Despite what some across Wall Street say, if the July consumer price index numbers come in red-hot like they did for June, you can bet on the Federal Reserve raising interest rates another 75 basis points in September. In addition, if other data points that the Fed uses to gauge inflation also move higher, there is an outside chance for the dreaded full percentage point increase to become a reality.
Despite those increases, on a historical basis, rates across the Treasury curve are still reasonably low. The 30-year benchmark Treasury bond yields a paltry 3.06%. With inflation well above that number, and factoring in any taxes, that is likely a negative return for investors.
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Income investors with a degree of risk tolerance are not buying long-dated Treasury debt, but they do look for stocks of companies that pay massive dividends. Three sectors provide that opportunity: shipping, business development companies (BDCs) and mortgage real estate investment trusts (REITs). We screened our 24/7 Wall St. research database and found seven stocks that are Buy rated across Wall Street that come with 11% and higher dividends.
It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
AFC Gamma
This off-the-radar idea offers outstanding total return potential. AFC Gamma Inc. (NASDAQ: AFCG) originates, structures, underwrites and invests in senior secured loans and other types of loans and debt securities for established companies operating in the cannabis industry in states that have legalized medicinal or recreational adult-use cannabis.
The company primarily originates loans structured as senior loans secured by real estate, equipment and licenses or other assets of the loan parties to the extent permitted by applicable laws and the regulations governing such loan parties. AFC Gamma has elected and qualified to be taxed as a real estate investment trust for the United States federal income tax purposes under the Internal Revenue Code of 1986.
The company’s stellar first-quarter results and topped both top and bottom line expectations. Revenues of $18.64 million for the quarter ended March 2022 surpassed the consensus estimate by more than 8%. The company has beaten consensus revenue estimates three times over the past four quarters. Second-quarter results are due Tuesday.
Investors receive a 12.71% distribution. JMP Securities has a $25 price target, while the consensus target is $23.15. The shares closed Friday trading at $18.05 a share.
AGNC Investment
This company has paid solid dividends for years. AGNC Investment Corp. (NASDAQ: AGNC) operates as a REIT in the United States. It invests in residential mortgage pass-through securities and collateralized mortgage obligations for which the principal and interest payments are guaranteed by U.S. government-sponsored enterprises or agencies.
AGNC Investment funds its investments primarily through collateralized borrowings structured as repurchase agreements. The company has elected to be taxed as a REIT under the Internal Revenue Code of 1986 and would not be subject to federal corporate income taxes, if it distributes at least 90% of its taxable income to its stockholders.
AGNC Investment stock investors receive an 11.76% distribution. Keefe Bruyette’s price target is $13.25. The $12.40 consensus target is closer and Friday’s closing share price of $12.25.
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Annaly Capital Management
This stock is trading well under $10, which gives aggressive investors a chance to really load up on the shares. Annaly Capital Management Inc. (NYSE: NLY), a diversified capital manager, engages in mortgage finance and corporate middle market lending.
The company invests in agency mortgage-backed securities, mortgage-servicing rights, agency commercial mortgage-backed securities, non-agency residential mortgage assets, residential mortgage loans, credit risk transfer securities, corporate debts and other commercial real estate investments. It has elected to be taxed as a REIT.
The company posted massive second-quarter earnings and revenue results that beat analyst expectations. Trading at a tiny 2.6 times earnings, it offers aggressive investors a huge opportunity.
Shareholders receive a 13.44% dividend. The Barclays analysts have set a $7 target price. The consensus target is $6.54 and Annaly Capital Management stock closed on Friday at $6.55.
Broadmark Realty
Similar to a mortgage REIT, this top company is an investor in what is known as deed of trust loans. Broadmark Realty Capital Inc. (NYSE: BRMK) engages in the underwriting, funding, servicing and managing a portfolio of short-term and first deed of trust loans to fund the construction, development and investment in residential or commercial properties in the United States.
The company also provides short-term and first deed of trust loans secured by real estate to fund the construction and development and investment in residential or commercial properties. The company has elected to be taxed as a REIT. As a result, it is not subject to corporate income tax on that portion of its net income that is distributed to shareholders.
Investors receive an 11.26% distribution. The $9 B. Riley Securities target price compares with an $8.17 consensus target and Friday’s close at $7.45.
