In a market facing recent volatility and concerns about a potential recession, dividend stocks can provide a steady income stream and relative stability. Here are two dividend-paying stocks with yields exceeding 10%, both receiving ‘Strong Buy’ ratings from analysts:
1. MFA Financial (MFA)
Company Overview: MFA Financial operates as a real estate investment trust (REIT), focusing on residential real estate assets including mortgage loans and mortgage-backed securities. As of Q2 2024, the company holds a significant portfolio of residential whole loans and securities.
Recent Performance:
Q2 2024 Net Interest Income: $53.49 million, up 20% year-over-year.
Non-GAAP EPS: 44 cents, a 10% increase from the previous year and better than expected.
Dividend: The company’s dividend is $1.40 annually, yielding about 11.4% at the current price of $12.26.
Analyst Opinion:
Jay McCanless of Wedbush: McCanless views MFA as emerging from a challenging period and appreciates the stability and high yield of its dividend. He rates the stock as Outperform (Buy) with a $14 price target, suggesting a potential upside of 14% over the next year. Including the dividend, the total potential return exceeds 25%.
Consensus:
Strong Buy with 3 Buy ratings and 1 Hold.
Average Price Target: $13.13, implying a 7% upside.
2. Golub Capital BDC (GBDC)
Company Overview: Golub Capital is a business development company (BDC) that provides capital to small- and mid-sized enterprises (SMEs), focusing heavily on senior loans. The recent merger with GBDC 3 has expanded its total assets to approximately $8.8 billion.
Recent Performance:
Q2 2024 Total Investment Income: $171.27 million.
Adjusted Investment Income per Share: 48 cents.
Dividend: The annualized dividend is $1.56, yielding around 10.6% at the current price of $14.76.
Analyst Opinion:
Paul Johnson of KBW: Johnson highlights Golub Capital’s high-quality portfolio and cost-effective management. He rates the stock as Outperform (Buy) with a $16.50 price target, indicating a 12% potential upside. Including the dividend, the total return could exceed 22.5%.
Consensus:
Strong Buy with 3 Buy ratings and 1 Hold.
Average Price Target: $16.50, suggesting a 12% upside.
Investment Considerations:
Both MFA Financial and Golub Capital BDC offer substantial dividend yields that can provide investors with a reliable income stream during uncertain market conditions. Analysts have positive outlooks for both stocks, indicating potential for further appreciation in addition to their attractive dividends. As always, investors should consider their individual risk tolerance and investment goals before making decisions.
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