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3 “Strong Buy” Stocks with Over 9% Dividend Yield

Yahoo Finance

Markets ended 2020 on a high note, and have started 2021 on a bullish trajectory. All three major indexes have recently surged to all-time highs as investors seemingly looked beyond the pandemic and hoped for signs of a rapid recovery.

Veteran strategist Edward Yardeni sees the economic recovery bringing its own slowdown with it. As the COVID vaccination program allows for further economic opening, with more people getting back to work, Yardeni predicts a wave of pent-up demand, increasing wages, and rising prices – in short, a recipe for inflation.

“In the second half of the year we may be on the lookout for some consumer price inflation which would not be good for overvalued assets,” Yardeni noted.

The warning sign to look for is higher yields in the Treasury bond market. If the Fed eases up on the low-rate policy, Yardeni sees Treasuries reflecting the change first.

A situation like this is tailor-made for defensive stock plays – and that will naturally bring investors to look at high-yield dividend stocks. Opening up the TipRanks database, we’ve found three stocks featuring a hat trick of positive signs: A Strong Buy rating, dividend yields starting at 9% or better – and a recent analyst review pointing toward double-digit upside.

CTO Realty Growth (CTO)

We’ll start with CTO Realty Growth, a Florida-based real estate company that, last year, made an exciting decision for dividend investors: the company announced that it would change its tax status to that of a real estate investment trust (REIT) for the tax year ending December 31, 2020. REITs have long been known for their high dividend yields, a product of tax code requirements that these companies return a high percentage of their profits directly to shareholders. Dividends are usual route of that return.

For background, CTO holds a varied portfolio of real estate investments. The holdings include 27 income properties in 11 states, totaling more than 2.4 million square feet, along with 18 leasable billboards in Florida. The income properties are mainly shopping centers and retail outlets.

During the third quarter, the most recent reported, CTO sold off some 3,300 acres of undeveloped land for $46 million, acquired two income properties for $47.9 million, and collected ~93% of contractual base rents due. The company also authorized a one-time special distribution, in connection with its shift to REIT status; its purpose was to put the company in compliance with income return regulation during tax year 2020. The one-time distribution was made in cash and stock, and totaled $11.83 per share.

The regular dividend paid in Q3 was 40 cents per common share. That was increased in Q4 to $1, a jump of 150%; again, this was done to put the company in compliance with REIT-status requirements. At the current dividend rate, the yield is 9.5%, far higher than the average among financial sector peer companies.

Analyst Craig Kucera, of B. Riley, believes that CTO has plenty of options going forward to expand its portfolio through acquisition: “CTO hit the high end of anticipated disposition guidance at $33M in 4Q20, bringing YTD dispositions to nearly $85M, with the largest disposition affiliated with the exercise of a tenant’s option to purchase a building from CTO in Aspen, CO. Post these dispositions, we estimate >$30M in cash and restricted cash for additional acquisitions, and we expect CTO to be active again in 1H21.”

To this end, Kucera rates CTO a Buy along with a $67 price target. At current levels, his target implies a 60% one-year upside potential. (To watch Kucera’s track record, click here)

Overall, CTO has 3 reviews on record from Wall Street’s analysts, and they all agree that this stock is a Buy, making the analyst consensus of Strong Buy unanimous. The shares are priced at $41.85, and their average price target of $59.33 suggests room for ~42% growth in the year ahead.

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Land is in the ‘rearview mirror’ for this Central Florida real estate firm. Here’s what’s next.

Jack Witthaus
Staff Writer
Orlando Business Journal

A mega acreage deal may help transition Daytona Beach’s largest landowner into a real estate investment trust.

Consolidated-Tomoka Land Co. (NYSE American: CTO) revealed it sold a controlling interest on Oct. 16 in all — yes all — of its 5,300 acres in Daytona Beach. The Daytona Beach-based real estate company sold the land for $97 million to funds managed by Evanston, Illinois-based hedge fund Magnetar Capital, whose Magnetar Financial LLC owns about 4.6% of the company’s shares, according to Yahoo Finance. Investors in Consolidated-Tomoka seemed pleased, as the company’s stock price grew 6.4% by the market’s close on Oct. 17.

Consolidated-Tomoka President and CEO John Albright told investors on a not-so-typical third-quarter earnings call that land was in the “rearview mirror.” “The market wasn’t valuing the land whatsoever as far as where our stock’s been trading. So right now, we are very focused on investing that capital in income-producing properties.”

That excited some investors on the call who saw the deal as a potential opportunity to turn the company into a REIT, which essentially owns and leases space. The income from the REIT’s leased properties then is given as dividends to shareholders.

Albright declined to say Oct. 17 if the company would become a REIT. He told Orlando Business Journal in a statement that the 5,300-acre “joint venture” deal with Magnetar Capital allows the company “more flexibility in how we structure deals with developers.”

But Alrbight did say in the earnings call that the deal “definitely speeds up the conversation about what’s next for CTO” and said there would be more communication on what that next step for the company would be.

That didn’t stop analysts from weighing in on the REIT speculation during the earnings call.

“I just want to say up front, I give my vote toward becoming a REIT sooner rather than later,” said Brian Rohman, a portfolio manager and analyst for Boston-based Boston Partners Global Investors Inc., which owns about 2.8% of the company.

Investors later speculated that Consolidated-Tomoka’s ownership of the LPGA International Golf Club would be a roadblock to becoming a REIT. But that roadblock apparently has been cleared. On Oct. 18, Consolidated-Tomoka announced it had sold the golf club for about $3.5 million to an affiliate of Manassas, Virginia-based Fore Golf Services Inc. The LPGA International Golf Club had suffered “significant operating losses,” Albright said in a prepared statement.

Consolidated-Tomoka’s stock was trading higher as of late morning Oct. 18, and its stock has a 52-week range of $49.23-$68.64. The company traces its roots back to 1902, and at one point owned more than 1.8 million acres of land in Florida.