2 large dividend stocks with a 9% yield; RBC says “Buy”
Eevery investor wants a sure return – this is the way to make money in the markets, after all. With the major indices all posting strong gains for the year (19% on the S&P 500 and 18% on the NASDAQ), these returns are clearly on the table. But there are shorter-term downside moves, and many market experts advise both optimism and caution.
RBC chief U.S. equities strategist Lori Calvasina notes that the uptrend has been both substantial and sustained, and she is revising her mid- to long-term forecast for the S&P accordingly.
“For 2021, we are raising our S&P 500 price target and EPS forecast by approximately 4% from our previous views. Our 2021 price target is reduced from 4,325 to 4,500 and our 2021 EPS forecast is increased from $ 192 to $ 200. For 2022, we are increasing our EPS forecast by 2.7% to $ 222 from $ 216 and we are introducing a price target of 4,900, a gain of about 9% over our 2021 price target, ”noted Calvasina.
So far, so good. But in the short term, Calvasina notes that there is a high probability of a pullback before the end of the year, which will cause stocks to drop significantly.
“… We want to be clear about the message we are sending. We continue to believe that the S&P 500 will experience a period of significant volatility / decline before the end of the year, a call we have made in recent months… [We] see the risks of an economic recession as low, reducing the likelihood of a full growth crisis, and intend to treat them as a buying opportunity, ”the strategist explained.
Short-term losses, long-term gains and a buying opportunity looming – it looks like RBC is predicting a market environment that is not one for risk avers. Calvasina’s colleagues among RBC stock analysts seem to agree, as they have pointed to stocks with solid dividend yields – we’re talking about at least 9% here. These are classic defensive games for investors in an uncertain market environment.
We used the TipRanks database to search for data on two of these choices; here are the details, plus some analyst comments to add some color.
Sibanye Stillwater (SBSW)
We’ll start with Sibanye Stillwater, a South African mining company with substantial operations in Africa and the Americas. The company has precious metal mining operations, including gold and platinum, in South Africa and the United States, as well as copper and gold exploration rights in North and South America.
The company reported 983,000 ounces of total gold production last year, as well as 2.783 million ounces of platinum group metals. The company’s reserves include more than 66 million ounces of platinum group metals and more than 11 million ounces of proven gold. These reserves make Sibanye Stillwater one of the world leaders in gold production and the dominant player in the platinum group.
Sibanye’s 1H21 report showed EPS of 39 cents, up 141% from a year earlier, and record cash flow of $ 1.2 billion. The company had more than $ 710 million in cash against net debt of $ 930 million. That gave the company the confidence to declare a dividend, payable this month, of 65 cents per share, down from 10 cents a year ago. At the current rate, the dividend yields a 9.5% yield, well above the average 2% dividend seen among public companies in general.
RBC’s Tyler Broda likes what he sees here, particularly in the company’s ability to sustain returns for shareholders: to see the company offer attractive return potential.
Looking towards the end of the year, the analyst adds, “We estimate the balance sheet will be in a net cash position of $ 974 million by the end of the year, well above the cushion of. cash of $ 350 million suggested by the strategic asset allocation of the company. “
In line with these comments, Broda sets an outperformance rating (i.e. (To see Broda’s balance sheet, Click here)
Overall, while there are only two recent reviews on SBSW, they both agree that this is a buy proposition, giving the stock its unanimous consensus rating of d moderate purchase. The stock has an average price target of $ 25, which is a 77% increase from the current price of $ 13.06. (See the analysis of SBSW stocks on TipRanks)
New Residential Investment (NRZ)
Then there’s a real estate investment trust, a class of companies long known as dividend champions. These companies exist to buy, own, manage and rent various types of real estate; they also invest in mortgages and mortgage-backed securities. Tax regulations require them to return a large portion of the profits to shareholders, and dividends are a common vehicle for this. New Residential has a large portfolio, valued at over $ 6 billion, about half of which is mortgage management rights.
Over the past few weeks, New Residential has reported several interesting developments for investors, including second quarter results, a significant acquisition and a substantial increase in its dividend payout. As for the quarterly report, the company posted EPS of 26 cents per share, down from a loss of 2 cents per share in the quarter a year earlier. The merger was the completion of the previously announced purchase of Caliber Home Loans, bringing the mortgage company’s loan origination and management into the New Residential portfolio.
For our purposes here, the dividend may be the most important. New Residential has declared a payment of 25 cents per common share, which will be released in October. At current levels, this cancels out at $ 1 per share and gives a return of 9%. New Residential cut its dividend in April of last year, in response to pressure from COVID, and has increased it four times since then.
RBC’s Kenneth Lee, rated 5 stars by TipRanks, came out optimistic after hearing New Rez management on a call about the company’s status. Lee wrote: “We have organized an investor call with the NRZ management team. We started out believing that the combination of the Newrez-Caliber mortgage business and NRZ’s investment portfolio could allow NRZ to perform well in all rate environments, and we better understood the potential market share gains. and recent sales profit margin trends. We continue to favor NRZ given the potential benefit of rising rates with its MSR portfolio, the potential for dividends to increase over time as earnings rise… ”
To that end, Lee rates NRZ stocks on a higher yield (i.e. buy) and his price target of $ 12 implies a 9.5% hike this coming year. Based on the current dividend yield and expected price appreciation, the stock has a potential total return profile of 18.5%. (To look at Lee’s background, Click here)
With 4 recent opinions on file, and all to buy, New Residential obtains a unanimous rating of strong buying consensus. The stock is selling for $ 10.90 and its average target of $ 12.63 suggests growth of around 15% over the next 12 months. (See the analysis of NRZ shares on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the analysts presented. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.