Stock markets are taking a dive, with the S&P 500 slipping 5% from its peak and the NASDAQ falling 9%. The sudden drops, after weeks of fairly steady gains, brought the value of defensive investments into a sharper focus. Investors have just gotten a quick object lesson in a truth that should never be forgotten: stock markets can turn on a moment’s notice.
The shift, whether a temporary correction or the start of a new cycle, makes the importance of protecting your portfolio clear. Defensive stocks have a better look, after all, in the wake of a market drop. And that makes the higher-yielding dividend stocks more attractive.
Right now, the average dividend yield among S&P-listed companies is only ~2%; that’s low, but in our era of Zero Interest Rate Policy (ZIRP), it’s considered a strong return. Fortunately, it’s only an average – there are plenty of stocks out there with higher dividend returns.
Using the TipRanks database, we’ve located three that are yielding 7% or better – and each has received a thumbs up from investment bank RBC.
Brookfield Property Partners (BPY)
We’ll start with Brookfield Property Partners, a real estate company with global reach and a highly diversified portfolio of properties. The company has its hands in retail and commercial space, offices, industrial parks, student housing, multi-family residential units, and hospitality properties – in short, Brookfield is involved in just about any sector of the real estate business. From a major presence in the UK’s university dorm system – more than 5,700 beds – to prime office buildings in major world hubs – New York, Toronto, LA, Sydney – to urban multi-use projects like Manhattan West, Brookfield pursues profitability and resilience through diversity.
Hard times during the coronavirus pandemic have pushed real estate values down and interrupted income streams from rent collection – and this shows in Brookfield’s financial results, despite the diverse portfolio. EPS slipped further in Q2, falling from the previous quarter’s 49-cent loss to a net loss of $1.26. Funds from Operations came in at $178 million, but net income was reported at negative $1.5 billion.
Despite the sharp decline in revenues and earnings, Brookfield has kept up its dividend payments. The regular quarterly dividend of 33 cents per share is next scheduled for payment at the end of September, but has already been declared. At this rate, the dividend annualizes to $1.32 with a stellar yield of 11.8%. The company shored up its liquidity situation at the end of August, completing $2.2 billion in new financing arrangements, a move that will help to keep the dividend sustainable.
RBC analyst Neil Downey describes Brookfield as “playing a long game with a steady hand.” Downey rates the stock an Outperform (i.e. Buy) along with a $17 price target that implies a robust 51% return potential for the coming year. (To watch Downey’s track record, click here)
“Acute tenant pressures are now easing, but a wave of retailer restructurings and structural headwinds for physical retailing are likely to persist. The company’s high financial leverage and high cash flow payout ratio amplify the sensitivity of its unit price and investor angst. We continue to believe these forces have pushed the unit price to a sizable discount to intrinsic value, thus offering out-sized return potential with the passage of time and a return to greater normalcy,” Downey opined.
Overall, with 3 “buy” ratings against just 1 “hold,” BPY shares have earned their Strong Buy consensus rating. The stock is selling for $11.24, and the average price target of $14.06 implies that there is room for 25% upside growth. (See BPY stock analysis on TipRanks)
New York Community Bancorp (NYCB)
Next on our list is a savings bank, the New York Community Bank. With over $54 billion in assets, NYCB is one of the nation’s largest banks. It boasts over 230 branches, and serves customers in the NYC Metropolitan area (including New Jersey), as well as Northeastern Ohio, South Florida, and Central Arizona.
NYCB has managed to maintain positive earnings during the coronavirus crisis, beating expectations in both quarters of 1H20 and showing a sequential gain in Q2. Second quarter EPS came in at 21 cents, with total net income up 9% to $97.1 million. The bank saw gains in total loan accounts, and steady total deposits of $31.7 billion.
Solid performance allowed the bank to keep up its regular quarterly dividend payment, of 17 cents per common share. The company has a 5-year history of reliable dividend payments. At the current rate, the dividend annualizes to 68 cents and yields 7.4%. Management has shown no inclination to change the dividend, which is easily affordable for the company at current income levels.
Covering the stock for RBC, analyst Steven Duong sees it in a solid position to keep delivering positive results.
“NYCB is better positioned for a credit downturn and we expect NIM expansion beyond FY21, while expenses remain controlled. NYCB’s PPNR will be strong enough to support our expected credit losses and the company’s dividend. The current dividend yield is very attractive,” Duong noted.
Backing this optimistic outlook, Duong gives NYCB an Outperform (i.e. Buy) rating, and his $12 price target implies room for 30% upside growth in the year ahead. (To watch Duong’s track record, click here)
Overall, New York Community Bank has a Moderate Buy rating from the analyst consensus, based on 10 reviews, including 4 Buys, 5 Holds, and a lone Sell. Shares are selling for $9.24, and the average price target is $11.95, in line with Duong’s above. (See NYCB stock analysis on TipRanks)
Artisan Partners Asset Management (APAM)
For the last stock on our list, we move to the asset management sector of the financial world. Artisan Partners offers advisory services for investors, including portfolio management, financial planning, and investment supervision. The company operates worldwide, and boasts over $127 billion in total assets under management. Artisan Partners has offices across the US, and its international presence is represented in Singapore, London, Dublin, and Sydney.
Shares in APAM are up 23% year-to-date, showing a full share price recovery from the late-winter market swoon. The company’s financial results in the first half of 2020 marched in line with the share results – there was a sharp drop in Q1, but a quick recovery in Q2. The second quarter EPS came in at 71 cents, 10 cents better than the forecast, while the top-line revenues of $209 million were in line with the previous two quarters.
These solid results have allowed APAM to keep up its dividend payment. The company paid out 67 cents per common share at the end of August. At this rate, the payment has a yield of 7.2% and a total annual value of $2.68 per share – but the company typically adjusts the payment to fit earnings, and pays out at least one special dividend per year.
RBC analyst Kenneth Lee writes, “We revise our EPS estimates upwards as we contemplate a more favorable organic growth outlook. We continue to favor APAM’s focus on differentiated [and] non-indexable investment strategies. We would highlight that 12 out of 18 of the firm’s investment strategies have outperformed their benchmarks after fees YTD…”
Lee sees APAM as a strong performer with a reliable dividend, and rates the stock an Outperform (i.e. Buy). His $42 price target suggests a 13% potential upside from current levels. (To watch Lee’s track record, click here)
All in all, Artisan Partners has a Strong Buy analyst consensus rating, with 4 Buys and just one Hold set recently. The average price target is $42, matching Lee’s, while shares are currently selling for $37.07. (See APAM stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.