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3 stocks with large dividends at more than 7%; Compass Point says ‘Buy’
President Trump’s announcement that he tested positive for the corona virus grabbed the headlines, but the dog that didn’t bark brings a more interesting point. Wall Street is no longer so worried about the corona virus; the perception is that the virus will go away or a vaccine will be developed, but in either case the economy will improve. According to an RBC survey of portfolio managers, the upcoming November election poses a clear risk to investors. markets. A large majority of investors surveyed, 76%, fear the election will be challenged, which will lead to weeks – if not months – of uncertainty. And uncertainty is bad for the markets: recent events and a not-so-distant history confirm this. For the story, we only need to look back to 2000, when it took until December 12, and an appeal to the Supreme Court, to decide the results of the Florida recount. The S&P 500 slipped 5% in those weeks – and that was the uncertainty caused by a state, recounting a limited number of votes. The point here is not that this election will be fraudulent or illegitimate. Rather, like Caesar’s wife, the election should be above the perception of impropriety – and this year that bar may be too high. And then the challenges will begin. In the RBC poll, 83% of portfolio managers believed that such challenges, challenging election results (one way or the other) would be a net negative for the stock market. And only a small minority, 14%, believe the final results will be known when the polls close on election day, November 3, and that’s what brings us to dividend stocks today. When investors get nervous, they look for a way to protect their portfolios – and dividends, promising a steady stream of income, may be the answer fearful shareholders seek, according to analysts at research firm Compass Point. They chose three stocks whose dividends pay 7% or more. We pulled the TipRanks data to find out what makes these purchases compelling in times of turbulence Saratoga Investment Corporation (SAR) We’ll start with Saratoga Investment Corporation, a mid-size investment management firm specializing in debt, appreciation , and equity investments. Saratoga has over $ 480 million in assets under management, and its portfolio includes home security, industry, software, and waste disposal. The variety and stocks chosen are designed to give the company a resilient revenue stream, which doesn’t mean Saratoga was able to avoid the corona bullet. The company saw its revenues turn negative in the second quarter and saw EPS drop from 61 cents in the first quarter to 51 cents in the second. As a result, Saratoga announced that it was postponing its fiscal dividend for the fourth quarter, as a cash-saving measure during the pandemic crisis. Saratoga, in July, declared its first quarter tax dividend of 40 cents per common share – and paid it in August. There are reasons of trust. The company has $ 9 million in committed but unused loans as well as $ 155 million in available credit facilities, a new baby bond issue of $ 43.1 million and $ 282 million. in equity – all against just $ 60 million in long-term debt. the restored dividend, although down 28% from the company’s last dividend payment, the new distribution reflects Saratoga’s liquidity position. The current payout is annualized to $ 1.60 and yields a 9.2% return, which is more than 4.5 times the average return of S&P listed companies. Covering the shares of Compass Point, analyst Casey Alexander writes of the new dividend, “[With] the dividend is now officially reset to $ 0.40 per quarter, it’s time to make lemonade out of the lemons that investors have received… In our opinion, although we may not be done with the credit problems, SAR has set the dividend at a level that allows the BDC to revert as the dividend trend QoQ increases as the BDC’s current earning power greatly exceeds the level of the new dividend. Taking everything into account, Alexander credits the SAR stock with a buy and gives it a target price of $ 19.75, which implies a 16% increase for the coming year. (To see Alexander’s track record, click here) Overall, Saratoga gets a unanimous Strong Buy rating from analyst consensus, based on 3 recent positive reviews. The shares are selling for $ 17.02 and have an average price target of $ 22.58, slightly more bullish than Alexander’s and suggesting a year-over-year rise of ~ 33%. (See SAR share analysis on TipRanks) Solar Capital, Ltd. (SLRC) Next on our list, Solar Capital, is an investor in senior secured loans and