2 stocks with high dividend yields of at least 7%; Raymond James Says « Buy »
For investors looking for a strong dividend player, there are a few segments of the market known for their high-yield dividends, which makes them logical places to look for reliable payers. The hydrocarbon sector, oil and gas exploration and mainstreaming, is one of them. The sector deals with products that are indispensable – our world lives on oil and its by-products. And although the overhead for energy companies is high, they still have a market for their services, resulting in instant cash flow that can be used to pay dividends, among other things. All of this prompts investment firm Raymond James to look to midstream oil and gas companies for dividend stocks with growth potential. « We expect the [Midstream] group to increase its average EV / EBITDA multiple this year by about 1 revolution, which equates to a ~ 20-25% movement in its stock value, » noted Justin Jenkins, analyst at Raymond James. Jenkins outlined a number of points that led to a midstream rebound in 2021, including moving from “lockdown” to “reopening”. a general push on the way for commodities when the economy picks up; a political point that some of DC’s more traditional centrists are unlikely to vote for anti-oil Green New Deal policies; Finally, when stocks are relatively low, dividend yields are high. A look at the TipRanks database reveals two midstream companies Raymond James became aware of – for all of the above. These are stocks with certain unique attributes: a dividend yield of 7% or more and buy ratings. MPLX LP (MPLX) MPLX, which was spun off from Marathon Petroleum as an independent midstream company eight years ago, acquires, owns, and operates an R range of midstream assets including pipelines, terminals, refineries and river navigation. MPLX’s primary businesses are in the northern Rocky Mountains and the Midwest and extend south to the coast of the Gulf of Mexico. Sales reports from the « Corona yea r » of 2020 show the value potential of oil and gas in midstreaming. The company reported revenue of $ 2.18 billion for the first quarter, $ 1.99 billion for the second quarter, and $ 2.16 billion for the third quarter. The result turned negative in the first quarter, but was positive in the following two quarters. The Q3 report also showed net cash flow of $ 1.2 billion, more than enough to cover the company’s dividend payout. MPLX pays 68.75 cents per common share or $ 2.75 on an annual basis quarterly, giving the dividend a high yield of 11.9%. The company has a diversified range of midstream activities and strong cash generation. This causes Justin Jenkins of Raymond James to improve his stance on MPLX from neutral to outperform (i.e. buy). His target price of $ 28 implies a 22% year-on-year uptrend for the stock. (To see Jenkins’ track record, click here.) Jenkins confirms his stance: “Given the number of ‘boxes’ history can check for MPLX, it’s no surprise that this is a debate stock. Given changing G&P trends, an expected rebound in refined / refined product volume, the story hits many operational boxes – and spans multiple financial debates too … We also believe that solid financial results for 2020 should provide longer-term confidence … For the rest of the street, other analysts generally seem to be on the same side. With 6 purchases & nd 2 holds in the last three months, the consensus rating is considered a strong buy. Additionally, the average target price of $ 26.71 is ~ 17%. (See MPLX stock analysis on TipRanks) DCP Midstream Partners (DCP) Headquartered in Denver, Colorado, DCP Midstream Partners is one of the largest natural gas midstream operators in the country. DCP controls a network of gas pipelines, hubs, storage facilities and facilities that stretch between the Rocky Mountain, Midcontinent and Permian Basin manufacturing areas and the Texas and Louisiana Gulf Coast. The company also operates in the Antrim gas region of Michigan. In the most recently reported quarter – 3Q20 – DCP collected and processed 4.5 billion cubic feet of gas and 375,000 barrels of natural gas liquids daily. The company also reported net cash flow of $ 268 million, of which $ 130 million was free cash flow. The company reduced its debt burden by $ 156 million for the quarter and saw operating expenses decrease 17% year over year. All of this enabled DCP to keep the dividend at 39 cents per share. At the beginning of the corona crisis, the company had to cut that payment – but only once. The recently declared dividend for the fourth quarter of 20 is the fourth in a row at 39 cents per common share. The annualized rate of $ 1.56 gives a respectable return of 7.8%. This is another stock that is getting an upgrade from Raymond James. Analyst James Weston is upping this stock from Neutral to Outperform (i.e., Buy) while setting a price target of $ 24, which implies 20% growth over the one year horizon. “[We] expect DCP to have another solid quarter due to sequential improvements in NGL prices, volatility in the NGL market and positive upstream trends. We do not use the current propane prices and expect for the n A solid but more normal price regime for next 12 years. 18 months. We believe this will create a favorable operating environment for DCP cash flows that is not currently reflected in Street estimates, ”said Weston. All in all, the Consensus Rating of the Moderate Buy analysts for DCP is based on 7 current ratings, which break down 4 to 3 buy versus hold. The price of the stock is trading at $ 19.58, and the average target of $ 23 suggests an upside of ~ 15% from that level. (See DCP stock analysis on TipRanks.) To find great ideas for trading dividend stocks at attractive valuations, visit TipRanks ‘Best Stocks to Buy, a newly launched tool that brings together all of TipRanks’ stock insights. Disclaimer: The opinions expressed in this article are solely those of the presented analysts. The content is intended to be used for informational purposes only. It is very important that you do your own analysis before making any investment.