The Federal Reserve initiated its first interest rate increase since 2018, marking a major shift in monetary policy. Conventional wisdom expected such a move. The magnitude of the increase was only 25 basis points. Our collective expectations were set up for the possibility that the Federal Reserve would shift policy to combat serious inflation problems.
Or is it all gone? The latest data on US inflation for February shows a 7.9% annualized rate. This is the highest rate in 40 years. It also continues to accelerate at 7.5% annualized in January, while it was 1.7% in February 2021. These numbers and concerns about the March numbers this week have brought renewed attention to the Fed, who announced in recent days that it would reverse its long-standing quantitative ease policy.
This means that the Fed will end the easy money terms which have fueled stock market expansions over the past few years. Instead of creating new money, the Fed will begin to shrink its balance sheet to the tune $1 trillion annually. It will take almost a decade for the Fed’s $9 trillion surplus to be repaid.
In this environment of uncertainty and fog, there is no guarantee that volatility will decrease. The S&P lost 1.3% last week, its first weekly loss in almost a month. The NASDAQ also fell 3.9%. Both indexes are still down for the year.
Investors and analysts alike are starting to look at dividend stocks because of the recent market fluctuations. These are classis defensive play, used to protect portfolios in times like these. We have used the TipRanks databaseWe will provide the details of three reliable dividend-payers that have received the Street’s recent thumbs up. Let’s take a closer view.
DCP Midstream PartnersDCP)
The energy industry is a good place to start. While the Biden administration has worked diligently to de-emphasize fossilfuels, the fact is that oil and natural gas will remain the mainstay of the sector’s energy sector for the near future. DCP is a midstream firm that moves hydrocarbon products from the wellhead to the marketplace. DCP’s portfolio is diverse and includes assets in the gathering, processing, transporting and marketing of natural gas and naturalgas liquids.
DCP reported a net profit of $315 million for the 4Q21 quarter. This is a substantial 266% increase over the $86 million earned in the previous quarter. The increase was also impressive per share; EPS increased by 323% from 34 cents in the 4Q20 quarter to $1.44 in the 4Q21 quarter. The company’s top-line of $3.23 billion was up 81% year over year.
DCP claimed that these were not the only benefits. DCP is reaping the benefits of rising fuel prices. Investors are also benefitting. DCPs distributable cash flows, which fund the dividend, increased from $178 million a year ago to $219 millions in this most recent quarter.
The dividend was paid at 39 cents per common stock at the end January. This yields 4.5%, and is annualized to $1.56 Since 2006, the company has not missed a quarter of its reliable dividend payments.
Evercore analyst Todd Firestone is bullish on the midstream company because of all this. He writes, “Our upgrade is based principally on i. group leading commodity exposure as record frac spreads and pricing clearly favor DCP,” and ii. valuation and iii. returns messaging. These themes should continue to be attractive to investors looking for new or re-entry into the space. We believe that the post-COVID MLP DCP is not your father’s MLP.
These comments support Firestone’s Outperform rating (i.e. His Buy rating is supported by his $42 price target, which implies a upside of 26% for next year. (To view Firestones track records, Click here)
This reliable dividend payer has a unanimous Strong Buy consensus ranking, based upon 7 analyst reviews. The shares are priced at $33.25, with a $40.57 average price target suggesting an upside of 22%. (TipRanks offers DCP stock predictions)
BRT Apartments Corporation (BRT)
Now it’s time to shift gears and look for a REIT. These companies, which are real estate management and ownership companies, are known as dividend champs in the stock market. Federal tax regulations mandate that they return a high proportion of profits directly to shareholders. This is why dividends are often used as an instrument to achieve that return. BRT, which has a portfolio mainly of multifamily dwellings in the US Sunbelt area, is typical of its niche. BRT’s current portfolio includes 32 properties in 11 States and totals 8,985 apartment unit.
BRT reported a loss of 8c per share in Q4 as 2021 ended. This was a significant improvement over the quarter prior to 2021, when the net earnings per share fell 19 cents. BRT reported $1.62 in EPS for the year.
However, the most important metric for us is the funds from operation (FFO). This is the cash flow used to pay the company’s dividend. In 4Q21, it was 35cs per share. It was 29cs one year ago. This was sufficient to cover the dividend payout, which was declared at 23c per common share in March. The dividend yields 4% at an annualized rate 92 cents.
B. Riley investment firm Craig Kucera is a 5-star analyst who sees this company filling a niche in the REIT sector. Even better, he points out that BRT has JV asset and consolidation sales making it a must-watch.
“We believe that BRT’s strategic shift in order to extract more value from its unconsolidated multifamily assets portfolio through both assets sale and consolidation should result in a higher multiple of shares. JV disposition proceeds (with substantial gains) are used to reduce leverage and simplify BRT’s ownership interest structure. Kucera stated that the 2022E FFO will be increased from $1.15 to $1.30 due to higher SS NOI growth and improved G&A scaling by asset consolidation. A 2023E FFO will be established at $1.35.
Kucera rates BRT stock a Buy in light of these comments. His $29 price target suggests that there is a 1-year upside potential of 29%. (To watch Kuceras track record, Click here)
Other analysts aren’t inclined to disagree. BRT is a Strong Buy, with 4 Buy ratings, no Holds or sells. BRT’s share value of $22.68 and average target price of $28 give it a 12-month upside rate of 23%. (TipRanks has a BRT stock forecast)
Realty Income Corporation (O)
Last but not least, another REIT. Realty Income is one the market’s top dividend payers and backs up the payments by a huge portfolio, more than 11,100 commercial real property properties. Realty’s properties are subject of long-term net lease agreements and are available to more than 1,000 clients. Realty has properties throughout the 50 states as well as Puerto Rico, the UK, Spain, and Spain.
Realty Income reported a net EPS increase of 1 cent in its 4Q21 quarterly release. However, the full year result was better at 87cs. The company’s quarterly FFO grew by more than 7 percent year-over-year to reach 89c/share, more than enough for the dividend.
This dividend is worth a closer look as it is one the most reliable markets. Realty Income has kept it steady for more than 50 years, going back to 1969 when the company was founded. They have never missed a monthly payment. The company has paid out 620 dividends and received 98 consecutive quarterly dividend increases over that period. The most recent dividend, which was paid in March to April 15th, was 24.7c per common share. This annualizes out to $2.96 and yields 4.1%.
Andrew Rosivach, analyst at Wolfe Research, writes about Realty Income. We believe O, which has only 2.7% and 5.1% respectively of leases rolling in 2022, and 43.7% rents from investment-grade tenants, would quickly become a must own’ stock in an inflationary scenario. O declined only 14% in 2008, surpassing the REIT index by 2,700 base points. Indeed, O’s inability to rent mark to the market, as highlighted above, could become a positive in a recession.
Rosivachs comments confirm Rosivachs Outperform (i.e. His Buy rating is supported by Rosivachs comments, while his $84 price target suggests room for a 1-year upside of 17%. (To watch Rosivachs track record, Click here)
This stock has a Moderate Buy consensus rating by Wall Street based on 10 analyst reviews which include 7 Buys as well as 3 Holds. (TipRanks stock forecast for Realty income)
TipRanks has great ideas for stock trading at attractive valuations. Stocks to BuyTipRanks has just launched a new tool called, which unites all of TipRanks equity insight.
Disclaimer: The opinions contained in this article are the sole opinions of the featured analysts. This content is meant to be used only for informational purposes. It is important to do your own analysis prior to making any investment.