subordinated debt, with an investment portfolio of mid-market companies. The company invests capital in investment grade lending instruments, thereby making additional financing available to its customers. Solar Capital has a portfolio of $ 1.4 billion invested in 183 companies across 80 industries, Solar Capital was able to maintain positive earnings during the “ corona semester ” despite a sharp decline in net result for T1 and T2. In a favorable situation, revenues, which turned negative in Q1, turned positive again in Q2, and Q3 earnings projections show that the decline is slowing or stopping – we’ll find out in the Q3 report on November 5. Despite all this uncertainty, Solar Capital has kept its dividend stable. The company has a 7-year history of reliable dividend payments, and the current quarterly dividend of 41 cents has been paid consistently over the past 11 quarters. At an annualized payout of $ 1.64, the dividend currently pays 10.5%. In an era of official near-zero interest rate policy, this gives the SLRC an enviable return. Compass Point’s Casey Alexander, who also hedges the SAR, points out that the SLRC dividend is the main draw for investors – and that management cultivated it for it. goal. “Management has stated their intention to continue paying the dividend of $ 0.41 per share because they believe the dividend coverage is visible as it begins to create new assets at higher spreads. This is the environment that the SLRC has been waiting for and which has been the main reason it has maintained a posture of under-indebtedness in recent years, ”noted Alexander. With visible dividend coverage ahead, Alexander gives the SLRC a buy rating. Its price target, at $ 17.75, indicates confidence in a 12% upside potential. This is another stock with unanimous Strong Buy consensus rating. SLRC sits fairly with 5 positive reviews recorded. The average price target is $ 18.20, which is about a 15% increase from the current share price of $ 15.86. (See SLRC stock market analysis on TipRanks) First Hawaiian (FHB) Our latest stock today, First Hawaiian, is the holding company that owns First Hawaiian Bank. First Hawaiian offers the usual range of banking services to retail and commercial customers, with 53 branches in the Hawaiian Islands, three more in Guam and two in Saipan. Banking services include loans, deposit accounts, credit and debit cards, mortgages, insurance, and pension plans. The recently completed second quarter showed mixed results. Top line revenue showed a sequential slide, from $ 164 million to $ 152 million, but that was slight compared to the 46% drop in profits. EPS for the second quarter was 16 cents, on net income of $ 20 million. The bright spots for the quarter were total loans, which rose 3% to $ 383 million, and deposit balances, which rose 13% sequentially to $ 2.3 billion. The bank’s total assets at the end of 2Q20 stood at $ 23 billion, up 10% from the end of the first quarter, which explains management’s declaration of dividend in July. The company’s board of directors approved a regular quarterly dividend of 26 cents, which was paid in early September. At $ 1.04 annualized, that dividend pays 7.2%, which puts it well above the average yield – and well above the current yield on Treasuries. FHB has a 4-year history of reliable dividend payments, and the current statement marks the seventh consecutive quarter at current levels. Compass Point analyst Laurie Havener Hunsicker believes that a macro look at FHB justifies a bullish stance. “FHB clearly outperformed credit during the last crisis. While past results do not dictate future performance, we are impressed with FHB’s management team and its credit culture; furthermore, we believe that FHB is well positioned to outperform credit again during the COVID-19 crisis, ”the analyst noted. As per his comments, Hunsicker rates FHB a buy and sets a price target of $ 21 which suggests room for a solid 46% appreciation over the next year. (To look at Hunsicker’s track record, click here) However, Wall Street isn’t sure about FHB, and analysts are equally divided, with recent reviews at 1 buy, 1 hold, and 1 sell – for an analyst consensus note of Hold. FHB shares are selling for $ 14.42 and have an average price target of $ 16.67, which represents upside potential of 15%. (See First Hawaiian Stock Market Analysis on TipRanks) For great ideas for trading dividend stocks at compelling valuations, visit the Best Stocks to Buy from TipRanks, a newly launched tool that brings together all information about stocks by TipRanks. are only those of featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.