Eagle Bulk Shipping
This industry leader broke out in a big way and has been consolidating in recent trading. Eagle Bulk Shipping Inc. (NASDAQ: EGLE) engages in the ocean transportation of dry bulk cargoes worldwide.
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The company owns, charters and operates dry bulk vessels that transport a range of cargoes, including iron ore, coal, grains, fertilizers, steel products, petcoke, cement and forest products. It serves miners, producers, traders and end users. As of December 31, 2021, the company owned and operated a fleet of 53 vessels.
Eagle focuses exclusively on the versatile midsize dry bulk vessel segment and owns one of the largest fleets of Supramax/Ultramax vessels in the world. The company performs all management services in-house (including strategic, commercial, operational, technical and administrative) and employs an active management approach to fleet trading with the objective of optimizing revenue performance and maximizing earnings on a risk-managed basis.
Shareholders receive a 16.39% dividend. The price target at Jefferies is $65, while the consensus target on Eagle Bulk Shipping stock is $73.30. The stock closed on Friday at $50.99.
FS KKR
This is a very well-known name on Wall Street, and it is offering a solid entry point at current levels. FS KKR Capital Corp. (NASDAQ: FSK) is a BDC specializing in investments in debt securities. It seeks to purchase interests in loans through secondary market transactions or directly from the target companies as primary market investments.
The company also seeks to invest in first lien senior secured loans, second lien secured loans and, to a lesser extent, subordinated or mezzanine loans. In connection with the debt investments, the firm also receives equity interests such as warrants or options as additional consideration. It also seeks to purchase minority interests in the form of common or preferred equity in target companies, either in conjunction with one of the debt investments or through a co-investment with a financial sponsor.
Additionally, on an opportunistic basis, the fund also may invest in corporate bonds and similar debt securities. The fund does not seek to invest in start-up companies, turnaround situations or companies with speculative business plans. It seeks to invest in small and middle-market companies based in the United States. The fund seeks to invest in firms with annual revenue between $10 million and $2.5 billion. It seeks to exit from securities by selling them in a privately negotiated over-the- counter market.
FS KKR Capital posted stellar first-quarter results, announced a huge stock buyback and raised the dividend by three cents per share to $0.68. The second-quarter results are expected to come after the closing bell Monday.
Shareholders receive a 12.36% dividend. Jefferies has a $25 price target. The consensus target of $22.56 compares with Friday’s close at $22.00 a share.
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Genco Shipping & Trading
This is another top shipping stock that looks poised to trade higher. Genco Shipping & Trading Ltd. (NYSE: GNK) engages in the ocean transportation of dry bulk cargoes worldwide. The company owns and operates dry bulk carrier vessels to transport iron ore, coal, grains, steel products and other dry bulk cargoes. It charters its vessels primarily to trading houses, including commodities traders, producers and government-owned entities.
Genco provides a full-service logistics solution to customers utilizing an in-house commercial operating platform, as it transports key cargoes such as iron ore, grain, steel products, bauxite, cement, nickel ore among other commodities along worldwide shipping routes.
The wholly owned, high-quality, modern fleet of dry cargo vessels consists of the larger Capesize (major bulk) and the medium-sized Ultramax and Supramax vessels (minor bulk), enabling it to carry a wide range of cargoes. It makes capital expenditures from time to time in connection with vessel acquisitions. As of April 12, 2022, the company’s fleet consisted of 17 Capesize, 15 Ultramax and 12 Supramax vessels with an aggregate capacity of approximately 4,635,000 deadweight tonnage and an average age of 10.1 years.
The company posted strong second-quarter results last week, with earnings and revenues that both came in ahead of Wall Street expectations. With port traffic starting to finally clear some, and supply chain issues improving, this may be the best long-term play of all these companies, certainly for the shipping names.
Genco Shipping & Trading stock comes with an 11.46% dividend. The $25 target price set by the Jefferies team is lower than the $27.46 consensus target. But the stock closed at $17.45 on Friday.
Needless to say, these aggressive investments are not suitable for conservative investors who have preservation of capital as their number one objective. With that noted, all these stocks have been hammered this year and are offering the best entry points (in most cases) since last year. With second-quarter earnings still to come for some of these stocks, it may make sense to buy patrial positions and see how the results come in.
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