Markets are in a state of flux right now with huge changes on the near horizon. The collapse of the Silicon Valley bank – and its takeover by the Fed and crypto-heavy Silvergate and Signature banks – has sparked fears of a new banking or financial crisis, as well as calls for the Federal Reserve to scale back its interest rate policy. . Rate hikes and monetary tightening.
The inflation number for February was in line with expectations, with a monthly increase of 0.4% and an annual rate of 6%. While this means that prices remain high, the rate of increase is slowing. For some context, the January annual rate of inflation was reported as 6.4%.
Today’s inflation data has failed to provide a clear picture given the troubled environment in the banking sector. The news should give the Federal Reserve the impetus it needs to rein in monetary tightening in a move that supports banks – without the worry that inflation will spiral out of control. This goes against the central bank’s ‘key directive’ on fighting inflation, but there is deep uncertainty about what will happen next.
In the words of Mohamed El-Arian, “This roller coaster… is a reflection of economic, financial and policy instability which, looking ahead, will require time to stabilize.”
For investors, the key point now is finding portfolio options that can deliver results even when inflation remains high. will turn to the natural course dividend stock, Classic defensive play. We used the TipRanks platform to pull recent data on two high-yielding dividend payers, combining strong Buy analyst ratings with actual rates of return.
enterprise product partner ,EPD,
The first dividend stock we’ll look at, Enterprise, is a major player in North America’s midstream energy segment. Enterprise boasts an extensive hydrocarbon transportation network, centered on the Texas-Louisiana Gulf Coast and extending to the Southeast, Midwest, Plains, and Rocky Mountains. The company’s assets include pipelines, river barges, rail and road tankers, all of which lead to processing plants, refineries, tank farms and terminals.
Enterprise reported strong earnings numbers for the fourth quarter of 2022. Its financial results showed operating income of $1.76 billion, up 25% year-over-year, and net income of $1.45 billion for a 36% y/y gain. Per share, diluted EPS came in at 65 cents, compared to 47 cents in the year-ago period. 4Q22 EPS was also 3 cents better than forecast.
The company managed them effectively Income The result even though revenue slipped. The top line of $13.65 billion for the quarter marked the second consecutive quarter-over-quarter decline in revenue, and came in more than $1 billion below expectations. On a positive note, year-over-year, revenue was still up 19%.
To the interest of dividend investors, the firm’s distributable cash flow came in at $2.03 billion for the quarter and $7.75 billion for the full year. These represent Y/Y gains of 22% and 17% respectively. Gains in distributable cash flow allowed Enterprise to support a generous dividend, and in its most recent announcement, on January 5, the company raised its 4Q22 dividend payment by 2 cents to 49 cents per common share. At an annual rate of $1.96, the dividend yields 7.7%.
With dividends like that, investors should rest in peace. That’s a full 1.7 points higher than inflation, which guarantees both a steady income stream and a real rate of return.
EPD shares have caught the attention of Scotiabank analyst Tristan Richardson, who sees this year and next as a period of growth for the company.
“We see FY2023 as a year with multiple earnings catalysts, with several large projects coming online during the year which could offset the tough comps around commodities and FY2024 for free cash flow (FCF) expansion Can set With scheduled downtime for the propane dehydrogenation facility (PDH) in FY2022 and the planned commissioning of PDH2, we expect some baseline for petite growth in FY2023 against a gradual reopening of global downstream demand,” said Richardson. .
“We also expect the United States to remain extremely competitive from an export perspective as production growth requires the price of NGLs to clear the EPD dock. Separately, balance sheet flexibility will allow for the return of capital to shareholders. reveals more opportunities,” said the analyst.
Richardson’s view of the enterprise’s prospects supports his Overweight (i.e. Buy) rating on the shares, and his $31 price target indicates confidence in a 21% one-year upside. Based on the current dividend yield and expected price appreciation, the stock has a potential total return profile of ~28%. (To see Richardson’s track record, Click here,
Overall, the 11 recent analyst reviews on EPD break down to 10 Buy and 1 Hold for a Strong Buy consensus rating. The stock is currently trading for $25.72 and its $31.91 average price target indicates 24% growth in the coming year. (Look EPD Sock Forecast,
Ares Capital Corporation (ARCC,
From energy stocks, we will turn our gaze to business growth. Ares Capital is a business development company, or BDC, providing new sources of capital to small and medium-sized businesses that may not necessarily have access through more traditional banks. Ares provides funding, credit facilities and other financial instruments to companies in their target locations.
By the end of 2022, Ares’ investment portfolio will consist of 466 companies with the backing of 222 private equity sponsors. The fair value of the portfolio was $21.8 billion, and was composed primarily (over 61%) of first lien and second lien senior secured loans. Of the rest, about half was in various equity securities.
This portfolio gave the company some solid numbers in 4Q22. Total investment income came in at $640 million, up 21% year-over-year — and about $56 million better than expected. drilling down, core eps 63 cents was up 8.6% y/y, and beat expectations by 7 cents. The company ended the year with $303 million in liquid assets on hand.
Against that backdrop, we can see why Ares kept its dividend payout at 48 cents per common share in its most recent announcement. The payout, set to go out later this month, marks the second consecutive month with a common dividend at this level; The company has been increasing the payout through mid-2021, and also continues to pay a special dividend. The common share DIV becomes $1.92 annually, and yields 10.8%. That’s a solid return, beating inflation by 4.8 points.
5-Star analyst Devin Ryan covers this stock for JMP, and is bullish on its prospects for 2023. Ryan writes of Ares, “Given the heightened concerns about credit, we are optimistic that ARCC is poised to outperform given its track record of strong credit underwriting, an experienced and longstanding management team, a best-in-class origination platform, and leveraging a multi-cycle-tested business model. In short, we position Ares Capital to outperform in 2023 given the competitive advantages of the Ares platform in a challenging and uncertain macro environment. Wale continues to be seen as a BDC.
These comments support Ryan’s Outperform (i.e. Buy) rating on the stock, while his price target of $23 reflects gains of 29% over a one-year time horizon. (To see Ryan’s track record, Click here,
In total, this stock has 6 recent analyst reviews on file, and all of them are positive – leading to a unanimous Strong Buy consensus rating. Shares are priced at $17.74 and an average price target of $21.25 suggests an upside potential of ~20% for the next 12 months. (Look ARCC Stock Forecast,
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disclaimer: The views expressed in this article are those of select analysts only. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.