U.S. Markets closed

3 “Strong Buy” Dividend Stocks Yielding Over 6%

Once again, we’re scanning the markets for high-value stocks. The key factors to look for are a solid upside potential combined with a high dividend yield. Today we’ll reverse course slightly, and point out three stocks that fit that profile – and show a lower-cost, more affordable point of entry for investors.

Of the possible value factors for an investment, the dividend yield is probably the most important. It represents a quickly available, and recurring, cash return on a stock investment. With the Federal Reserve’s key rate set in the 1.5% to 1.75% range, and Treasury bond yields typically running well below 2%, dividends offer income-minded investors a route toward higher returns.

While some big-name, high-profile stocks (Apple and Microsoft come to mind, along with Visa and Mastercard) offer token dividends yielding between 0.5% and 1.5%, and the average dividend yield among S&P-listed stocks is only 2%, there is no hard ceiling on dividend yields.

We’ve used the TipRanks Stock Screener tool to search more than 6,500 stocks to find stocks with high yields exceeding 5%, along with a considerable upside potential and a Strong Buy consensus view from Wall Street’s analysts. The Screener returned 35 stocks to fit the profile – here are three of them.

PacWest Bancorp (PACW)

First on our list is a bank holding company, PacWest. These holding companies exist are formed to control one or more banks, and take advantage of Federal Reserve regulations to raise capital – through stock issues, borrowing, or acquisitions – more easily than independent banks. PacWest, based in Los Angeles and holding a market cap of $4.4 billion, is the parent company of Pacific Western Bank. The subsidiary bank has 79 branches in southern and central California, along with one branch in North Carolina, and controls $21 billion in assets.

In the last four quarters, PacWest beat the earnings forecasts three times. The exception, however, was the most recent reported quarter – Q3 2019. In that report, the company showed an EPS of 92 cents, 2% below both the estimates and the Q3 2018 number. Revenues also missed expectations, with the $285.7 million reported 1.7% below the forecast, and almost 4% below the year-ago value. Despite the recent quarterly disappointment, PACW shares were up 22.5% in 2019.

Going back as far as 2011, PACW has a history of gradually raising its dividend payment. The current quarterly payout is 60 cents per share; the company raised it from 50 cents in February 2018, marking the third increase in seven years, and a 233% increase from the 2011 value. PACW’s dividend is reliable, too, and paid out regularly each quarter. The annualized value, $2.40, makes the yield a healthy 6.54%. Finally, at a payout ratio of 65%, the dividend is easily sustainable. All of this, taken together, makes PACW a true dividend champion.

Writing from Piper Sandler, Aaron Deer sees growth potential for both the bank and its holding company. He writes, “We expect solid yearend growth after a slower summer… We look for deposits growth to also hit a double-digit pace, with good inflows from both the community bank and venture division…. Operating expenses should remain well controlled but there could be a slight uptick from the new Colorado branch and bankers hired in that market… Some credit noise is possible but we think overall asset quality should remain healthy.”

Deer gives PACW a Buy rating with a $44 price target. At current share price levels, this indicates a 20% upside potential. (To watch Deer’s track record, click here)

Deer’s is not the only bullish report PACW has received recently. The stock’s Strong Buy consensus rating is based on three reviews, all of which agree that this stock is a Buying proposition. At $36.68, the current share price is a bargain price, and the average price target of $41.67 suggests an upside of nearly 14%. (See PacWest’s stock analysis at TipRanks)

City Office REIT (CIO)

Our next stock offers a slight variation on the value factors. With a lower share price and a higher dividend yield, CIO is both easier to enter and brings a better return. Neither of these factors is surprising, as City Office is a Real Estate Investment Trust (REIT), a company formed to purchase, own, and operate various types of properties – commercial, residential, industrial – or mortgage securities, and reap the profits. By law, REITs are required to return a high percentage of their profits to the shareholders, and usually use dividends to comply. As its name suggests, City Office focuses on metropolitan office spaces. The company operates mainly in the Southern and Western US.

City Office derives its profits from 66 office buildings in Tampa, Orlando, Dallas, Denver, Phoenix, San Diego, and Portland. The properties have total of 5.9 million square feet in net rentable area, and are located in some of the country’s faster growing urban centers.

