3 major dividend stocks with growth opportunities; Goldman Sachs says “Buy”
Investing means finding profits and investors have long seen two main paths towards this goal. Growth stocks, stocks that will give a return based primarily on the appreciation of the stock price, are one way. The second path is through dividend stocks. These are shares that return a percentage of profits to shareholders – a dividend, usually sent quarterly. Payments vary widely, from less than 1% to more than 10%, but the average of shares listed on the S&P 500 is around 2%. Dividends are a nice addition for a patient investor, as they provide a steady stream of income. Goldman Sachs analyst Caitlin Burrows looked into the real estate trusts segment, a group of stocks that have long been known for high and reliable dividends – and sees plenty of reasons to expect strong growth in three stocks in particular. Scrolling the trio through the TipRanks database, we learned that all three were also acclaimed by the rest of the street, as they boast a consensus from “Strong Buy” analysts. Broadstone Net Lease (BNL) The former, Broadstone Net Lease, is an established REIT that went public last September in an IPO that raised over $ 533 million. The company placed 33.5 million shares on the market, followed by another 5 million shares collected from subscribers. It was considered a successful opening and BNL now boasts a market cap of over $ 2.63 billion. Broadstone’s portfolio includes 628 properties in 41 US states plus the Canadian province of British Columbia. These properties house 182 tenants and are worth a total of $ 4 billion. The best feature here is the long-term nature of the leases: the residual weighted average lease is 10.8 years. During the third quarter, the most recent with all financial data available, BNL reported net income of $ 9.7 million, or 8 cents per share. The proceeds came mainly from rents and the company reported that it collected 97.9% of the rents due during the quarter. Looking ahead, the company expects $ 100.3 million in property acquisitions during the fourth quarter and a 98.8% increase in rent collection rate. Broadstone’s income and high rent collections support a dividend of 25 cents per common share, or $ 1 per year. It is an affordable payment for the company and offers investors a 5.5% return. Goldman’s Burrows views the company’s takeover operations as the most important factor here. “Positive acquisitions are key earnings driver for Broadstone … Although management stopped acquisitions following COVID-induced market uncertainty (BNL did not complete any acquisitions in 1H20) and prior to its IPO, we are confident that acquisitions will increase in 2021 and we saw the start of this with the 4Q20 business … We estimate that BNL achieves a positive investment spread of 1.8%, leading to 0.8% earnings growth ( on 2021E FFO) for every $ 100 million of acquisitions (or 4.2% on our 2021E acquisition volumes), “Burrows said. To that end, Burrows rates BNL as a Buy and its $ 23 price target implies a ~ 27% upside for the year ahead. (To see Burrow’s track record, click here) Wall Street generally agrees with Burrows on Broadstone, as evidenced by the 3 positive reviews the title has garnered in recent weeks. These are the only reviews on file, which make the analyst consensus rating a strong unanimous buy. The shares are currently priced at $ 18.16 and the average price target of $ 21.33 suggests a one-year upside of ~ 17%. (See BNL Stock Analysis on TipRanks) Realty Income Corporation (O) Realty Income is a major player in the REIT field. The company holds a portfolio worth over $ 20 billion, with over 6,500 properties located in 49 states, Puerto Rico and the UK. Annual revenue exceeded $ 1.48 billion in fiscal 2019 (the latest with full data) and maintained a monthly dividend for 12 years. Looking at the current data, we find that O recorded an income of 7 cents per share in 3Q20, along with $ 403 million in total revenue. The company collected 93.1% of the rent contracted in the quarter. Although relatively low, a detailed analysis of monthly values shows that rental collection rates have increased since July. As noted, O pays a monthly dividend and has done so regularly since it went public in 1994. The company increased its payment in September 2020, marking the 108th increase over that period. The current payment is 23.45 cents per common share, which annualizes to $ 2.81 cents and gives a yield of 4.7%. Based on the above, Burrows has placed this title on his list of convictions for the Americas, with a buy valuation and a price target of $ 79 for the next 12 months. This target implies a 32% rise from current levels. Supporting his position, Burrows noted, “We estimate FFO growth of 5.3% annually in 2020E-2022E, versus an average of 3.1% for full REIT coverage. We expect key earnings drivers to include a continuous recovery in acquisition volumes and a gradual improvement in cinema rents (in 2022) “. The analyst added, “We assume O makes $ 2.8 billion in acquisitions in each of 2021 and 2022, versus the consensus expectation of $ 2.3 billion. [We] we believe our takeover volume assumptions may indeed prove conservative as, eight days into 2021, the company has already made or agreed to make $ 807.5 million in acquisitions (or 29% of our 2021 estimate). ” . Overall, Wall Street takes a bullish stance on Realty Income shares. 5 purchases and 1 suspension issued in the previous three months make the stock a strong buy. Meanwhile, the average price target of $ 69.80 suggests a rise of $ 69.80. about 17% of the current stock price. (See O stock analysis on TipRanks) Essential Properties Realty Trust (EPRT) Last up, Essential Properties, owns and manages a portfolio of single-tenant commercial properties in the US. There are 214 tenants in more than 1000 properties in 16 industries, including car washes, convenience stores, medical services and restaurants. Essential Properties boasts a high occupancy rate of 99.4% for its properties. In 3Q20, the company reported an 18.2% increase in revenue year-on-year, reaching $ 42.9 million. Essential Properties ended the quarter with available cash of $ 589.4 million, including cash, cash equivalents and available credit. The strong cash position and increased revenues allowed the company to be confident enough to increase the dividend in the fourth quarter. The new dividend payment is 24 cents per ordinary share, an increase of 4.3% compared to the previous payment. The annualized current rate at 96 cents and gives a yield of 4.6%. The company has regularly increased its dividend for the past two years. In his review for Goldman, Burrows focuses on the recovery Essential Properties made from the height of the COVID panic last year. “When the shelter mandates in place went into effect in early 2020, only 71% of EPRT’s properties were open (fully or on a limited basis). This situation has improved in the following months and now only 1% of EPRT’s portfolio is closed… We expect EPRT’s future earnings growth to be driven by increased acquisitions and we estimate potential earnings growth of 2.8% $ 100 million worth of acquisitions, “Burrows wrote. In keeping with its optimistic approach, Burrows assigns EPRT shares a buy rating, along with a one-year price target of $ 26, suggesting a 27% rise. All in all, EPRT has 9 recent analyst reviews and the breakdown of 8 buy and 1 sell gives the stock a strong buy consensus rating. The shares are priced at $ 20.46 and an average price target of $ 22. 89, offering approximately 12% upside potential from current levels. (See EPRT Stock Analysis on TipRanks) To find good ideas for trading dividend stocks at attractive valuations, visit TipRanks’ Best Stocks to Buys , a o newly launched tool that combines all of TipRanks’ equity insights. Disclaimer: The views expressed in this article are solely those of the analysts present. The content is to be used for informational purposes only. It is very important to do your own analysis before making any investments.
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