The S & P 500 has broken over 3,000, marking a milestone in the current bull rally. There is a deepening feeling that stocks are a leading indicator, which shows that the economy will reverse in 2H20.
This is the blue sky scenario and it can happen. However, we live in an uncertain world and even the most optimistic investors will look for ways to defend their portfolios in times like these. It makes sense to look at value stocks, stocks that trade at low cost but have high upside potential, and high-yielding dividend stocks whose steady stream of income is a cushion against stock devaluation. We used the TipRanks database to find three stocks that match this profile.
<p class = "Artboard-Atom Artboard-Text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Ares commercial property (ACRE)“data-reactid =” 14 “>Ares commercial property (ACRE)
We start with a real estate investment trust. These companies typically pay dividends with high returns because of tax codes, they have to pay back a high percentage of their income directly to shareholders. Typical of its niche is Ares, which takes up, invests and manages commercial real estate loans in medium-sized companies.
The economic and market slide of the past few months has hit the company hard. With the slowdown in business activity, there was less opportunity for real estate loans and repayment income was impacted. Ares recorded a sequential drop in earnings from Q4 to Q1, although at 11% it was not as deep as many similar companies. However, the company’s stock price has still fallen. With a net exchange rate loss of 50%, Ares has performed poorly in the current cycle.
Though the stock has fallen and earnings are lower, Ares has maintained its solid dividend. The company paid out 33 cents per share in the first quarter, slightly more than its EPS. However, the yield is the real attraction here – at 16.5% it is sky-high and far above the average of 2.2% among comparable companies in the financial sector.
JMP 5-star analyst Steven DeLaney sees ACRE’s current situation as an opportunity to shop at lower prices. He writes about the stock: “… our prospects for a recovery in the value of ACRE stocks remain positive after the expected months of temporary economic turmoil, as the company has minimal risk for commercial real estate with higher risk and generally a solid credit Underwriting has been around since its inception in 2012. “
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The purchase rating of DeLaney is supported by a price target of USD 10 This suggests a robust upward trend of 32%. (To see DeLaney's track record, Click here) “data-reactid =” 19 “> DeLaney’s buy recommendation is supported by a $ 10 price target, suggesting a robust upward trend of 32%. (To see DeLaney’s track record, Click here)
Ares has a unanimous consensus rating for strong buy analysts based on 3 current buy ratings. The shares are sold for $ 7.61 and the average price target corresponds to that of DeLaney at $ 10. The upward movement of 31% and the ultra-high dividend yield should include investors. (See ACRE stock analysis on TipRanks.)
<p class = "Artboard-Atom Artboard-Text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Barings BDC, Inc. (BBDC)“data-reactid =” 29 “>Barings BDC, Inc. (BBDC)
Next up is a business development company, Barings BDC. This company offers its clients asset management and direct procurement to raise capital. Barings invests in medium-sized debt, stocks and fixed income assets with clients around the world. Barings has assets under management of over $ 327 billion worldwide.
Barings managed to avoid strong sequential declines in the first quarter, but the 15-cent EPS still missed the forecast by one cent. Sales of $ 18.7 million missed the forecast by almost 2%. However, it showed modest growth compared to the previous year.
BBDC pays 16 cents per share quarterly, which equates to an impressive 64% annual return of an impressive 9%. While not as outstanding as Ares above, it’s still more than four times the average return of 2% that S&P listed companies generate.
<p class = "Canvas-Atom Canvas-Text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Finian O'Shea covers this inventory for Wells Fargo and writes: "With a stable portfolio, leverage and liquidity profile, we believe that BBDC is one of the names that will sail through the recession with relatively little damage – and is therefore likely to generate a very attractive return in the medium to long term." ( To look at O'Shea's track record, Click here) “data-reactid =” 37 “> Finian O’Shea covers this stock for Wells Fargo and writes:” With a stable portfolio, leverage and liquidity profile, we believe that BBDC is one of the names comparatively due to the recession sailing will do little harm – and therefore likely to generate very attractive returns in the medium to long term. “(To look at O’Shea’s track record, Click here)
Strong Buy’s consensus rating is another unanimous vote based on 3 ratings. BBDC sells for $ 7.40 a share, and the average price target of $ 8.50 indicates upside potential of 10%. (See Baring’s BDC stock analysis on TipRanks)
<p class = "Artboard-Atom Artboard-Text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Ready Capital Corporation (RC)“data-reactid =” 47 “>Ready Capital Corporation (RC)
Finally, there is another REIT that focuses on commercial mortgages. Ready Capital buys, creates, finances and manages commercial mortgage loans and related real estate securities, including multi-family real estate. The company’s customer base is in the United States, where it boasts of providing over $ 3 billion in capital through its services.
Ready suffered the worst drop in the stock price on this list as it fell 59% since February. Shares have remained unchanged since their initial decline, and earnings plummeted from over 40 cents to just one cent in the first quarter.
However, the outlook for the second quarter is better. Forecasts assume an EPS of up to 52 cents in the second quarter. Most investors seem to see Ready’s pain as burned in – repayments have been declining, but if the economy improves, the situation is likely to reverse. In the meantime, Ready has kept its dividend at 40 cents quarterly. The annualized payment is $ 1.60 per share. These are decent numbers, but the return is where it is. RC’s dividend is a staggering 25% after the price drop – more than enough to make the potential risks worthwhile.
Crispin Love, analyst at Piper Sandler, writes: “We believe that RC will survive volatility in 2020/2021 due to its diversified platform, low LTVs, PPP benefits and the potential to buy non-performing assets. The company’s $ 4.2 billion portfolio of 4,500 loans shows LTVs from around 60% and 90% of the loans are current through April 30. In the CRE portfolio, 10% of the loans are forgiving, while 7% of the loans in the Resi portfolio are forgiving. Given RC’s focus on low equilibrium, we believe there was concern that the indulgence rates could be significantly higher. “
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "All this is a recipe for a finished product Analysts at $ 17.50 shows how strong their trust is – it implies an upside potential of 195% for the coming year. (To see Love's track record, Click here) “data-reactid =” 52 “> All of this is a recipe for a stock ready to recover, and Love rates RC with a buy. The analyst’s target price of $ 17.50 shows how strong his trust is is – it implies an upside potential of 195% for the coming year. (To see Love’s success story, Click here)
While RC stocks get another strong buy from the analyst consensus, which is also based on 3 buy ratings, there is some caution here, which is shown by a hold thrown into the mix. Ready’s shares are selling for $ 5.92, and the average price target of $ 13.50 indicates a strong upward movement of 128%. (See Ready Stock Analysis on TipRanks)
<p class = "Artboard-Atom Artboard-Text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "To find good ideas for trading dividend stocks at attractive valuations, visit TipRanks ‘Best Stocks to Buy, a newly launched tool that brings together all the insight into TipRanks’ stocks.“data-reactid =” 62 “>To find good ideas for trading dividend stocks at attractive valuations, visit TipRanks ‘Best Stocks to Buy, a newly launched tool that brings together all the insights into TipRanks’ stocks.