Looking for at least 10% dividend yield? Analysts Suggest 2 Dividend Stocks to Buy

Do you like dividends? Of course you do – and rightly so!

Researchers who study historical stock market performance estimate that over time, the payment (and reinvestment and compounding) of dividends have contributed between 30% and 90% of the total returns of the S&P 500. Put simply, if you are not investing in dividend stocks, you are wrong.

Using the TipRanks platform, we looked for two stocks that offer dividend yields of at least 10%, which is almost 6 times higher than the average yield found in the markets today. Each of them is rated Buy, with some positive analyst reviews recorded. Let’s take a closer look.

Crestwood Equity Partners (CEQP)

We will start in the energy sector, with Crestwood Equity Partners. The energy sector is notorious for losing cash, and energy companies frequently use that cash to fund generous dividend payouts. Crestwood is one such dividend payer. The company, which is a midstream operator, has an extensive network of assets, located in several of the richest oil and gas producing regions in the continental United States.

These assets include gathering, processing, storage and terminal facilities, as well as trucks and railcars for transportation, in the Williston, Delaware and Powder River basins. The company also has a presence in the Carolinas, Florida, as well as Mississippi and Missouri. Crestwood has three main operating segments, namely Gathering & Processing North, Gathering & Processing South and Storage & Logistics.

Since May last year, Crestwood has streamlined its operations through a series of strategic divestitures and acquisitions. The company has ditched some of its non-core assets, including gas operations in the Marcellus Shale and its former network in the Barnett Shale. This allowed the company to focus its resources on expanding its areas of the Delaware Basin, doubling its natural gas operations in that region.

Crestwood posted mixed results in its recently released 1Q23 results. The company posted quarterly revenue of $1.26 billion, down 20% year-over-year and missing the forecast by $40 million. The company’s GAAP revenue of 15 cents a share, however, was up from a 4-cent EPS loss in 1Q22, and was 5 cents better than expected.

Of particular interest to dividend investors, Crestwood’s distributable cash flow (DCF) for the first quarter was $103.6 million. That was down from $116.7 million in the year-ago quarter, but was more than enough to cover the company’s distributions to common stockholders, which amounted to $69 million.

These distributions were made through a dividend of 65.5 cents per common share, which was paid on May 15. The annualized payout of $2.62 gives a high return of 10%.

Among the bulls is Truist’s 5-star analyst Neal Dingmann, who takes a bullish look at Crestwood.

“We believe Crestwood will benefit from the fruits of its relatively recent strategic merger and acquisition, with a near-term upside already evident from better-than-expected new connected wells in the last quarter. Additionally, with notable short-term increases, the company is rapidly making up for any lost ground caused by last year’s storms and other issues,” Dingmann said.

“We continue to believe that Williston and Delaware remain two of the key regions where additional infrastructure will be required to continue planned operations. We expect CEQP to achieve its 3.5x leverage target over the next few quarters, which will open up more opportunities for shareholder returns,” the analyst added.

Going forward, Dingmann expects the stock to hit $30 per share in the next 12 months, which will result in a gain of 13%. Based on the current dividend yield and expected price appreciation, the stock has a potential total return profile of approximately 23%. This projection justifies Dingmann’s buy rating on the stock. (To see Dingmann’s track record, click here)

Overall, analysts on the street give CEQP shares a strong buy consensus rating, based on 6 reviews that include 5 buys against just 1 take. The shares are currently trading at $26.69 and their average price target of $29.83 implies an upside of around 12% over the next 12 months. (See CEQP Stock Forecast)

SFL Company (SFL)

We will now move from the energy sector to ocean freight, another stock class that has long been known as dividend champions. SFL Corporation is a major player on the global maritime communication lanes and operates a fleet of 74 ships, mainly cargo carriers. The company’s vessels include bulk carriers, tankers, container ships and car carriers, and range in size from relatively modest 57,000 ton bulk carriers to a 308,000 ton VLCC or very large crude carrier. . SFL has a history of selling older vessels and reinvesting the proceeds into newer vessels, in order to maintain a modern fleet.

A fleet of this size and diversity allows SFL to handle almost any cargo imaginable, and the company’s vessels are found on all major ocean trade routes around the world. The company’s vessels are operated primarily on long-term fixed charters, which stabilizes both the revenue stream and operating costs. SFL is one of the largest ship-owning companies in the world and has been listed on the stock exchange since 2004. The company has paid a dividend every quarter since its IPO.

SFL operations are often booked years in advance and the company has a large charter backlog. In the latest financial report, for 1Q23, the company noted that two of its car carriers had their contracts extended by three years, which added some $155 million to the backlog, and that Herculesan ultra-deepwater drilling rig currently in Namibia, had a new four-year contract, increasing the backlog by approximately $50 million.

Also in the 1Q23 report, the company posted net income of $6.3 million, or 5 cents per share. This EPS figure was 10 cents lower than expected. Despite the lack of profits, the company maintained its policy of return on shareholders’ capital, both through buybacks and dividends. SFL management announced a buyback policy totaling $100 million and declared a cash dividend of 24 cents per common share. Dividend payment is scheduled for June 30; at its current rate, it annualizes at 96 cents per share and yields 10.3%.

All of this caught the attention of BTIG analyst Gregory Lewis, who says: “Over the past year, SFL has paid out 30-60% of the quarterly OCF in dividends, suggesting that SFL has sufficient leeway to increase its dividend over time… SFL continued to renew its fleet in 1Q, with agreements for the sale of a Suezmax and two chemical tankers for a combined amount of around 63 M $. All three vessels traded on the spot market. In the second quarter, SFL sold another unhedged Suezmax, generating approximately $41 million in proceeds that can be recycled into new ships. Bottom Line: SFL continues to execute its portfolio strategy, favoring a diversified fleet with high contract coverage that can support dividend growth through stable cash flow.

To that end, Lewis values ​​SFL shares long and gives them a price target of $13, suggesting an upside of around 39% on the one-year horizon. (To see Lewis’ track record, click here)

SFL appears to be flying under Street’s radar and currently Lewis is the only current analyst review for the stock, which is trading at $9.32. (See SFL Inventory Forecast)

To find great ideas for dividend-paying stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that brings together all of TipRanks’ stock information.

Disclaimer: The views expressed in this article are solely those of the analysts featured. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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