You really can’t go wrong with dividend stocks. These stocks provide a stable, long-term income stream that supplements returns from stock appreciation. And even if the stock price falls, you can still make money through the dividend. It’s a solid benefit to add to any stock portfolio – and can be further magnified by its high-yield dividends, which can deliver yields of 9% or better.
For investors looking for these high-yield dividend payers, the analysts on the street are at work. They’ve sifted through the ranks of div stocks and labeled several of the 9%+ high-yield payers currently as Buys.
We used the TipRanks platform to get the details of two of these picks. Let’s dive in.
Hercules capital(HTGC)
We’ll start with Hercules Capital, a BDC or business development company. Hercules focuses its work on emerging companies, especially those with a preference for sciences and technology: life sciences, sustainable and renewable technology and SaaS financing technology. Hercules is a leading specialist financing provider in this niche, supporting a venture capital-backed customer base with access to credit services and growth capital financing.
Since its founding in 2003, Hercules has provided financing to more than 660 companies, totaling more than $21 billion in capital commitments. The company currently has more than $4.6 billion in assets under management.
In terms of dividends, Hercules has long been committed to maintaining capital returns for shareholders. The company’s current regular dividend, which was last paid on October 28 on November 20, was set at 40 cents per common share and was supplemented by a special dividend of 8 cents per share. The combined dividend payout, of 48 cents per common share, amounts to $1.92 per share annually and delivers a strong forward yield of 9.75%.
That dividend is supported by Hercules’ financial results, which were reported for the third quarter of 24 at the end of October. The company’s total investment income in the quarter was reported at $125.25 million, which management said is a company quarterly record. Investment income rose 7.3% year over year, although it exceeded expectations by $2.9 million. Ultimately, Hercules had quarterly net investment income of 51 cents per share.
This BDC has caught the attention of JMP’s Brian McKenna, an analyst in the top 2% of Wall Street equity experts, who is impressed by Hercules’ business prowess. McKenna writes of the company: “Hercules continues to demonstrate its leadership position in venture lending, and we are once again quite pleased with the strength of the quarter’s results and the company’s trajectory through year-end. Lower base rates and tighter spreads will clearly provide P&L headwinds going forward, but we also believe the company has demonstrated the ability to consistently deliver ROEs in the mid to upper teens for the cycle. So while the shares trade at a healthy valuation level on paper, we believe the underlying performance and prospects for the business more than justify this multiple.”
To quantify his position, the 5-star analyst gives an Outperform (Buy) rating to this stock, with a $22 price target indicating a one-year upside potential of 11.5%. Add the dividend yield and the potential return on HTGC over a year rises to 21.5%. (To view McKenna’s track record, click here)
Overall, the stock has a consensus rating of Moderate Buy, based on six recent reviews that are evenly divided into three buys and holds each. The stock’s $19.7 trading price and $20.29 average price together imply a modest 3% upside over the next twelve months. (To see HTGC stock forecast)
The second stock we’ll look at, Ares Capital Corp., is a BDC with twenty years of experience under its belt. The company operates as a provider of credit and financing services to the small business sector in the U.S. market, the small and medium-sized businesses that have traditionally been the driving force behind the U.S. economy. Ares’ services are essential to its clients, providing them with the tools they need to thrive; in return, Ares receives returns on his varied business investments.
During his lifetime, Ares has built a portfolio with a fair value of $25.9 billion, as of September 30. The company has investments in 535 client companies, and those investments are supported by 240 private equity sponsors. The company’s portfolio relies heavily on senior secured first lien loans, which make up 52.8% of the total. Senior secured second lien loans make up 10.6% of the total, and preferred stock comprises 10.4% of the portfolio. Based on industry composition, Ares’ largest investment targets are software and services (25.4%), healthcare services (12.8%), and commercial and professional services (10.7%).
The company’s current common stock dividend is set at 48 cents per share and has been at this level for nine quarters now. The dividend was last declared on October 30 and paid on December 30. The 48 cent dividend is $1.92 per common share annually and the forward yield is currently 9%.
In terms of financial results, Ares Capital Corp. reported. released its Q3 24 figures at the end of last month. The company showed total investment income of $775 million, more than 18% more than the same period last year – and $1.69 million higher than forecast. Ultimately, however, the company’s non-GAAP revenues failed to materialize; earnings per share of 58 cents were a cent lower than expected.
The earnings per share miss didn’t bother RBC analyst Kenneth Lee, who is ranked among the top 1% of Wall Street analysts by TipRanks, and who said of Ares Capital: “Credit performance remains solid; Given the favorable macro conditions, there is likely to be less downside risk. Given the variable rate assets, attention will likely focus more on the downward interest rate cycle; our updated model still includes multiple rate cuts and we continue to see well-supported dividends. We maintain our Outperform rating as we like ARCC’s strong track record of managing risk through the cycle, well-supported dividends and economies of scale.”
That Outperform (Buy) rating is supported by a $23 price target, which indicates an 8% upside for the coming year. If we add the dividend yield, the potential return here can be up to 18%. (To view Lee’s track record, click here)
There are 10 known recent Wall Street reviews for ARCC, and their breakdown includes 7 Buys to 3 Holds for a consensus rating of Moderate Buy. The stock is priced at $21.33 and the average price target of $22.15 implies a 4% upside over one year. (To see ARCC stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is for informational purposes only. It is very important to do your own analysis before making an investment.
