Commercial real estate could ‘continue to worsen’ at the beginning of 2021: economist
3 big dividend stocks that yield over 7%; Raymond James Says “Buy”
Wall Street investment firms are burning the midnight oil as we near the end of 2020, releasing their year-end reports and New Year forecasts, both for investor delight. There’s the obvious point: we are in a moment of rising markets and investor sentiment is high now that the elections are over and COVID vaccines have an emergency clearance and get into distribution networks. The lockdown policies have been put in place, however, fighting the virus this winter is slowing economic recovery. Whether or not the economy really recovers remains to be seen. Meanwhile, Raymond James’ strategist Tavis McCourt has published his view of the current situation and his comments are to be taken into account. First, McCourt notes that investors are focusing on the good news: “[The] The stock market is more focused on vaccine use and fully reopening economies in 2021, and so far negative data points have largely been pushed aside. Looking ahead to the future, McCourt writes over the next two years: “We believe the logical outcome of 2021 (and 2022 for that matter) is a likely ‘return to normal’ with strong EPS growth driven by lower P / It is made up for unless the vaccine history changes. We expect cyclical sectors and smaller cap stocks will continue to outperform, as is common in early cycle markets… ”Raymond James research analysts scoured the markets for the“ right ”buys, and theirs Selection is examined more closely. They have viewed high yield dividend payers as an investment game of choice. The TipRanks database sheds additional light on three of JMP’s recommendations – stocks with dividend yields of 7% or better – and which the investment firm sees 10% up or down better. New Residential Investment (NRZ) The Real Estate Investment Trust segment ( REIT) has long been known for its high and dependable dividends, a trait encouraged by tax regulations that require these companies to return a certain portion of profits directly to investors. New Residential Investment, based in New York City, is typical of its sector. The company’s portfolio includes residential mortgages, mortgage loan service rights, and lending. NRZ focuses its activities on the residential real estate sector. NRZ is a mid-cap company with a market value of $ 4.13 billion and a portfolio of $ 5.72 billion. The company’s sales have increased since the second quarter of 2020 after heavy losses during the “Corona recession” of the first quarter. The result for the third quarter was 19 cents per share after 54 cents in the same quarter of the previous year. But even with this loss, NRZ made sure to maintain the dividend. In fact, it did more than that. The company raised its dividend to 15 cents per common share for the third quarter to continue an interesting story. In the first quarter, the company reduced the common stock dividend to 5 cents in order to preserve the capital during the corona crisis. Since then, the company has increased dividends by 5 cents each subsequent quarter, and the fourth quarter payment announced in mid-December is 20 cents per common share. At this rate, the dividend is annualized to 80 cents and the yield exceeds 7.87%. In addition to increasing the dividend, NRZ has announced a share buyback program totaling $ 100 million. The buyback applies to preference shares and is in line with the existing buyback policy for common shares. Analyst Stephen Laws writes in his coverage for Raymond James on NRZ: “We expect strong origination volume and attractive profit on sales margins to come close to-term results and we continue to expect a dividend increase in the fourth quarter […] For the fourth quarter of 20, we’re increasing our core earnings estimate by $ 0.02 per share to $ 0.35 per share. For 2021, we’re increasing our core earnings estimate by $ 0.08 per share to $ 1.31 per share. “Consistent with these comments, Laws is outperforming (buying) the stock. His target price of $ 11.50 implies a year-long move up of 16% (To see Laws’ track record, click here.) It doesn’t come often require all analysts to agree on a stock. If this happens, keep this in mind. NRZ’s consensus rating for a strong buy is based on unanimous 8 purchases, the average for the stock is $ 11.36, the price target indicates 14% and up from its current share price of $ 9.93. (See NRZ stock analysis on TipRanks.) Fidus Investment Corporation (FDUS) Next up is a business development company, Fidus Investment. This