Like many REITs, CIO reports earnings as funds from operations. In the most recent quarter reported, Q3 2019 the company gave an FFO of 29 cents per share, 6.4% below the forecast, but up 3.5% year-over-year. Revenues showed a stronger yoy gain, of 16%, and came in at $38.95 million – although that was still 1% below the estimates. CIO shares gained 41.6% in 2019, far outpacing the broader markets.

CIO’s dividend, at 23.5 cents quarterly, may not sound like much, but it annualizes to 94 cents and offers a very high yield of 6.96%. The company has paid out this dividend consistently since 2015, although it has not raised the payment in that time. The payout ratio, which compares the dividend to the quarterly earnings, is 81%, a typical value for REITs.

4-star analyst Mitchell Germain, from JMP Securities, is bullish on CIO, writing, “Our positive investment opinion is driven by market mix, with an emphasis on the Sunbelt, and a compelling value-add investment strategy, anchored on adding market scale, and finding smaller investments that have less institutional interest. Shares currently trade at 11.7x (2020e FFO/share), which compares to the office REIT sector average of 17.2x, keeping us positive on the investment…”

Hanold set a $15 price target with his Buy rating, indicating confidence in an 11% upside for the stock. ( (To watch Germain’s track record, click here)

Like PACW above, CIO has three recent Buy reviews backing up its unanimous Strong Buy consensus rating. The stock’s $14.83 average price target indicates an upside potential of 9.8% from the $13.50 current share price. (See City Office’s stock analysis at TipRanks)

Starwood Property Trust (STWD)

The last stock on today’s list is another REIT, this one focused on mortgage loans, mainly commercial mortgage-backed securities and other commercial real estate debt investment, but the company has also invested in similar residential mortgage loans and securities. With a market cap of $7.01 billion, and an investment portfolio exceeding $16 billion, Starwood is the largest commercial mortgage REIT in the US.

Starwood’s most recent quarterly report – again, for Q3 of last year – showed slightly mixed results, but was generally positive. EPS was down 1.8% from the year before, but the 52 cents reported met expectations. Total quarterly revenue, at $327.19, missed the forecast by 1.5%, but was up 14.5% year-over-year. Shares slipped 1% after the report, but have since gained 5.7%. Overall, STWD shares showed a 36.7% appreciation in 2019.

STWD’s dividend has been held steady at 48 cents since 2014. This quarterly payment translates to an annualized value of $1.92 and a strong yield of 7.72%. That yield is almost 4 times the S&P 500 average, and over 4 times the average return of Treasure bonds. Combined with the moderate share price of $24.88 and the strong appreciation in the past 12 months, this makes STWD an excellent investment value.

This stock’s solid performance attracted attention from Donald Fandetti, 5-star analyst from Wells Fargo. Fandetti initiated coverage of STWD with a Buy rating, saying, “We view STWD as one of the best positioned commercial real estate finance companies that also has a history of successfully incubating new businesses… STWD’s div yield is 600+ bps over the 10-yr yield vs historical 250-350 pre-crisis periods.”

Fandetti supported his view of STWD with a $26 price target, implying a modest 4.5% growth potential to the upside. (To watch Fandetti’s track record, click here)

Starwood’s Strong Buy consensus rating is based on three Buys set in the past two months. As noted, shares sell for $24.88; the $26.50 average price target suggests an upside potential of 6.5% from that level. (See Starwood’s stock analysis at TipRanks)

  • Business
    Barrons.com

    If Coronavirus Is Killing Fewer People Than the Flu, Why Has Beijing Quarantined Millions?

    China's Leaders on the Hot Seat Market Intelligence Report by TIS Group Feb. 21: Over the past several days, we have detailed some, though not all, of the actions being taken by China's government to control the coronavirus outbreak. I was told today that roughly 50,000 people die in China each year from the flu. If the coronavirus is just another flu-like virus and the current death toll really is about 2,000, not 50,000, why then has Beijing locked down 750 million people?

  • Morgan Stanley is paying $13B for E-Trade, or $2,500 per customer. You can earn a $3,500 sign-up bonus for signing with a new broker — with one major catch
    Business
    MarketWatch

    Morgan Stanley is paying $13B for E-Trade, or $2,500 per customer. You can earn a $3,500 sign-up bonus for signing with a new broker — with one major catch

    If the latest Wall Street mega-deal doesn't make you want to switch online brokerage accounts for a lucrative sign-up bonus, maybe it should. Wall Street giant Morgan Stanley announced an agreement Thursday to pay $13 billion to acquire the online brokerage E-Trade which has 5.2 million customer accounts. “The combination will significantly increase the scale and breadth of Morgan Stanley's Wealth Management franchise, and positions Morgan Stanley to be an industry leader in Wealth Management across all channels and wealth segments,” Morgan Stanley said in a statement.

