The stock market closed on a negative note last week, weighed down by investor speculation that the Federal Reserve could ease the pace of policy easing.
Fed Chairman Jerome Powell emphasized in remarks Thursday that there is no immediate rush to cut rates, citing positive economic indicators. This message was reinforced on Friday by a stronger-than-expected retail sales report for October.
Meanwhile, enthusiasm for President-elect Donald Trump’s pro-business agenda is waning, while concerns about the potential costs and inflation risks associated with his fiscal policies are growing.
In this environment, investors will focus on defensive stocks – and that often means dividend stocks. These investments provide consistent income, making them a reliable choice during periods of market uncertainty.
So if you’re looking for dividends on Friday’s gloomy day, Wall Street analysts have highlighted two dividend stocks to buy, including one with a 14% yield. Let’s take a closer look, with insights from the TipRanks database.
AFC Gamma (AFCG)
We’ll start with a real estate investment trust, a REIT, which works with a bit of a twist. The company, AFC Gamma, works with the cannabis industry, where it acts as a financing provider and makes available commercial real estate loans, as well as loans and other financial services. The company provides direct and bridge loans in the range of $10 million to $100 million – an important source of financing in an industry that is growing rapidly but also faces a complex legal structure. AFC Gamma estimates that the cannabis industry has an addressable market of approximately $30 billion.
The company is based in West Palm Beach, Florida, one of the states with a legal cannabis framework, and its customer base consists of state-licensed cannabis operators across the country. The cannabis industry has high overhead costs because cultivation facilities require a combination of large floor space and intensive use of both water and electricity supplies. Access to traditional bank capital can be limited because cannabis is illegal at the federal level and states present a patchwork of different legal frameworks. Overall, AFC Gamma’s target niche is a great opportunity for a finance company that can operate outside banking networks – and the company’s status as the largest REIT in the cannabis industry makes it attractive to dividend investors.
AFC Gamma has been paying dividends since 2021. The most recent statement came in September this year, for an October 15 payout of 33 cents per common share. The annualized rate of the payment, $1.32 per share, yields an impressive forward yield of almost 14.3%.
The company’s dividend is supported by its financial results. In the last reported quarter, 3Q24, AFC Gamma showed distributable earnings per share, a DEPS, of 35 cents per common share, which beat forecasts by a penny – and covered the dividend payout with room to spare.
Seaport analyst Sonny Randhawa highlights AFC Gamma’s strength in its niche, as well as its potential to continue generating returns in a growth sector.
“As the rest of the cannabis sector eagerly awaits the DEA’s decision on realignment, the eventual elimination of 280E taxes is just one of many company-specific and industry catalysts that AFCG should benefit from in the coming years…AFCG’s cyclical tested management team and Robust investment review process, investors significantly outperformed the largest cannabis REIT and our US cannabis ETF by more than 26% and 826% respectively, by generating a total return of 37% since the first time. trading day. We believe the best is yet to come as AFCG offers investors the rare opportunity to sit at the top of the capital stack in an emerging growth sector while delivering equity-like returns,” Randhawa explains.
These comments support the analyst’s buy rating on ACFG, and his $13 price target implies a 42% one-year upside. Add the dividend yield and the total return on this stock could reach 56% next year. (To view Randhawa’s track record, click here)
AFC Gamma hasn’t attracted much attention from analysts, but those who have recently rated the stock agree with Randhawa’s assessment. ACFG has a unanimous Strong Buy analyst consensus rating, based on three recent reviews. The $13.33 average price target for the stock suggests room for a 46% upside in the coming year. (To see ACFG Stock Prediction)
Four Corners Property Trust (FCPT)
The next stock on our list, Four Corners Property Trust, is a more traditional REIT. This company focuses on restaurant properties and has built a solid portfolio of properties in 47 states. The company has investments in 1,153 properties, representing 156 restaurant brands, with a total area of 7.8 million square meters, and an average lease term of 7.3 years. Four Corners’ activities are the acquisition, ownership and leasing of these properties, with the aim of generating returns for its own investors.
The average investor will probably recognize some of the brands from Four Corners’ portfolio. Of the company’s total investments, 314, or 35%, are in Olive Garden restaurant locations; The company also leases properties to 116 Longhorn Steakhouse locations, 82 Chili’s locations and 23 Outback Steakhouses. In addition, 10% of the company’s portfolio is rented to auto service locations and 8% to other retailers.
On the financial front, Four Corners’ Q3 24 results showed total revenue of $66.79 million, reflecting a 3% increase year-over-year, but fell short of expectations by just $690,000. The bottom figure, earnings per share of 27 cents, was in line with expectations. The company reported adjusted financing from operations (AFFO) of 43 cents per share, up one cent from the prior year.
AFFO fully supports the dividend, which was increased to a rate of 35.5 cents per common share in the most recent statement on November 11 for the fourth quarter. At this rate, the annualized payment will be $1.42 per share. The term return is healthy at 5%.
Four Corners shares have caught the attention of UBS analyst Michael Goldsmith, who sees plenty of reasons for investors to buy in.
“We rate FCPT Buy because we believe its favorable cost of capital and diversification strategy away from restaurants supports upside AFFO growth at a favorable valuation… We model UBSe AFFO growth for 2025 of 4%, which is ~100 basis points ahead of consensus, positioning FCPT above the peer industry average… We see upside to FCPT’s valuation due to accelerating acquisition activity in the second half of 2024. Based of our correlation of avg. quarterly ac. volume and avg. quarterly AFFO multiple (R=0.47), we believe FCPT’s activity in the second half of 24 deserves an AFFO multiple of 18x (currently 16x),” Goldsmith opined.
That Buy rating comes with a $33 price target, which suggests a one-year upside of ~17%. Add the dividend yield and the total return over a year is close to 22%. (To view Goldsmith’s track record, click here)
Overall, FCPT stock has a consensus rating of Moderate Buy, based on five analyst ratings split into 3 Buys and 2 Holds. The current trading price of $28.22 and the average target price of $30.50 together imply an upside of 8% over the next twelve months. (To see FCPT 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.
