Do you love dividends? Of course you do — and rightly so!
Scholars who study the stock market’s historical performance estimate that over time, the payment (and reinvestment, and compounding) of dividends have contributed anywhere from 30% to 90% of the S&P 500’s total returns. Simply put, if you’re not investing in dividend stocks, you’re doing it wrong.
Using the TipRanks platform, we’ve looked up two stocks that are offering up to 24% yield – that’s almost 15x higher the average yield found in the markets today. Each of these is Buy-rated, with some positive analyst reviews on record. Let’s take a closer look.
TORM plc (TRMD)
Let’s start off with Torm, a Danish shipping firm and one of the world’s biggest carriers of refined oil products. The company owns a fleet of around 80 vessels, shipping products such as gasoline, jet fuel, kerosene, naphtha, and gas oil. Torm boasts a presence in all big vessel classes in the product tanker segment with a strong focus on the LR2, LR1, and MR vessel classes.
Last year, the company benefited from the sanctions imposed on Russian oil exports following its invasion of Ukraine and it has managed to sustain the performance. In the recently reported Q2 print, the company dialed in revenue of $384.3 million, a 13.5% year-over-year improvement. Likewise, at the other end of the scale, EPS of $2.14 came in some distance above the $1.31 notched in the same period a year ago. The Q3 guide was also robust, with the company citing an improved product tanker market, with 74% of the overall fleet days booked at $30,500/day.
The strong earnings managed to back Torm’s very juicy dividend. The latest quarterly payout stands at $1.5 per share. This payment will go out on September 12; at its current rate, it annualizes to $6, and yields an enormous 24%.
Among the bulls is Pareto Securities analyst Eirik Haavaldsen, who sees several reasons to back this name.
“TORM delivered a solid Q2 report, with FFAs (forward freight agreements) contributing positively this time – and Q3 guidance exceeding our expectations,” Haavaldsen said. “TORM has now generated near USD 10/share (~800m) of operating cashflow over the past four quarters and been able to grow/renew the fleet significantly… TORM is a stellar operator, and although the Oaktree-overhang remains, we find the (more than) ~20% yield attractive into what we continue to believe is a multi-year super-cycle.”
These comments form the basis for Haavaldsen’s Buy rating on TORM, while his $35 price target makes room for one-year gains of 42%. (To watch Haavaldsen’s track record, click here)
One other analyst has recently chimed in with a TRMD review, and they are also positive, providing the stock with a Moderate Buy consensus rating. At $36, the average target implies shares will generate returns of ~47% in the year ahead. (See TRMD stock forecast)
Star Bulk Carriers (SBLK)
We’ll stay on the seas for our next high-yield dividend stock. Star Bulk Carriers is an international shipping company that specializes in the transportation of dry bulk commodities across the world’s oceans. With a fleet of 127 vessels, including Capesize, Ultramax and Supramax vessels, amongst others, the Greece-based company ships major bulks such as iron ore, minerals and grain. Additionally, Star Bulk transports minor bulks like steel products, bauxite and fertilizers.
The first half of 2023 amounted to a difficult time in the dry bulk market and the company’s earnings suffered in Q2 on account of lower dry bulk rates. Adj. EPS fell from $2 in the same period a year ago to $0.47 while missing Street expectations by $0.04. Revenue also fell substantially, by 42.8% year-over-year to $238.69 million although that figure came in almost 5% above the consensus estimate.
Despite the earnings drop, the company boosted its quarterly dividend from the prior $0.35 to $0.40 per share. This offers a generous yield of 9.2%.
Shifting our focus to Wall Street, Star Bulk has a fan in Stifel analyst Benjamin Nolan, who believes the company is performing well against a tricky backdrop.
“Despite a challenging dry bulk market in 2Q, Star Bulk reported much better results than we had expected driven largely by their Capesize vessels, and consequently the dividend announced (which floats with cash flow) was also much better than expected,” the 5-star analyst said. “With the largest fleet in the public peer group, much of which was acquired at times when asset values were substantially lower, Star Bulk has also been using this period when asset prices remain elevated to crystalize gains and further reduce leverage.”
“Ultimately, it is a strong rate environment which should cause shares to re-rate which we expect later this year, but in the meantime we believe the management is adding value to shareholders. Consequently, we continue with our Buy rating,” Nolan further added.
That Buy rating is backed by a $30 price target, suggesting shares have room for ~71% growth over the one-year period. (To watch Nolan’s track record, click here)
Overall, 2 other analysts have recently chimed in with SBLK reviews and they are also on board, providing the stock with a Strong Buy consensus rating. The forecast calls for 12-month returns of a robust 63%, considering the average target clocks in at $28.67. (See SBLK stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
