The signs go beyond a fever, cough, and shortness of breath.
Stock markets fell 4.4% yesterday, marking the third session in a row of losses. The declines haven’t erased the gains from last week’s bullish trading, but they put a damper on investors’ enthusiasm. There’s a feeling of gloom; President Trump has said that the country and economy are in for a hard two weeks in the first half of April as the coronavirus epidemic peaks in the States, and he walked back his previously stated hope to see the country ‘get back to work’ by mid-month. No one is certain what the near-term holds, except that times are hard.It’s in times like these that investors, when they buy, start looking that much harder at dividend stocks. With share prices dropping, and interest rates cut to near zero, stock dividends are the surest form of asset returns available today – and those low share prices have brought down the initial cost of entry.Investment bank Wells Fargo has been following the markets, and the bank’s stock analysts are coming to the plain conclusion: get into dividends now. In a series of reports released in February and March, the firm's stock researchers outline some low-cost, high-return dividend stocks that investors need to consider – and also one that may be too risky to try. We’ve pulled the details from the TipRanks database, so let’s find out what makes these stock moves so compelling.Oaktree Specialty Lending (OCSL)We’ll start in the financial sector, appropriate when the financial world seems to be crumbling around us. But there is hope. Oaktree focuses on specialty finance, offering customized credit and loan solutions for companies that lack access to more traditional capital markets. The company generates its income through fees and interest on its loan products, which include first and second liens, unsecured loans, and preferred equity. With traditional markets staggering under the weight of the lockdowns and quarantines, Oaktree may find a wider field of action later this year.Earlier this year, just before the coronavirus outbreak hit the US, Oaktree announced a capital drive of its own, raising $300 million in 3.5% notes, which will come due in 2025. The notes were used to reduce outstanding debt while lowering the rates, and providentially gave Oaktree a sound footing just as the market disruptions hit. Shortly afterward, OCSL reported Q1 fiscal 2020 earnings, showing $14.1 million in net income, or 10 cents per share. This was down from Q4, and missed the EPS forecast by 17%.Income was enough to maintain the dividend, however, at 10 cents per quarter. The annual payment, 40 cents, gives the stock a yield of 11.8%, far higher than the 2% average dividend yield found on the broader markets. OCLS has a reliable dividend history, and adjusts the payment when needed to ensure that the company can afford the dividend.Wells Fargo analyst Finian O’Shea wrote on the stock shortly before the earnings report, saying, “OCSL continues to exit legacy positions at par or greater, which likely improves its fundamentals every quarter that passes. While we still see the case for a discount because it chooses to under-earn, we are very positive on the stock at these levels.”O’Shea stands by this opinion, giving the stock a Buy rating with a $6 price target indicating an upside potential of 86%. (To watch O’Shea’s track record, click here)OCSL’s Moderate Buy analyst consensus rating is based on 2 recent reviews, both of which agree that the stock is a buy-side proposition. Shares are priced at a heavy discount, $3.10, and the $5.80 average price target suggests an 81% upside potential for the coming 12 months. (See Oaktree stock analysis on TipRanks)TPG Specialty Lending (TSLX)Next up is another specialty finance company, TPG. TPG’s customer base is middle market companies, and like Oaktree above, its corporate customers have limited access to the capital markets. TGP offers credit, financing, and funding solutions for complex business models. Underlining the importance of the niche, TSLX rose 27% in calendar year 2019.The company had a good financial quarter to finish 2019, too. EPS beat expectations by 8.5%, coming in at 51 cents and at the top line, revenues were 3.6% over expectations, at $66.5 million. On a sour note, both numbers were down year-over-year. Despite that yoy drop, TSLX kept up its dividend – the company pays out 6 dividends annually, and has a history of adjusting those payments to ensure reliability. The current payment, due this month, is 25 cents per quarter.Annualized, TSLX’s dividend comes out to $1.64, giving a yield of 12.4%. This is more than 6x higher than the average stock dividend. And it simply blows away Treasury bonds, which have dipped below 1% as the Fed has cut rates to the bone in an effort to ameliorate the financial damage of the current economic shutdowns.Finian O’Shea, quoted above, reviewed this stock as well, and rated it as a clear Buying proposition. He put a $23.50 price target on the shares, implying an upside of nearly 80%. (To watch O’Shea’s track record, click here)In his comments, O’Shea sees this stock as a conservative, defensive play. He wrote, “We’ll reiterate the view that the value-add provided though highly structured and idiosyncratic deals is still under-appreciated, and perhaps highlighted by TSLX’ best-in-class-peers now showing non-accruals. Moreover, we see that TSLX should receive a richer valuation for preserving a defensive and opportunistic financial position at this market stage.”TPG has 5 Buy ratings and just 1 Hold, giving the stock a Strong Buy from the analyst consensus. The stock is selling for $13.15, and the average price target of $23.13 is indicative of a 76% upside potential for the coming year. (See TPG’s stock analysis at TipRanks)Ventas, Inc. (VTR)Last on our list is Ventas, which Wells Fargo says to steer clear of. This company is a real estate investment trust, focused on health care facility properties in the US, Canada, and the UK. The company holds a varied portfolio, including medical offices, nursing homes, acute and special care centers, surgical centers, and medical labs. The portfolio is valued at more than $25 billion.You’d think that a company focused on health care properties would not be badly hurt in the current epidemic environment, but Ventas shares are down heavily in the current market downturn, having lost 61%. This comes despite the company edging over the estimates in its last quarterly report, when it showed 93 cents per share Funds from Operations and $996 million total