3 large dividend divisions yield at least 9%; BTIG says “Buy”
How important are dividends to the profits of equity investors? Investment guru John Bogle told the Financial Industry Regulatory Authority (FINRA) on 15 October 2007, “Over the past 81 years…, reinvested dividend income has accounted for about 95 per cent of long-term compound returns. companies in the S&P 500. These impressive figures seem to suggest that mutual funds highlight the importance of dividend income. “That is, dividends are very important! Of course, the average stock of the S&P 500 currently only pays a dividend yield of about 2%, which is not much. If you want to get a better result, the REIT sector is a great place to start looking for high-yield dividend stocks. REITs are companies that acquire, hold, operate and manage real estate portfolios, usually some combination of residential or commercial real estate, or related mortgages and mortgage-backed securities.The tax law requires these companies to distribute profits directly to shareholders. back, and most choose dividends as the means of their choice to match, which often results in high dividend yields in the sector.The slowly weakening COVID epidemic has made it difficult for property managers as tenants have had difficulty renting and landlords have difficulty renting vacancies. Tim Hayes, BTIG analyst however, he believes that there are reasons to pay special attention to the properties of CRE. “While recognizing the fundamentals of commercial real estate (CRE) and the potential risk of capital / income, we believe there are a number of reasons to be constructive, particularly by the industry trading at a discount compared to previous levels and offering attractive dividend yields with wide interest rate spreads at key interest rates.” Hayes commented. Against this background, we opened the TipRanks database to obtain the latest statistics on Hayes ’CRE choices. These are the stocks for which the analyst initiated Buy ratings, pointing to their high dividend yields. We are talking about at least 9% here. Ares Commercial Real Estate (ACRE) The first dividend option is Ares Commercial Real Estate, which focuses on the commercial real estate mortgage sector. Ares boasts a diversified portfolio – of office space, apartments, hotels and mixed-use properties – mainly in the Southeast and West. The company has invested more than $ 2 billion in 49 separate loans, 95% of which are senior mortgages. At the end of October, the company released 3Q20 earnings (the last reported quarter), showing total revenue of $ 22.4 million, an increase of 13% over the previous year. Earnings of 45 cents per share increased by 40% compared to the previous year. Ares also closed a $ 667 million commercial property with a secured loan obligation with 23 financing-reinforced financing. On the dividend front, Ares declared its 4Q20 dividend in December. The payout of 33 cents per ordinary share was paid on January 15 – and is fully covered by current income levels. At the current exchange rate, the dividend will turn to $ 1.32 annually and yield an impressive 10.50% return. Among the bulls is Hayes, who wrote, “We believe that ACRE shares are being unfairly discounted relative to other commercial mREITs, with a strong Ares sponsor, a very healthy balance sheet and limited risk exposure.” In his view, this puts the company “in a good position to face the headwind of COVID-19”. In line with these comments, Hayes is buying ACRE and its $ 13.50 price target represents a 10% increase from current levels. (Click here to view Hayes history) Only another analyst has published a recent ACRE rating and also shares the stock with a Buy rating, making the analyst consensus here a Moderate Buy. The shares are priced at $ 12.28 and their average price target of $ 12.75 suggests a modest ~ 4% increase is expected. (See ACRE stock analysis at TipRanks) KKR Real Estate Finance Trust (KREF) Then there is KKR, which operates in the commercial real estate sector and has nearly half of its stakes in New York, Illinois, Pennsylvania and Massachusetts. . The company owns and finances commercial real estate; 83% of its activity is residential and office space in desirable urban areas. The quality of BSS is also reflected in the company’s quarterly results. The liquidity position was strong – KKR reported $ 700.6 million at the end of the third quarter – the last quarter reported. EPS of 56 cents increased 7% in a row and 36% year-on-year. Further evidence of the solid position of BSS came in early January, when it was announced that it had closed 7 new trade loans in the fourth quarter, totaling $ 565.4 million. This level of activity is a clear sign that BSS is recovering after the economic downturn caused by the epidemic. The solid funds allowed the company to continue the dividend – which has been held reliably for four years now. The most recent statement, made in December, related to a 43 per cent ordinary share dividend paid in mid-January. This price is $ 1.72 per common share as an average annual salary and a robust return of 9.7%. Covering the KREF, Hayes is most impressed by the move back to proactive lending, saying, “We believe the 4Q20 initiative is in line with pre-pandemic production and presents a shift from‘ defense ’to‘ crime ’as a transactional activity. We have rebounded and capital markets remain favorable. We expect that increased capital outflows will help income power and dividend coverage and may justify an increase in dividends as the macroeconomic outlook improves. “To this end, Hayes gives KREF a purchase option and 19.50 sets a price target of $ 6%, indicating an increase of ~ 6% from current levels. (Click here to see Hayes history) Wall Street has listened to all the KREFs, and the only other recent review also recommends Buy. Overall, equities have a moderate buying consensus. Meanwhile, the average price target stands at 19.26 and rises modestly by 55%. (See KREF stock analysis on TipRanks) Starwood Property Trust (STWD) For the third stock on Hayes ’selected list, we turn to Starwood, a commercial mortgage REIT, with a diversified portfolio of first mortgages and mezzanine loans, 50 million $ 500 million range. The company operates in the United States and Europe, boasts a $ 5.9 billion market top, and has offices in New York, London and San Francisco. Starwood’s high-end portfolio brought significant gains even during the 2020 “crown recession”. The company posted $ 152 million in GAAP earnings in the third quarter, up 53 cents per share, with earnings of 8% and 6%, respectively. -annually. Against this background, we can note the company’s dividend, which was kept stable at 48 cents per share for two years. The last statement was made in December, the dividend was paid on 15 January. At the current exchange rate, annualized at $ 1.92, the yield is 9.23%. Again, we look at a stock that Hayes is proposing to buy. “We see STWD as the few‘ blue chips ’in the commercial mREIT sector in terms of size, liquidity, best-in-class executive team, strong balance sheet and diversified investment platform that has consistently resulted in stronger ROE than their peers. To this end, STWD is one of the few commercial mREITs that has neither restructured their liabilities with expensive rescue capital nor reduced their dividends since the release of COVID-19, ”Hayes said. Overall, there is little action on the street heading towards STWD, with only another analyst speaking out about the company’s prospects. An additional purchase rating means that STWD qualifies as a moderate purchase. However, the average price target of $ 21 suggests that the shares will remain tied to the province for the foreseeable future. (See STWD Stock Analysis on TipRanks.) To find good ideas for trading dividend installments with an attractive valuation, visit TipRanks Best Buyable Shares, a newly launched tool that combines all of TipRanks ’stock information. Disclaimer: The opinions expressed in this article are those of the leading analysts only. The content is used for informational purposes only. It is very important that you do your own analysis before you start investing.