TipRanks
2 ‘Strong Buy’ Stocks With 7% Dividend Yield
You can get whiplash, trying to follow the market fluctuations these days. Volatility rules for now, as investors are pulling out of Big Tech – a move that is pushing the general markets down. The bearish sentiment comes as new COVID case numbers are falling, along with the weekly unemployment claims. Both are positive news bites for the economy, and will help to justify increased economic opening. At the same time, a Congressional COVID relief package working its way through the legislative process promises a booster shot for consumer spending – and combined with a recent rise in oil prices, this has market watchers thinking about inflation. The result: the US Treasury’s 10-year bond has hit a yield of 1.48%, a one-year high. So investor money is pulling out of stocks, and heading over to bonds. Overall, it’s a situation tailor made for defensive stocks. High-yield dividend plays are getting lots of love from Wall Street’s stock analysts, and are showing high upside potential as investors move toward them. These are the stocks that pad a portfolio, providing an income stream capable of compensating for low share appreciation. Using TipRanks database, we’ve found two dividend plays that are yielding just above 7%. If that’s not enough, all three received enough support from Wall Street analysts to earn a “Strong Buy” consensus rating. Sixth Street Specialty Lending (TSLX) The financial sector is frequently a source of high-yielding dividend stocks, so it makes sense to look there. Sixth Street Specialty Lending is, as its name suggests, a player in the credit industry, where it is a provider of capital and credit financing for small- to mid-market companies. These small and medium enterprises are the traditional engine of America’s business sector, providing a majority of all jobs created, and specialty finance companies like Sixth Street are essential to their success. Over the past year, two trends have been clear in Sixth Street’s performance. First, the company showed a steep drop earnings when corona hit, followed by a strong rebound in 2Q20, with the EPS figure falling since then back into line with historical norms. And second, the stock’s share price has regained value slowly but steadily since hitting bottom late last March. A quick look at the numbers bears this out. TSLX showed an earnings loss in Q1 last year, but the 79 cents per share reported in Q4, while down 34% sequentially, was still up 41% year-over-year. The stock has also regained share price, rising 112% from its ‘covid panic’ trough. Sixth Street’s stock saw a momentary spike earlier this month, when it announced the Q4 results, along with the latest dividend declaration. The company’s earnings and revenue met expectations, and management declared a 41-cent per common share base dividend, along with a $1.25 special dividend. Sixth Street has a history of using special dividends to supplement the base payment. At the current base rate, the dividend yields a robust 7.5%. Raymond James analyst Robert Dodd is impressed with Sixth Street’s overall performance, but especially likes…
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