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2 Compelling Dividend Stocks Yielding at Least 8%; Oppenheimer Says ‘Buy’

The crises of the previous yr – the COVID pandemic, the social lockdowns, the financial shock – are on the wane, and that’s good. However, the disaster post-mortems are rolling in. It’s solely pure to check the present financial disaster to the ‘Great Recession’ of 12 years in the past, however as Oppenheimer’s chief funding strategist John Stoltzfus factors out, “Considering the differences in what caused the Great Financial Crisis of a little more than 12 years ago… and the current crisis… it’s little wonder that as good as things are when compared to this time last year there remains much to be revealed as to how the exit and the legacy of the pandemic crisis will take shape…” Stoltzfus additionally believes that the financial information, whereas struggling some setbacks, is usually resilient. Markets are rising, and that, as Stoltzfus says, “…in our view likely presents more opportunity than risk for investors who have suitable tolerance for risk and who practice patience.” Taking Stoltzfus’ outlook into consideration, we needed to take a more in-depth take a look at two shares incomes a spherical of applause from Oppenheimer’s inventory analysts. Using TipRanks’ database, we discovered that each share a profile: a Strong Buy consensus ranking from the Street’s analyst corps and a dependable dividend yielding at the very least 8%. Let’s see what Oppenheimer has to say about them. Owl Rock Capital (ORCC) We’ll begin with Owl Rock Capital, one of many monetary business’s myriad specialty finance firms. These firms typically inhabit the middle-market finance sector, the place they make obtainable capital for acquisitions, recapitalizations, and common operations to mid-market firms that don’t essentially have entry to different sources of credit score. Owl Rock’s portfolio consists of investments in 119 firms, totaling $11.three billion. Of these investments, 96% are senior secured loans. Owl Rock reported its 4Q20, and full yr outcomes, on the finish of February. The firm noticed This fall internet revenue of $180.7 million, which got here out to 46 cents per share. This was up from 36 cents per share in 4Q19, a 27% improve. Also up was funding revenue, which at $221.three million for the quarter was up 9% year-over-year. Full-year funding revenue was $803.three million, up greater than 11% from 2019. In addition, the corporate completed 2019 with over $27 billion in belongings beneath administration. Of explicit curiosity to dividend buyers, Owl Rock’s board declared a 31-cent per frequent share dividend for the primary quarter. This is payable in mid-May, and matches the corporate’s earlier common dividend funds. The annualized fee of $1.24 provides a yield of 9%. Also of curiosity about Owl Rock’s dividend, the corporate paid out the sixth and last particular dividend – associated to the 2019 IPO launch – on this previous December. In 2019, ORCC paid out for 80 cent particular dividends, together with the common dividend funds. The firm has stored its dividend dependable, assembly each the common and particular funds, since going public in the summertime of 2019. Owl Rock caught the eye of Oppenheimer’s Mitchel Penn, who sees the corporate as a stable funding with potential to beat the estimates. “We estimate EPS of $1.22 and $1.34 in 2021 and 2022 for an ROE of 8% and 9%, respectively. We project that Owl Rock can earn a 8.5% ROE, and given an estimated cost of equity capital of 8.5% we calculate a fair value of $15/share or 1.02x book value,” Penn famous. “To achieve an 8.5% ROE, ORCC will either need to increase its portfolio yield from 8.4% to 9.0% or increase its leverage from 1x to 1.2x. It’s also possible that it does a little of both. Our model accounts for the fee expense increase from a flat 75 bps to a base fee of 1.5% on assets and an incentive fee of 17.5% on income.” Penn charges this inventory an Outperform (i.e., a Buy), and his $15 value goal counsel a 7% upside potential from present ranges. The dividend yield, nevertheless, is the true attraction right here (To watch Penn’s monitor report, click on right here.) ORCC shares have attracted three latest evaluations, and all are to Buy – which makes the Strong Buy consensus ranking unanimous. This inventory is promoting for $13.98 per share and has a mean value goal of $14.71. (See ORCC inventory evaluation on TipRanks) Fidus Investment Corporation (FDUS) Sticking with the mid-market finance sector, we’ll check out Fidus Investment. This firm, like Owl Rock, affords capital entry to smaller companies, together with entry to debt options. Fidus has a portfolio that’s based mostly primarily on senior secured debt, together with mezzanine debt. The firm that Fidus has invested in are valued between $10 million and $150 million. In the fourth quarter, rounding out 2020, Fidus invested in seven firms new to its portfolio, placing a complete of $103.9 million into the investments. The firm’s portfolio, for that quarter, introduced in an adjusted internet funding revenue of $10.7 million, or 25 cents per frequent share. This was up three cents, or 13%, year-over-year. For the complete yr 2020, the adjusted internet revenue reached $38 million, up from $35.three million in 2019. Per share, 2020’s $1.55 was up 7.6% yoy. Fidus’ shares have been climbing steadily previously yr. Since final April, the inventory has gained a formidable 153%. This provides FDUS a stable share appreciation, to enrich the dividend returns. Those dividends are substantial. The firm declared its 1Q21 cost in February, and paid out on March 26. The common cost, at 31 cents per frequent share, yields 8% with an annualized payout of $1.24. In addition to this common cost, Fidus additionally declared a particular dividend of seven cents per share, practically double the 4-cent particular cost made within the earlier quarter. Turning now to the Oppenheimer protection on Fidus, we discover that 5-star analyst Chris Kotowski is happy with this firm, sufficient to fee it an Outperform (i.e. Buy) with an $18 value goal. This determine suggests a 15% one-year upside. (To watch Kotowski’s monitor report, click on right here) “The fundamentals [are] stable with debt investments at year-end essentially stable and interest income in line with both the prior quarter and our estimate…. What we are most pleased about is that we ended the year with only one small non-accrual. There was a significant loss during the year on one credit, which was crystallized in 4Q20, but there were also equity gains in 1Q20 that offset that, and in our mind, the fact that we end a year like this with minimal net losses validates FDUS’s business model.” Of Fidus’ dividend coverage, sustaining a base cost with particular dividends added on when potential, Kotowski writes merely, “We think a variable dividend makes a world of sense.” Like ORCC above, this can be a inventory with a unanimous Strong Buy consensus ranking based mostly on three latest constructive evaluations. Fidus’ shares are promoting for $15.70 and their $17.17 common value goal signifies a 9% upside potential from that stage. (See FDUS inventory evaluation on TipRanks) To discover good concepts for dividend shares buying and selling at engaging valuations, go to TipRanks’ Best Stocks to Buy, a newly launched device that unites all of TipRanks’ fairness insights. Disclaimer: The opinions expressed on this article are solely these of the featured analysts. The content material is meant for use for informational functions solely. It is essential to do your individual evaluation earlier than making any funding.


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