revenue. Company management, however, is lowering its forward guidance, as it is not certain that tenants will be able to meet rent obligations as the economy comes to a halt. Health care facilities are working harder than ever – but their medical operations expenses are growing faster as they try to cope with the coronavirus, and those medical operations may be seen as a higher priority than rent. It is part of the spreading ripple of consequences the epidemic has set in motion.VTR is maintaining its divided, as REIT’s are required by law to return earnings to shareholders. The current payment is 79.25 cents quarterly, or $3.17 annually. This makes the yield 13.8%, the highest of the stocks on this list. The question for investors is, Does this yield offset the likely future risk?Todd Stender, covering the stock for Wells Fargo, says to Sell this stock, and he has lowered the price target from$56 to $29. He writes of the company, “The company did indicate that through February, its senior housing and companywide results were in line with its previous expectations; however, mgmt. felt it was prudent at this point to remove 2020 guidance not knowing how long this situation may last. The company has also shifted focus to the balance sheet and is becoming a bit more defensive given the level of uncertainty by tapping $2.75B from its $3.0B line of credit for added liquidity and flexibility.”Even though he rates the stock a Sell, Stender’s lower price target still suggests about 20% upside. This REIT may still bring a return, but as with the dividend yield, it’s not known if that return potential is enough to balance the likely near-term risks. (To watch Stender’s track record, click here)This stock’s analyst consensus rating is a Hold, based on a single Buy against 4 Holds and 3 Sells. Shares are currently trading for $22.95, and the average price target of $42.57 suggests a premium of 80% from that trading level. (See Ventas stock analysis on TipRanks)To find good ideas for dividend stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
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(Bloomberg) -- As the coronavirus pandemic wrecks economies, markets and fortunes, three founders of a company that makes ventilators have added a combined $7.3 billion to their wealth this year.Shenzhen Mindray Bio-Medical Electronics Co. shares have climbed 41%, fueled by a surge in demand for the life-saving devices. Covid-19, the disease caused by the virus, has flooded hospitals worldwide with patients struggling to breathe.Chairman Li Xiting, a Singapore citizen and the city-state’s richest man, has added $3.7 billion to his net worth this year and has a $12.7 billion fortune, according to the Bloomberg Billionaires Index. That puts him among the top five gainers in the world. Jeff Bezos -- the world’s richest person -- is up $3.4 billion, while Bill Gates is down $15.3 billion.The global health crisis has exposed a shortage of ventilators -- the equipment health-care providers rely on to keep critically sick patients alive. While companies from Ford Motor Co. to General Motors Co. rush in to help ramp up production, Mindray’s board secretary Li Wenmei said that global demand is at least 10 times what’s available at hospitals. New York is just a few days away from exhausting its supply, according to state Governor Andrew Cuomo.The death toll worldwide has exceeded 53,000 while infections have topped 1 million. Italy and Spain are the most impacted in Europe, but the disease has also spread rapidly across the U.S., where President Donald Trump warned of 100,000 deaths or more.The Society of Critical Care Medicine estimates that 960,000 patients would need ventilator support in the U.S., but the nation only has about 200,000 such machines. In Italy, the country with the most number of fatalities, a severe ventilator shortage has forced doctors to triage patients.Until late last month, Mindray’s ventilators didn’t have approvals in the U.S. market but the Food and Drug Administration authorized their use under an emergency rule designed to help ease the shortage. That move has also boosted the prospects of Mindray.That authorization is “providing opportunities for Chinese ventilator products to enter the U.S. market quickly,” analysts led by Tian Jiaqiang at Citic Securities Co. wrote in a research note this week.Mindray, which makes 3,000 ventilators a month, isn’t the only manufacturer of the machine in China. Beijing Aeonmed Co. also got FDA authorization last month, according to the regulator’s website. Shares of Jiangsu Yuyue Medical Equipment & Supply Co., another maker, have rallied 98% this year in Shenzhen, boosting its market value to $5.7 billion.Giant RivalsThough Mindray, with a market capitalization of $44 billion, is dwarfed by medical-device giants like Dublin-based Medtronic Plc, the Chinese firm has the potential to expand its market share, said Nikkie Lu, an analyst with Bloomberg Intelligence.“It’s had a very good track record,” with its products able to enter markets like Europe and Hong Kong, she said.In an earnings filing this week, Mindray said orders from Europe especially have increased dramatically, with Italy purchasing the first batch of almost of 10,000 pieces of equipment including ventilators and monitors.The company, which has 17 subsidiaries in China and operations in 30 countries, makes health monitoring systems, ventilators, defibrillators, anesthesia machines and infusion systems. The firm has a direct sales team in the U.S. and long-time global partners include Mayo Clinic, the Johns Hopkins Hospital, Massachusetts General Hospital and Cleveland Clinic, according to its annual report.Not ForeverThe boost to the wealth of Mindray Chairman Li, who founded the firm in 1991 along with Xu and Cheng, contrasts with the erosion in net worth of his peers in Asia. Li Ka-shing, Hong Kong’s richest man, has lost $7.1 billion this year as the city fights a recession from the double-whammy of the pandemic and last year’s political protests. Singapore reported the biggest economic contraction in a decade in the first quarter, and expects a severe recession for the year.The ventilator boom won’t last forever, said Bloomberg Intelligence’s Lu. As more societies age, demand will grow for breathing-support devices, but not to match the scale seen during this crisis, she said.“Sales will definitely drop after the outbreak.”(Updates wealth numbers and case tally)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
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