Investing

8 Dividends Yields of 10% and Higher That May Have Upside Potential

Jon C. Ogg

Icahn Enterprises L.P. (NYSE: IEP) is the investment vehicle associated with activist investor Carl Icahn. The current $8.00 annualized per unit distribution has grown since being held static at $6.00 per year from $2014 through 2017, but it is not really followed by Wall Street analysts. The Icahn entity’s current price of $69 or so compares with a 52-week range of $50.33 to $79.65. Note that this $14 billion entity has traded since the 1980s, and it went over $120 a share ahead of the Great Recession and challenged that high again back in 2013 and 2014. The current distribution indicates an 11.5% yield. With no analyst coverage to speak of, investors may have even a harder time predicting earnings and distributable gains and cash flows than in, say, Berkshire Hathaway.

National CineMedia Inc. (NASDAQ: NCMI) is an advertising network that sells through movie chains and theaters in nearly 200 market areas. It owns a 48.6% interest in National CineMedia and is the group’s managing member. It has more than the $500 million market cap, and after raising its dividend to $0.22 per quarter in 2011, it did lower that payout to $0.17 per quarter in 2018. The company is using a component of cash flow, cash and other metrics to pay a current dividend yield of 9.65%. While shares trade near $7, the consensus target price is $9.06 and the 52-week trading range is $5.88 to $10.94.

New Media Investment Group Inc. (NYSE: NEWM) is one in which investors are entirely on their own to evaluate whether the 18% dividend yield is sustainable. The company is in a pending merger with Gannett to consolidate the newspaper and media industry even further, and not every investor is happy with the terms, as Gannett has a $1.1 billion market value that is more than double that of New Media. This situation remains fluid, and New Media’s stock price drop from above $20 back in 2016 shows that it has not been immune to print media’s woes, With a recent share price of $8.30, New Media has a 52-week trading range of $7.08 to $16.25 and a consensus target price of $11.00.

New Residential Investment Corp. (NYSE: NRZ) is a residential credit mortgage REIT that has seen its share price fall handily from earlier in 2019. Still, its 14% dividend yield is above peers, and Wedbush Securities sees it rising from $14.20 currently to as much as $18.00. Surprisingly, the consensus target price was even higher than the 26% or so upside called out by Wedbush. Its current $2.00 annualized per share dividend payment has been covered more in depth after the recent analyst call, but the shares are down 21% from a year ago and down about 15% in the past 90 days or so.

Tanger Factory Outlet Centers Inc. (NYSE: SKT) has been public and has paid dividends for more than 25 years. The REIT and outlet center operator has still managed to grow its dividend since recovering from the Great Recession, and there appear to be some continued concerns over its ability to operate in the current retail apocalypse, when Amazon and online sellers are eating into every retailer. The $1.42 per share annualized dividend comes with a 9.7% yield, against a $14.65 share price, but the 52-week range of $14.51 to $24.91 should explain just how concerned the investing community is about earnings in the future. The consensus target price of $15.17 also isn’t exactly robust, considering the current price and how much it has come down from the highs, as this peaked at more than $40 back in 2016.

Western Midstream Partners L.P. (NYSE: WES) is a $10 billion MLP, and its current annualized distribution of $2.47 per unit generated a yield equivalent of 10.6%, based on the current $23.20 price. With that unit price down from a 52-week high of $36.16 during the recent exodus of anything tied to energy, its consensus price target is still somehow up at $32.50. Western Midstream has continued to grow its quarterly distributions since 2013, and when it offered its 2019 outlook, it noted that its distribution coverage ratio was 1.20 times. With equivalent earnings per unit of $1.69 in 2018, its consensus estimates are $1.89 per unit in 2019 and $2.27 per unit in 2020. Still, revenue of more than $2.2 billion peaked in 2017, and 2019 and 2020 are expected to be the recovery years to back above that.