  • ‘Overprotected’ investors could get stung in the next recession, warns top Barclays strategist
    Business
    MarketWatch

    ‘Overprotected’ investors could get stung in the next recession, warns top Barclays strategist

    Rattled by rising non-China coronavirus cases — notably in South Korea — investors appear unwilling to load up on stocks heading into the weekend. Welcome to the world of helicopter investing and our call of the day from Barclays Wealth Management's chief investment officer William Hobbs, who finds overly anxious investors living in the “long shadow” caused by the financial crisis. “The most common narrative in markets is what to do when the next recession comes along — own Treasurys, own gold, own quality to such an extent that my concern would almost be that if the next recession is of a more normal variety, such as a stock retracement of 10% to 15% and moderate declines in unemployment, you'll find that you have overprotected yourself and the underperformance could actually be in the areas which you thought were giving you safety,” Hobbs told MarketWatch.

  • Analysts: 2 Big 8% Dividend Stocks to Buy (And 1 to Sell)
    Business
    TipRanks

    Analysts: 2 Big 8% Dividend Stocks to Buy (And 1 to Sell)

    The company has been making reliable dividend payments since 2014, and has raised the payment modestly in the past two years. At $1.44 annualized, the yield is a generous 8.54%. Barclays analyst Christine Cho sees PAGP growing going forward, resting as it does on a sound foundation.

  • Business
    Barrons.com

    Stocks Drop on the Week but Still Look Bubbly. Time to Prepare for a Correction.

    The last time we got to these levels, the bubble burst and a 50%-plus global bear market began,” Consider the trading action in the market's most popular stocks. The FAANGs— (FB) (ticker: FB), (AAPL) (AAPL), (AMZN) (AMZN), (NFLX) (NFLX), and Google parent (GOOGL) (GOOGL)—are up 10% year to date, adding more than $330 billion in market value to the S&P 500. What's more, the average price/earnings ratio for FAANG stocks has jumped to 35 times estimated earnings from 21 times last year.

  • Microsoft Pulling Back; Buy More Or Sell?
    Business
    Investor's Business Daily Video

    Microsoft Pulling Back; Buy More Or Sell?

    As Microsoft stock pulls back, the IBD Live Team discusses whether it's best to take profits here or double down on this IBD Long Term Leader stock.

  • Michael Bloomberg says it’s not so ‘simple’ to produce his tax returns — here’s what most high-income tax returns have in common
    Politics
    MarketWatch

    Michael Bloomberg says it’s not so ‘simple’ to produce his tax returns — here’s what most high-income tax returns have in common

    Michael Bloomberg, the billionaire former New York City mayor running for the Democratic presidential nod, says he will release his tax returns — but that's no easy feat. “I can't go to TurboTax,” Bloomberg, the founder and CEO of the global media and financial data company Bloomberg L.P., told Democratic debate moderators on Wednesday night. Bloomberg, who is worth $65.2 billion according to Forbes, said he makes money from all over the globe, so his tax payments are complex.

  • New Victoria’s Secret Owner, Sycamore Partners, Has a Storied History in Footwear: 4 Things to Know
    Business
    Footwear News

    New Victoria’s Secret Owner, Sycamore Partners, Has a Storied History in Footwear: 4 Things to Know

    It's the end of an era for Victoria's Secret, the lingerie giant that for 28 years has been under the wing of mall retail group L Brands. On Thursday, private equity firm Sycamore Partners announced that it would acquire a 55% stake in the company for $525 million. The deal, which takes Victoria's Secret off the public market at a valuation of $1.1 billion, is notable not only for its relatively modest size (L Brands' market capitalization has fallen from $29 billion at its peak in 2015 to around $6.5 billion today) but also for the brand's new owner.

  • Business
    Barrons.com

    The Dow Closes Down 228 Points. Don’t Just Blame Coronavirus, Blame the U.S. Service Economy.

    The Dow Jones Industrial Average dropped again on Friday—and yields on long-term Treasury debt fell to record lows—but investors can't simply blame the coronavirus outbreak in China this time. A key U.S. economic indicator registered its weakest reading since 2013. The Markit Services PMI, or purchasing manager index, came in under 50—the level that divides growth from contraction.

