Finding the right stocks is the essence of investing. While that skill has a reputation for being more art than science, a savvy investor knows otherwise. Follow the data, read the trends and understand the basics; these are the proven methods of investing success.
The Investing Insights data tool makes the science – and its results – available to all investors. Using the full range of stock information, Investing Insights gathers everything and distils the mass of commodity into a single number, a score that's easy to read and indicates how a stock is likely to move in the near future. It is a valuable resource in finding investment opportunities.
We used the Investing Insights to select for your review three high yield dividend stocks with a "perfect 10" score – indicating likely overperformance in the year ahead.
Williams Companies ( WMB )
The first stock we'll look at is Williams Companies Inc (NYSE :), a natural gas processing company based in Oklahoma. Williams operates pipelines for natural gas, natural gas liquids, and oil extraction in a network that extends from the Pacific Northwest, through the Rockies to the Gulf Coast, and across the South to the Mid-Atlantic Ocean. Williams' core business is the processing and transportation of natural gas, with crude oil and power generation as secondary activities. The company's footprint is huge – it handles nearly a third of all natural gas consumption in the US, both residential and commercial.
Williams will report his 4Q20 results by the end of this month – but a look at the Q3 results is informative. The company reported $ 1.93 billion in revenue, down 3.5% year-on-year but up 8.4% quarter-on-quarter, and the highest quarterly revenue released so far for 2020. Net profit came in at 25 cents per share, flat from Q2 but 38% higher than a year earlier. The report was widely regarded as meeting or exceeding expectations, with the stock gaining 7% in the two weeks after it was released.
In a move that could indicate solid Q4 earnings on the way, the company announced its next dividend, to be paid on March 29. The payment of 41 cents per common share is 2.5% higher than the previous quarter, and up to $ 1.64 on an annual basis. At that rate, the dividend yields 7.1%. Williams has a four-year history of dividend growth and maintenance, typically increasing payment in the first quarter of the year.
About RBC's stock, five-star analyst TJ Schultz wrote: “We believe Williams can hit the trough of its 2020 EBITDA forecast. While we expect NO growth to slow in the near term, we believe WMB should benefit from less than previously expected associated gas from the Permian. Given our long-term view, we estimate that Williams will be able to stay comfortably within the investment-grade credit metrics during our forecast period and keep the dividend intact. "
To this end, Schultz rates WMB as an Outperform (i.e., Buy), and his $ 26 price target suggests a 13% rise over the next 12 months.
With 8 recent reviews on record, including 7 Buys and only 1 Hold, WMB has earned its Strong Buy analyst consensus rating. While the stock has risen to $ 23 in recent months, the $ 25.71 average price target means there is still room for ~ 12% growth this year. (See WMB Stock Analysis)
AGNC Investment ( AGNC )
Next up is AGNC Investment Corp (NASDAQ :), a real estate investment fund. It's no surprise to find a REIT as a dividend champion – these companies are required by tax codes to return a high percentage of the profits directly to shareholders, and often use dividends as a tool to comply with the law. Based in Maryland, AGNC focuses on MBS & # 39; and (mortgage-backed securities) with backing and guarantees from the US government. These securities make up about two-thirds of the company's total portfolio, or $ 65.1 billion of its $ 97.9 billion total.
AGNC & # 39; s most recent quarterly results, for 4Q20, showed $ 459 million in net income and net income per share of $ 1.37. While earnings per share declined last year, earnings per share were the strongest for 2020. For the full year, AGNC reported $ 1.68 billion in total revenues and $ 1.56 per share paid in dividends.
The current dividend, 12 cents per share of common stock paid monthly, will be $ 1.44 on an annual basis; The difference from last year's higher annual rate is due to a dividend cut implemented in April in response to the coronavirus crisis. At the current rate, the dividend offers investors a robust 8.8% return, and is easily affordable for the company given its current income.
One of AGNC's bulls is Maxim (NASDAQ 🙂 analyst Michael Diana who wrote, “AGNC has maintained a competitive return on book value compared to other mortgage REITs (mREITS), even if it is its dividend. earned and bought back shares. While the turmoil in the mortgage markets resulted in losses and lower book values ??for all mortgage REITs at the end of March, AGNC was able to meet all of its margin calls and, most importantly, incur relatively less realized losses and therefore more profit power. to maintain after turmoil.
Based on all of the above, Diana rates AGNC as a buy, along with a price target of $ 18. This figure implies ~ 10% upside potential from current levels.
Wall Street is on the same page. Over the past few months, AGNC has received 7 Buys and a single Hold – all added up to a Strong Buy consensus rating. However, the $ 16.69 average price target suggests that stocks will remain range bound for the foreseeable future. (See AGNC Stock Analysis)
Ares Commercial Real Estate ( ACRE )
Last but not least is Ares Commercial Real Estate (NYSE 🙂 Real Estate, a company that focuses on the commercial real estate mortgage industry. Ares has a diversified portfolio – including office space, apartments, hotels and mixed-use properties – mainly in the Southeast and West. The company has invested more than $ 2 billion in 49 individual loans, 95% of which are senior mortgage loans.
At the end of October, the company released revenue for the third quarter of 20 (the last quarter reported), with total sales of $ 22.4 million, a 13% year-over-year profit. Earnings per ordinary share of 45 cents were 40% higher than last year. In addition, Ares entered into a loan commitment of $ 667 million in collateralised commercial real estate, with enhanced financing on 23 senior loans.
In terms of dividend, Ares announced its dividend for 4Q20 in December. The payment, at 33 cents per common share, was paid on January 15 – and is fully covered by the current income level. At current rates, the annual dividend is $ 1.32 and yields an impressive return of 10.50%.
One of the bulls is Hayes, who wrote, “We believe ACRE shares are being unfairly discounted to other commercial MREIT's given strong Ares sponsorship, very healthy balance sheet and limited exposure to risky assets. " According to him, this keeps the company "well positioned to face the headwinds from COVID-19".
In line with these comments, Hayes values ??ACRE a Buy, and its price target of $ 13.50 implies a 10% increase from its current level.
Only one other analyst posted a recent ACRE review, which also rates the stock as a buy, making the analyst an average buy here. The shares are priced at $ 12.28, and their average price target of $ 12.75 suggests room for modest ~ 4% growth. (See ACRE stock analysis)
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