The Federal Reserve raised its interest rate for the first time since 2018 in March. This marked a significant change 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 has it changed completely? 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, along with concerns about the March numbers due out this coming week, have brought back attention to the Fed. The Fed announced recently that it was ending its long-standing quantitativeeasing policy.
This means that the easy money terms that fueled the stock market booms of recent years will be ended. Instead of creating new dollars, it will start to reduce its balance sheet by $1 trillion annually. It will take almost a decade for the Fed’s $9 trillion surplus to be repaid.
In such an environment, where uncertainty is building behind a wall, volatility is the only way to be certain. The S&P plunged 1.3% last week, marking its first weekly loss for nearly a month. The NASDAQ dropped 3.9%. Both indexes are still down for the year.
Investors and analysts alike are starting to look into 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 databaseTo find out more about three reliable dividend payers, which have all received recent Street approvals. Let’s take closer look.
DCP Midstream Partners (DCP).
The energy industry is a good place to start. Although the Biden Administration has worked hard to reduce the use of fossil fuels, oil and gas will continue to be the mainstay in the energy sector for the foreseeable future. DCP is a middlestream company that transports hydrocarbon products from the wellhead into the market. 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 also claimed other benefits. The company is seeing increased fuel prices benefit its investors. DCPs distributable liquidity, which funds the dividend’s funding, increased from $178m last year to $219m in this quarter.
At the end of January, this dividend was declared at 39 cents per share. 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 positive about this midstream company due to all of these factors. He wrote, “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 (i.e. Buy rating while his $42 price target suggests a 26% upside for the year ahead. (To view Firestones track records, Click here)
Based on 7 analyst reviews, this solid dividend payer has a unanimous Strong Buy consensus ranking. The shares are priced to $33.25, with a $40.57 median price target. This suggests a potential upside of 22% for the year. (TipRanks offers DCP stock predictions)
BRT Apartments Corporation (BRT)
Now, it’s time for you to change gears and move on to a REIT. These real estate management and ownership companies are well-known as dividend champs in the stock market. Federal tax regulations require them to return a high proportion of profits directly back to shareholders. This is why dividends are often used as an instrument for this return. BRT, which has a portfolio primarily 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 decrease from the previous quarter, which saw a net EPS loss of 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 that supports the company’s dividend. It was 35 cents per share in 4Q21, an increase of 29 cents from the previous year. This was enough to cover the dividend payment of 23 cents per common shares in March. Current dividend yield is 4%, with an annualized rate at 92cs.
B. Riley’s 5-star analyst Craig Kucera sees this company as a solid niche in the REIT industry. He also notes that BRT is a must-watch because of JV asset sales, consolidation, and consolidation.
“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 explained that we are increasing our 2022E FFO to $1.15-$1.30 because of the higher SS NOI and greater G&A scaling from asset consolidation. We also established a 2023E FO at $1.35.” Kucera added.
Kucera considers BRT stock a Buy based on these comments. His $29 target price suggests a one year upside potential of 29%. (To watch Kuceras track record, Click here)
Other analysts don’t disagree. BRT is a strong buy, with 4 Buy ratings, no Holds or sells and 4 Buy ratings. BRT’s share price is $22.68, and the average price target is $28 gives the stock a 12-month upside potential of 23%. (TipRanks offers a BRT stock prediction)
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 can be leased to over 1,000 clients under long-term net-lease agreements. Realty has properties throughout the 50 states as well as Puerto Rico, the UK, Spain, and Spain.
Realty Income’s last quarterly report for 4Q21 showed a net earnings per share of 1 cent, but the full-year result was stronger at 87 cents. The quarterly FFO of the company grew more than 7% year over year to reach 89c per share, which is more than enough to finance the dividend.
It is worth taking a closer look at this dividend, as it is one among the most reliable markets. Realty Income has been paying this dividend for over 50 years since its inception in 1969. It has never missed a single monthly payment. The company has made 620 monthly dividend payments and experienced 98 consecutive quarterly increases in dividends. The company’s most recent dividend was 24.7 cents per common stock. It was declared in March for an April 15th payment. This yields 4.1% on an annual basis and amounts to $2.96.
Andrew Rosivach, an analyst for Wolfe Research writes about Realty Income. He says that O, which has only 2.7%, 5.1%, and 43.7% respectively of leases, will quickly become a’must-own’ stock in an inflationary environment. O dropped only 14% in 2008 and outperformed the REIT index of 2,700 basis point in that year. Indeed, O’s inability to rent to market the above mentioned could be a positive in a recession.
Rosivachs comments confirm Rosivachs Outperform (i.e. Rosivachs comments back up his Buy rating, while his $84 target price indicates that there is room for a one year upside of 17%. (To watch Rosivachs track record, Click here)
Based on 10 analyst reviews, which include 7 Buys, and 3 Holds, the consensus Wall Street rating for this stock is Moderate Buy. (TipRanks has a stock forecast for Realty Income)
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Disclaimer: The opinions contained in this article are the sole opinions of the featured analysts. The information is provided solely for informational purposes. It is crucial to do your own analysis before you make any investment.
These views and opinions are solely the author’s and do not necessarily reflect the views of Nasdaq, Inc.