company is one of many in the midsize corporate finance niche. The portfolio provides debt solutions and access to the smaller companies that may not be able to obtain credit from the larger markets von Fidus focuses on senior secured and mezzanine debt for businesses valued at $ 10 million to $ 150 million. Fidus has Inv stakes in 68 companies valued at $ 697 million. The majority of this portfolio, 59%, is comprised of secondary bonds with the remainder being comprised primarily of subordinated debt, prime liens and equity related securities. The company posted revenue growth in the second and third quarters of 2020 after negative results in Q1. Return on sales for the third quarter was ~ $ 21 million, an impressive 129% increase over the previous quarter. Since the third quarter, Fidus has set its dividend for the fourth quarter at 30 cents per common share, as in the two previous quarters, plus an additional 4 cents special dividend approved by the Board of Directors. This brings the total payout for the quarter to 34 cents per common share and a yield of 9.5%. Robert Dodd, an analyst at Raymond James, likes what he sees in Fidus, especially the dividend outlook. “We continue to see the risk / return as attractive at current levels – with stocks trading below book value, solid forecast coverage of NII base dividends … We expect FDUS to post its 0.30 quarterly base dividend USD / share solidly overperformed over our projection horizon. As a result, we are projecting modest additions… ”Dodd rates the stock as Outperform (ie Buy) and sets a price target of $ 14. At the current level, this target means an upward movement of 10.5% in the next few months. (To see Dodd’s track record, click here.) Wall Street is a little more divided on FDUS stocks, which is reflected in analysts’ consensus rating of moderate buy. This rating is based on 4 ratings including 2 buys and 2 holds. The price of the shares is $ 12.66, and the average target price of $ 13.33 indicates a modest 5% uptrend from current levels. (See FDUS stock analysis on TipRanks) TPG RE Finance Trust (TRTX) Returning to the REIT sector, let’s look at TPG RE Finance Trust, the real estate finance arm of global asset management company TPG. This REIT, with a market capitalization of $ 820 million, has built a portfolio of commercial mortgage loans totaling $ 5.5 billion. The company is a provider of original commercial mortgage loans starting at US $ 50 million, primarily in the US primary markets. Most of the company’s loans and real estate are in the east. Like many financial firms, TPG RE Finance posted significant losses in the first quarter due to the corona pandemic crisis – but has largely recovered since then. Third quarter revenue increased 9% year over year to $ 48 million. During the quarter, TPG received loan repayments totaling $ 199.6 million, a solid result. At the end of the quarter, the company had cash or cash equivalents of $ 225.6 million. The company was able to easily fund its dividend of 20 cents per common share in the third quarter. For the fourth quarter, the company recently announced not only the regular payment of 20 cents, but also a one-time special dividend of 18 cents. Taken together, the dividends give a return of 7.5%, almost four times the average for companies listed on the S&P stock exchange. When we come back to Raymond James’ REIT expert Stephen Laws, we find he is optimistic about TRTX too. “TRTX has underperformed since we released our third quarter results, which we believe is an attractive buying opportunity. We expect Core earnings will continue to benefit from the LIBOR minimums on loans and that new investments will resume in Q1 21. The company’s portfolio has a combined retail and hotel exposure of 14%, which is below the industry average of 19% … ”To this end, Laws rates TRTX as a strong buy and its target price of $ 13 suggests an uptrend of ~ 22% in 2021. (To see Laws’ track record, click here.) This stock also has a strong buy rating from analyst consensus based on 3 unanimous buy ratings set in the past few weeks. The price of the stock is at $ 10.67, and the average target of $ 11.00 suggests a modest 3% uptrend from current levels. (See TRTX stock analysis on TipRanks.) To find great ideas for trading dividend stocks at attractive valuations, visit TipRanks ‘Best Stocks to Buy, a newly launched tool that brings together all of the insights into TipRanks’ stocks. Disclaimer: The opinions expressed in this article are solely those of the analysts presented. 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.