8 Dividend Picks With at Least 8% Yields and Projected Upside for 2020
What is interesting about the DoubleLine Income Solutions Fund is that its yield has been the same $0.15 that it paid out monthly since inception in 2013. It has added some occasional juice by distributing something extra at the December payments. The fund also invests in junk bond sectors internationally, and some securities are even not rated. If size matters, the DoubleLine Income Solutions Fund also has over $2 billion in assets under management, with a net asset value annual return of roughly 6% per year since inception.
To show just how diverse the fund is, note that the DoubleLine Income Solutions Fund holdings were shown to be over 44% in emerging markets, about 21% in high-yield corporates, almost 8% in bank loans and over 26% in mortgage-related and pooled products. Also worth noting is that about 45% of the fund has a duration of zero to three years and another 25% or so has a duration of three to five years.
Macquarie Infrastructure Corp. (NYSE: MIC) owns and operates businesses that serve other businesses and governments with international tank terminals for chemicals and energy products, aviation fuel delivery and many airport/plane services, as well as multiple energy services throughout parts of Hawaii. With shares trading at $44.00, its $4.00 annualized dividend comes with a 9% yield.
The Macquarie Infrastructure entity saw its quarterly payout drop to $1.00 per quarter back in 2018, and it announced a review of strategic alternatives to unlock shareholder value last October. It entered into a disposition agreement with Macquarie Infrastructure Management (USA), its external manager, and its most recent earnings report showed a 2% decline in total expenses and a 7% decline in adjusted EBITDA. Cash generated by operating activities increased by 30% last quarter to $157 million after current taxes payable as a result of the sale of the company’s portfolio of renewable power businesses.
While its consensus target price is closer to $43.50, Wells Fargo upgraded Macquarie Infrastructure to Overweight and issued a $45 target price in January.
Macy’s Inc. (NYSE: M) has been down and out for long enough that any investor who wants to chase it based only on the dividend yield will have to do it all alone. Macy’s has a very lonely crowd of frustrated and furious shareholders, but at the end of the day, it is a mall-based department store that is failing due to the Amazon and omnichannel apocalypse. Even factoring in a tired store image, much of its woes are hardly its fault alone, and Macy’s is still at least profitable.
The retail giant’s market cap is down to $5.3 billion, and its $17.00 share price and $1.51 annualized dividend make for a dividend yield of better than 9%. The question is whether Macy’s can keep paying out this much with a $2.75 earnings per share estimate for 2020 and a $2.45 EPS estimate for 2021. Many investors are assuming that its dividend is at risk. It is also hard to believe that this was close to a $70 stock back in 2015. Macy’s also has been in a close and shrink mode for some time and has plans to close another 125 stores from 2020 through 2023.
While the focus was on companies with upside to the consensus price target, Macy’s has a $16.19 consensus analyst target. That means that most analysts and investors now are basing returns solely upon the dividend. That said, two analyst upgrades in 2020 have put $18 target prices on the stock. One big question to ask here is if Macy’s has been in this much decline, imagine how harsh it’s going to look when that next recession inevitably arrives.
New Residential Investment Corp. (NYSE: NRZ) is a REIT that invests in and manages residential mortgage-backed securities (MBS) and related assets. At $17.45 a share, it has a $7.3 billion market cap, and the $2.00 per share dividend comes with a whopping 11.4% dividend yield. One issue that may add support is that New Residential’s February earnings report showed that it had a $16.21 book value per common share.
While New Residential is an MBS-REIT, the company is also growing some of its operations around the world of lending as well. Its consensus target price was $18.09, but Nomura Instinet just raised its target price to $20.00 from $18.50 after earnings. Its 50-cent quarterly dividend has been the same payout since 2017, but New Residential did recently launch a $350 million redeemable preferred stock offering.
Its core earnings of $0.51 a share on a GAAP basis was actually $0.61 on an adjusted basis, so some investors may wonder if a dividend hike is in the works. That said, the company’s tax treatment announcement showed that the $0.50 dividend was broken out as $0.3876 per share as the ordinary dividend, with almost eight cents per share coming from long-term capital gains and more than three cents per share coming in form of a return of capital.
NuStar Energy L.P. (NYSE: NS) is in the class of master limited partnerships (MLPs) and the entity dates back to 2001. Its yield-equivalent is about 8.6%. This trades in units rather than common shares, and its quarterly distribution of $0.60 per unit has been the same since it was cut from $1.095 per unit back in 2018. NuStar has a $3 billion market cap, and trading at $27.95, it has a 52-week range of $25.29 to $30.06 that is much more stable than many of the more volatile MLPs that may have a higher distribution.