The low rate environment motivates investors to find income from other sources like high yield dividend stocks. That’s the “Easy” button in today’s market.
But there is no reason to settle for just run of the mill income stocks when you can dig a little deeper to also find those trading at a steep discount to fair value. That combination of extreme yield and extreme value should compute to extreme outperformance.
BGC Partners (BGCP) is a great example of today’s investment theme. This is not a boring utility or consumer staples stock. Instead this is a financial firm expected to grow profits 12.5% a year (about 2X the pace of the average company). Yet even with that healthy outlook, they still sign fat dividend checks worth 9.77% a year. If that wasn’t good enough, it also has 57% upside to the attain its fair value target.
BGC Partners, Inc. - (BGCP - Get Rating) is not the only stock checking boxes for both stellar income and value. There are 6 more to consider in the list below. But first, lets discuss the research process I went through to unearth these gems.
POWR Ratings of A and B. Using our proprietary rating systems is always the best launching off point for our stock searches. This immediately narrows down to the stocks enjoying the best momentum and timeliness.
7% dividend yield was my minimum requirement for this search. But as you scan the list most are well above that mark. Including 3 in double digits yield plays. The top income producer is spinning off 15.18% dividend yield; CVR Partners (UAN).
Lastly the search for value was to uncover the stocks with the widest gaps between the current price and average Wall Street targets. Remember that most income stocks were bid up aggressively the past few months as Treasury rates plummeted. So many of the stocks on the initial screen were actually trading for more than their Wall Street targets.
These final seven choices have upside of 27% to 57% to reach fair value. Combine that likely capital appreciation with 7 to 15% dividend yields = a very attractive route to market outperformance.
OK…you get the idea. These are not just your ordinary high yield stocks. They also have the right stuff to enjoy strong share price gains. So get to clicking on the links below to learn more about each of these stocks. (Remember that the POWR Ratings has 4 different components…so you should investigate how each stock stacks up for Trade Grade, Buy & Hold Grade, Industry Rank and Peer Grade.)
|Company||Ticker||Div Yield %||Market Cap ($mil)||Price||Target||Upside %|
|BGC Partnrs Inc||BGCP||9.77||$1,977||$5.73||$9.00||57.07%|
|CVR Partners Lp||UAN||15.18||$418||$3.69||$5.50||49.05%|
|Fortress Trans & Infr||FTAI||8.28||$1,354||$15.95||$20.33||27.46%|
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BGC Partners, Inc. - (BGCP - Get Rating) shares were unchanged in after-hours trading Wednesday. Year-to-date, BGC Partners, Inc. - (BGCP - Get Rating) has gained 17.53%, versus a 21.60% rise in the benchmark S&P 500 index during the same period.
About the Author: Steve Reitmeister
Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks. More...
More Resources for the Stocks in this Article
|Ticker||POWR Rating||Industry Rank||Rank in Industry|
|BGCP||Get Rating||Get Rating||Get Rating|
|CLNY||Get Rating||Get Rating||Get Rating|
|FTAI||Get Rating||Get Rating||Get Rating|
|HESM||Get Rating||Get Rating||Get Rating|
|UAN||Get Rating||Get Rating||Get Rating|