall condition, “Revenues of $386M were consistent with our forecast, as robust portfolio growth and higher dividend income offset ongoing yield compression. The portfolio grew 16% YoY, ahead of our forecast, as ARCC ramped leverage to 0.93x. Credit remains stable and below peer averages while NOI is comfortably ahead of ARCC’s consistent distribution…”” data-reactid=”40″>Also bullish is Jefferies 5-star analyst John Hecht. He wrote of the stock’s overall condition, “Revenues of $386M were consistent with our forecast, as robust portfolio growth and higher dividend income offset ongoing yield compression. The portfolio grew 16% YoY, ahead of our forecast, as ARCC ramped leverage to 0.93x. Credit remains stable and below peer averages while NOI is comfortably ahead of ARCC’s consistent distribution…”

See Ares Capital stock analysis at TipRanks)’ data-reactid=”42″>With 8 recent Buy ratings, ARCC’s analyst consensus view is a unanimous Strong Buy. This is another affordable stock, priced at just $18.89. The average price target of $20 suggests a modest upside potential of 5.88% for the stock. (See Ares Capital stock analysis at TipRanks)

Anthony Powell notes “Hersha’s 3Q19 results missed our estimates, guidance and consensus as conditions in several of the company’s urban markets were more challenging than the company originally forecast. While Hersha continued to outperform in several of its markets, the overall softer environment in 3Q and October drives a 6% reduction in EBITDA guidance for the year. Looking forward… high supply growth in New York and relatively high leverage will remain concerns for investors”’ data-reactid=”56″>Wall Street’s analysts are not impressed with HT shares right now. Writing from Barclays, Anthony Powell notes “Hersha’s 3Q19 results missed our estimates, guidance and consensus as conditions in several of the company’s urban markets were more challenging than the company originally forecast. While Hersha continued to outperform in several of its markets, the overall softer environment in 3Q and October drives a 6% reduction in EBITDA guidance for the year. Looking forward… high supply growth in New York and relatively high leverage will remain concerns for investors”

Ari Klein, of BMO Capital, is also downbeat on this stock. He writes, “HT reported a weaker 3Q19 and lowered 2019 guidance, including adjusted EBITDA guidance by 5% at the midpoint and adjusted FFOps by 8%… EBITDA growth is not materializing as expected by HT…”’ data-reactid=”58″>4-star analyst Ari Klein, of BMO Capital, is also downbeat on this stock. He writes, “HT reported a weaker 3Q19 and lowered 2019 guidance, including adjusted EBITDA guidance by 5% at the midpoint and adjusted FFOps by 8%… EBITDA growth is not materializing as expected by HT…”

See Hersha stock analysis at TipRanks)’ data-reactid=”60″>Hersha Hospitality gets a Moderate Sell rating from the analyst consensus, with 2 Hold and 1 Sell rating given in recent weeks. Shares are priced at $14.11, and the $14.33 average price target suggests a minimal upside of 1.56%. (See Hersha stock analysis at TipRanks)

Source : Link