Dividend stocks are the Swiss Army knife of the stock market.
When dividend stocks go up, you make money. When they don’t go up — you still make money (from dividends). Heck, even when a dividend stock’s price goes down, it’s not all bad news, because the dividend yield (the absolute dividend amount, divided by the share price) gets richer the more The more the stock falls in price.
Knowing all this, wouldn’t you want to find great dividend stocks? Of course you would.
Wall Street analysts back it up — and they’re recommending two high-yield stocks dividend stock For investors looking for safety for their portfolio. These are stocks with a specific set of obvious characteristics: a dividend yield of at least 9% and a Buy rating. let’s take a closer look.
Blackstone Secured Lending (bxsl,
We’ll start with Blackstone Secured Lending, a business development company (BDC) under the auspices of the large Blackstone Asset Management firm. BXSL operates in the financial services sector, providing capital and credit access to US private companies. BXSL’s portfolio consists primarily – approximately 98% – of first lien senior secured loans; Most of the balance is in equity investments. In total, the portfolio was valued at $9.6 billion as of December 31, 2022, and more than 99% of debt investments are at floating rates.
The general quality of the company’s portfolio can be seen in its 4Q22 financial results. Blackstone Secured Lending reported net investment income of 90 cents per share, up 13% quarter-over-quarter and a more robust 34% year-over-year. The Q4 result came in above 88-percent forecasts and beat earnings for the third consecutive quarter.
However, dividend investors will be more interested in the company’s February 27 payout announcement. BXSL boosted its common share regular dividend by 17% for a new payment of 70 cents. This was the third consecutive quarter that the dividend was increased. The 70-cent Div is scheduled to be paid on April 27; At an annual rate of $2.80, the dividend yields a powerful 11.3%. This is more than 5 times the average dividend yield found among S&P-listed companies, and 5.3 points above inflation.
Among the bulls is 5-star analyst Casey Alexander of Compass Point, who notes that the company’s strategy is well-optimized for the current interest rate regime, and it’s well positioned to return capital to shareholders.
“We have maintained that in our view BXSL has the best combination of characteristics for investing in BDCs in the current economic environment. BXSL is among the BDCs where NIIs benefit most from higher interest rates.. .. We calculate that the BDC generated a 9.5% return in 2022 based on YE2021 NAV. Given the volatility of the private debt markets and rapidly changing interest rates, this is an outstanding performance,” said Alexander.
“In addition,” the analyst added, “we saw BXSL buy back more than $250M in shares during 2022 and announce an additional $250M share repurchase program. As we’ve always said, we’ve earned the right to take capital from the market.” To do that, you had to be willing to give it back when your stock was trading at a discount, and BXSL met that requirement.
Following his bullish commentary, Alexander rates BXSL a Buy, and his $29 price target reflects a potential 16% one-year upside for the stock. Based on the current dividend yield and expected price appreciation, the stock has a potential total return profile of ~27%. (To see Alexander’s track record, Click here,
Overall, BXSL shares have a Moderate Buy consensus rating from Wall Street analysts based on 9 recent analyst reviews, which include 6 Buy and 3 Hold. (Look BXSL Stock Forecast,
Westlake Chemical Partners ,Valqp,
Next up, Westlake Chemical Partners, is a limited partnership that was formed in 2014 by Westlake Chemical Corporation to operate its ethylene business. The company’s operations include the production and sale of ethylene and co-products such as propylene, butadiene and hydrogen, which are primarily used in the production of various plastics and other chemical products.
WLKP’s production facilities are located in Calvert City, Kentucky and Lake Charles, Louisiana. In addition to these facilities, the company also operates a 200-mile ethylene pipeline system that connects its production facilities to key markets in the Gulf Coast region, including Houston, Texas. The company has an annual production capacity of 3.7 billion pounds.
The company’s results at the end of last year – 4Q22 – were mixed disappointing. Revenue of $3.29 billion was down 6.3% year-over-year, missing the consensus estimate of $3.41 billion. In addition, the company’s GAAP EPS at $1.79, was down 64% y/y, and missed the consensus estimate of $2.38. The company attributed lower 4Q22 earnings in part to higher interest expense.
Despite lukewarm revenue and earnings, WLKP has shown solid cash flow growth over the past year. Total cash flow from operations came in at $122.6 million in 4Q22, for a highly favorable comparison to the year-ago quarter’s total of $21.9 million. And of particular interest to dividend investors, 4Q22 distributable cash flow was listed at $20.3 million – up $5 million from the $15.3 million reported in the year-ago period.
Distributable cash flow supports the company’s dividend payment, which was last declared for 47 cents per common share. The payments ended on February 16 this year. Westlake has kept its dividend at this level since early 2020, and has maintained a reliable quarterly dividend payout through 2014. The current annualized rate of payment, $1.88 per common share, yields a 9% yield.
The stock has caught the eye of Deutsche Bank 5-Star analyst David Beglieter, who makes a case for being bullish here based on the potential for future capital return growth and current risk mitigation.
“We are confident that WLKP will continue to provide a unique investment opportunity unlike other MLPs with: i) stable cash flows insulated from commodity price risks; ii) Strong balance sheet by prudent management of cash and leverage metrics; and iii) strategic alignment with its investment grade parent,” Begletter explained.
To this end, the Deutsche Bank analyst has a Buy on WKLP stock with a price target of $28, suggesting 31% upside over a one-year time horizon. (To see the track record of Beagletr Click here,
WKLP appears to be flying under the Street’s radar and is currently the only recent review on record from Deutsche Bank. (Look WLKP 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.