  • Bernie Sanders possibly running against President Trump is starting to scare investors: strategist
    Politics
    Yahoo Finance

    Bernie Sanders possibly running against President Trump is starting to scare investors: strategist

    There is a growing undercurrent in markets that say a battle this fall between self-described socialist Senator Bernie Sanders and President Donald Trump could be bad news for stock prices. As evidenced by the market's strong run-up in 2020, investors have yet to exit stocks on fears of a big government Bernie winning the Oval Office. But his continued strong showing in debates and national polls may lead to some profit-taking sooner rather than later.

  • Dow drops over 300 points on Fed comments, coronavirus worries
    Business
    Fox Business

    Dow drops over 300 points on Fed comments, coronavirus worries

    U.S. equity markets turned sharply lower Thursday midmorning as investors digested fresh comments from the Fed and rising fears over the coronavirus. The selling pushed the S&P 500 and the Nasdaq Composite off record highs and clipped over 300 points off the Dow Jones Industrial Average before giving back some of those losses. Fed Vice Chairman Richard Clarida told CNBC the market was too aggressive in pricing in a Fed rate cut later this year which investors including Keith Fitzgerald of Money Map Press cited as the catalyst for the sudden reversal in the equity markets.

  • Warren Buffett’s annual letter: Here’s what investors are looking for
    Business
    MarketWatch

    Warren Buffett’s annual letter: Here’s what investors are looking for

    Berkshire Hathaway Inc. (BRK)(BRK) will release Warren Buffett's eagerly awaited annual shareholder letter, the company's annual report and its latest earnings around 8 a.m. Eastern on its website, where investors can also peruse the chairman and chief executive's past missives. Mark Hulbert: Warren Buffett had a tough year—how might he explain it? Investors of all stripes have dived into the lengthy letters over the years to pick up Buffett's insights on a range of topics beyond Berkshire's performance.

  • Vanguard vs. Fidelity: Which Brokerage is Best?
    Business
    SmartAsset

    Vanguard vs. Fidelity: Which Brokerage is Best?

    If you're looking for a platform for investing, you may consider two of the largest brokerage firms, Vanguard and Fidelity. Vanguard, which has long stressed the value of low-cost investing, tends to focus on long-term investing, such as opening a retirement savings account or a brokerage account that can help investors build funds for a rainy day. On the other hand, Fidelity pursues a broader focus, one that includes retail investors as well as sophisticated traders.

  • Mason Hawkins' Southeastern Buys 4 Stocks in 4th Quarter
    Business
    GuruFocus.com

    Mason Hawkins' Southeastern Buys 4 Stocks in 4th Quarter

    Southeastern Asset Management recently disclosed its portfolio updates for the third quarter of 2019. Founded by Mason Hawkins (Trades, Portfolio) in 1975, the Memphis, Tennessee-based firm manages the Longleaf Partners Funds. GuruFocus has detected 4 Warning Sign with WMB.

  • Business
    TheStreet.com

    What Is Capital Gains Tax and When Are You Exempt?

    The subtraction of capital losses from capital gains is known as the net capital gain. That means one can offset the other, whether it's a gain offsetting a loss to make sure you still have a profit or a loss offsetting a gain to help pay less of a capital gains tax that year. To put it into numbers, let's say you have $5,000 of shares in one company and $2,000 of shares in another business.

  • Business
    Barrons.com

    A Rosy Forecast for Microsoft Shares

    We raise our price target to $212 [from $190], based on the shares trading to 30 times enterprise value/calendar-2021 free cash flow. We believe that the investment narrative for the next five years could be defined by 1) Azure's hybrid cloud portfolio and nonconflicted business model, which will allow Microsoft to sustain a competitive advantage, with its commercial cloud business eclipsing $100 billion in revenue by fiscal 2024. The combination of the Teams and Power Platform [software, which] could help Microsoft reshape the business-productivity landscape and enable it to move beyond a tactical information-technology vendor to a key strategic partner in the “middle office.

