The market pendulum has been swinging from one extreme to the other lately, making it difficult for investors to follow. The ups and downs of the rapidly changing situation are the exact opposite of what investors want to see.
Obviously, what investors would most like to see are returns. And whether the markets are up or down, following the analysts' "top picks" makes for a viable investment strategy. The Wall Street pros can do the footwork, and their published reports can inform our market decisions and act as a series of signposts for investors.
In this article, we'll explore three of these & # 39; top picks & # 39; point out. These are all names that yield dividends, a sure way to ensure a steady income no matter which direction the market takes. If that's not enough, all three stocks have a & # 39; Perfect 10 & # 39; from the Investing Insights .
The platform gives each stock a one-digit score, based on the sum of 6 separate factors. The factors used are known to correlate with future overperformance; when they line up, this is a strong indicator for buyers to be aware of. Let's take a closer look.
Ellington Financial ( EFC )
We start in the financial industry, where Ellington Financial (NYSE 🙂 occupies the real estate investment niche. Ellington puts its energy into a wide variety of real estate activities, including commercial and residential mortgage loans, equity investments and mortgage-backed securities. The company uses a range of risk management tools to mitigate the natural risks of mortgage-backed securities and ensure returns for investors.
Ellington's recent quarterly report, for 4Q20, showed the third consecutive increase in earnings per share, up 38% from Q3 to $ 1.44. For the full year 2020, earnings per share were 39 cents per common share, down 15% yoy, on net profit of $ 17.2 million.
Like most REITs, Ellington pays a regular dividend – and Ellington has been able to maintain regular dividend payments throughout the corona crisis year, despite a cut at the height of the panic. The most recent statement, made in early February for a March 25 payout, was 10 cents per common share, the same as the last three payments. The company pays the dividend monthly and gradually increases it after last year's cut. The current payment gives a return of 7.5%.
In his report from Ellington, Maxim (NASDAQ 🙂 analyst Michael Diana writes: "85% of EFC's equity is allocated to credit assets and nearly all have done well. Of particular note are non-QM loans and reverse mortgage loans. Not only was the demand for these credit classes high, but EFC also has material equity interests in the companies that provide these loans, so EFC wins twice. As smaller mortgage companies went out of business during the pandemic, competition has diminished, which has led to to favorable prices. "
Basically, Diana simply says, "EFC remains our top choice under our mortgage REIT (mREIT) coverage."
To this end, Diana EFC assesses a buy and its $ 19 price target suggests a one-year rate of rise of ~ 20%.
There is general agreement on Wall Street that EFC is a quality investment, and analysts' consensus rating shows: It is a unanimous Strong Buy, based on 4 recent reviews. The stock is priced at $ 15.77 and their average target is $ 17.25, implying 9% upside potential from current levels. (See EFC Stock Analysis)
OneMain Holdings ( OMF )
To stick with the financial industry, but in services rather than REITs, let's look at OneMain Holdings (NYSE :). The subsidiaries of this company provide a range of financial services, including consumer finance and insurance, to a customer base normally neglected by the mainstream financial sector: private clients who, for whatever reason, do not have access to the mainstream banking and credit financing sector. The importance of this market segment should not be ignored, and OneMain showed that in fiscal year 2020 by bringing in $ 4.4 billion in total revenues.
At the close of the 2020 calendar year, OneMain reported $ 1.23 billion in fourth-quarter revenue and $ 2.67 in earnings per share. While revenues remained sequentially stable, earnings per share were 43% higher than the previous quarter – and 39% higher than a year earlier.
Like EFC, OneMain pays a dividend, but unlike the REIT, OneMain has a unique additional dividend policy. Every second and fourth quarters, the company pays its minimum dividend per common share, but adds a one-time addition to the distribution in the first and third quarters. The minimum payment is currently set at 45 cents per common share; the last dividend paid on February 25 was $ 3.95.
Analyst Michael Kaye, of Wells Fargo, is impressed with OneMain and has no hesitation in commenting on the company: “We believe OMF is one of the best stories in consumer credit and surprisingly it is still under the radar from many financial investors. OMF is, in our opinion, a unique story about the return on excess capital and we expect to pay $ 8.30 in dividends in 2021, representing a dividend yield of 14.5%. We see the new credit card initiative also positive, as it must drive incremental growth, add value to their franchise and leverage their underwriting, distribution and service capabilities. OMF remains our first choice in our coverage. "
Kaye rates OMF stock as Overweight (i.e., buying) and his $ 65 price target implies a 34% rise over the next year.
It's not very often that the analysts all agree on a stock, so when it happens, pay attention. OMF's Strong Buy consensus rating is based on a unanimous 10 Buys. The average price target of $ 63.60 suggests a 31% increase from the current stock price of $ 94. (See OMF Stock Analysis)
Devon Energy ( DVN )
For the final "top pick" stocks we review here, we'll switch to the energy industry. Devon Energy (NYSE :), with a market capitalization of $ 15 billion, owns mineral rights – that is, the right to explore and drill – on 1.8 million acres in Texas and adjacent areas of Oklahoma and New Mexico. This is one of the most productive oil regions in North America, and in recent years production here has contributed to the development of the US into a net exporter of fossil fuels. Devon also controls production areas in the mountain state of Wyoming. All told, Devon has more than 10,000 wells in active use and an estimated 752 million barrels of oil equivalent in proven reserves.
In the fourth quarter of 2020, Devon showed a series of strong performance measures. Production averaged 333,000 boe per day, boosted by a 7% quarter-on-quarter increase in crude oil production. Operations generated cash flow of $ 773 million for the quarter, of which $ 263 million was free cash flow. In conjunction with the earnings report, Devon announced a regular dividend payment of 11 cents per share, along with an additional variable dividend of 19 cents per share. Both are payable on March 31.
Scotiabank's Paul Cheng reiterates his decision to make Devon a top pick, writing, “We still see a significant fundamental advantage despite the YTD's outperformance and the stock is now trading at> 4x the 2020 low. We see little reason to expect that relevance, concerns about size, liquidity, etc. will prevent the stock from getting a higher rating. As the company continues to deliver attractive fundamentals over the coming months and years and execute its shareholder-friendly strategy, we expect DVN to do better as the market appreciates the story and begins to better reflect these fundamentals in its share price. . "
Cheng & # 39; s Outperform rating (i.e. buy) is supported by a price target of $ 30, implying a 12-month upside potential of 31%.
In total there are 19 recent Devon Energy stock reviews, and they split 17 by 2 in favor of Buys versus Holds, making the analysts' consensus a clear Strong Buy. DVN is selling for $ 22.83 a share, and the $ 24.89 average price target suggests a 9% increase from that level. (See DVN Stock Analysis)
For more ideas for stocks trading at attractive valuations, visit Investing Insights .