  • Opinion: Bernie Sanders and the Missing $25 Trillion
    U.S.
    WSJ

    Opinion: Bernie Sanders and the Missing $25 Trillion

    During the Democratic debate on Feb. 19, 2020, Pete Buttigieg skewered Bernie Sanders over the high cost of his plans. Image: Mike Blake/Reuters

  • 3 Marijuana Stocks Poised to Lead a Sector Rebound
    Business
    TipRanks

    3 Marijuana Stocks Poised to Lead a Sector Rebound

    As the Canadian cannabis market continues to fail to meet sales projections, the licensed producers (LPs) with the best balance sheets are poised to lead a market rebound. With both Aurora Cannabis and Tilray implementing restructurings, the industry could see a void in certain markets providing opportunities for companies with the ability to fund growth initiatives. Based on the Aurora restructuring, the company is exiting several international markets along with shifting a focus to a value brand.

  • Are Investors Undervaluing Gilead Sciences, Inc. (NASDAQ:GILD) By 23%?
    Business
    Simply Wall St.

    Are Investors Undervaluing Gilead Sciences, Inc. (NASDAQ:GILD) By 23%?

    Today we'll do a simple run through of a valuation method used to estimate the attractiveness of Gilead Sciences, Inc. (NASDAQ:GILD) as an investment opportunity by projecting its future cash flows and then discounting them to today's value. This is done using the Discounted Cash Flow (DCF) model. Remember though, that there are many ways to estimate a company's value, and a DCF is just one method.

  • Buffett Bets on America Again
    Business
    GuruFocus.com

    Buffett Bets on America Again

    Investors searching for a guru that has been uber-bullish on the U.S. economy for decades need not look beyond Warren Buffett (Trades, Portfolio). In many televised interviews and his annual letters to shareholders of Berkshire Hathaway, Inc. (NYSE:BRK.A) (NYSE:BRK.B), the guru has emphasized why the largest economy in the world will continue to grow infinitely. GuruFocus has detected 5 Warning Signs with BRK.A. Click here to check it out.

  • Stock market news live: Stocks fall, Treasury yields slump amid ongoing coronavirus fears
    Business
    Yahoo Finance

    Stock market news live: Stocks fall, Treasury yields slump amid ongoing coronavirus fears

    Existing home sales data, IHS Markit's February purchasing managers' indices for the U.S. and coronavirus developments remained a focus for investors. The three major U.S. indices ended the day and week lower Friday as investors rotated out of risk assets and into safe havens, sending gold prices and Treasuries higher. Declines in the Dow were led by shares of Microsoft and Apple, down 3% and 2%, respectively, during Friday's session.

  • Business
    Barrons.com

    A Contrarian Economist Is Warning of Recession and Deflation. He’s Been Right Before.

    Economist David Rosenberg has been warning for years that the U.S. economy isn't as healthy as it might seem. In 2009, he moved to Toronto-based wealth manager Gluskin Sheff & Associates, serving as chief economist and maintaining his bearish outlook for much of one of the longest bull market in history. Barron's caught up with Rosenberg, who recently set off on his own as chief economist and strategist at Rosenberg Research & Associates.

  • Here’s three reasons why the 30-year Treasury yield plunged to a record low
    Business
    MarketWatch

    Here’s three reasons why the 30-year Treasury yield plunged to a record low

    The U.S. 30-year Treasury bond yield dropped to an all-time low on Friday, sparking worries among investors who wonder what it's saying about the economy's future prospects. Analysts say the slump in the long bond's yield this week reflects a confluence of factors including easy Federal Reserve monetary policy, concerns about the COVID-19 epidemic's impact on economic growth, and an absence of inflationary pressures. Historically, a slump in long-term yields can indicate fears that growth will start to disappoint and inflation will fall which may make the real return on bonds more attractive.

  • The 4 Most-Bought Guru Stocks of the 4th Quarter
    Business
    GuruFocus.com

    The 4 Most-Bought Guru Stocks of the 4th Quarter

    Hedge funds flock to big-name companies like Amazon CNBC also reported that Goldman Sachs Group Inc. NYSE:GS) said in a note that the typical hedge fund "now carries 69% of the long portfolio in its top-10 holdings, up from 55% in 2005." The note also mentions that investors are "crowding into the biggest stocks" like Amazon and Microsoft.

  • Business
    Barrons.com

    Virgin Galactic Stock Is Skyrocketing. It’s Just Hype.

    Every couple of years, a new stock mania captures the imagination of the investing public. It may be (SPCE) (ticker: SPCE), which could very well be the frothiest stock around right now. Late last year, Virgin Galactic went public through a merger with Social Capital Hedosophia Holdings, a special-purpose acquisition company.