It’s Monday, just the third trading day of the New Year. It’s tempting to start checking out the market statistics for 2020 – after all, that’s the data that we use to make our investment decisions. So, what does the data tell us, in this first full week of January?
The main thing, and probably the most important, is that volatility was up in the year’s first trading sessions. Investors came back from the New Year holiday and jumped right into trading, pushing markets up on Thursday. And then, they started selling on Friday, pushing the markets right back down. The news from the Middle East, with heightened tensions between the US and Iran, has been casting a shadow on the markets all weekend – we’ll see how it affects trading later today.
Investors always look for a safe spot in volatile market conditions. It’s natural. And dividend stocks are a natural refuge – they offer a steady source of income, even if share prices decline. But not all dividend stocks are created equal.
We’ve used the TipRanks Stock Screener tool, which scan more than 6,400 stocks, to find the dividend stocks that stand head and shoulders above the rest. We’ve set our filters to show small-cap stocks, with over 35% upside, and dividend yields exceeding 5%. Here are the results.
Gaslog Partners (GLOG)
The energy industry, inhabiting a sector that is essential to the modern economy, is well known for generating high profits. Gaslog, as its name suggests, is a player in the natural gas segment of the industry. The company provides logistical support, specifically liquified natural gas (LNG) carries – the giant oceangoing vessels that move LNG around the world.
GLOG showed some mixed results in its most recent quarterly report, for Q3 2019. Revenues beat the forecast by 1.3%, at $96.5 million, but EPS missed by 14% and came in at 43 cents. The company’s cash flow grew 26% year-over-year – and that led to a series of dividend payments as 2019 ended: a quarterly payment, in November, of 14 cents, followed by two special dividend payments in December, of 40 cents and 38 cents. Overall, the company’s payments to shareholders are yielding 6.32%, or more than triple the market average.
The high dividend helps make up for the stock’s recent collapse in share price. GLOG lost 37% in early November, before regaining $1 per share and levelling off at current prices. The November fall was responsible for GLOG’s 37% drop in 2019 – but analysts see the lower share price now as an opportunity.
4-star analyst Jonathan Chappell, of Evercore ISI, explains: “[I]n the last 6 weeks, GLOG shares have declined 32%... By our estimation, though, the “shortfall” represented roughly $10 million in total EBITDA, thus the 32% collapse seemed overdone... With the winter rate spike beginning to draw to a close volatility in the shares is likely to remain. But the structural integrity of the business model and capital structure remain intact, and with financing completed and a robust contracted revenue backlog, GLOG’s current price provides value (and yield) to investors.”
Chappell gives GLOG a Buy rating. His price target, $17, indicates the extent of his confidence – he sees a 79% upside here. (To watch Chappell’s track record, click here.)
Chappell is not alone in his bullish stance on GLOG. This stock has a unanimous consensus rating of Strong Buy, with 3 recent buy reviews bolstering the stock. Shares sell for a low $9.49, but the $18 average price target suggest that there is room in GLOG for 89% upside growth this year. (See Gaslog’s stock analysis at TipRanks)
Archrock, Inc. (AROC)
When natural gas is pulled out of the ground, it must be liquified for transport. That’s where Archrock comes in. The company owns, operates, sells, and maintains the compression equipment needed to liquify, store, and transport natural gas. It’s an essential service for the gas industry. Currently, Archrock operates solely in the continental US.
Low prices in the energy sector have plagued oil- and gas-related stocks for the past year, and AROC missed the forecasts in its most recent reported quarterly earnings (Q3 2019). However, despite the miss, both the top and bottom lines were up significantly year-over-year. Revenues, at $244.95 million, were up 5.4%, and EPS, at 14 cents, was up an impressive 75%. Even missing the pre-earnings estimates, gains like that will make investors happy.
What will also make investors happy is AROC’s dividend payment. The company has been paying out reliably since 2016 and raised the payment in both 2018 and 2019. The current quarterly payment, 14.5 cents per share, annualizes to 58 cents – and a strong yield of 5.75%.
RBC Capital’s 5-star analyst T J Schultz sees plenty of reason for optimism in AROC shares, starting with the company’s potential to maintain and improve its dividend. In his investment summary of the stock, he writes, “We think AROC is well positioned to benefit from improving market fundamentals. Particularly, we think improving compression fundamentals can drive cash flow growth at AROC that is sufficient to cover dividends by >2.0x while also delevering to under 4.0x by 2020.”
Schultz gives AROC a $14 price target to back up his Buy rating, implying a robust upside potential of 38%. (To watch Schultz’s track record, click here.)
Like Gaslog above, AROC has a Strong Buy analyst consensus rating based on 3 Buy reviews. The stock is another bargain, with shares priced at $10.09. The average price target of $13.83 suggests a premium of 37% to the upside. (See Archrock’s stock analysis at TipRanks)
Innovative Industrial Properties (IIPR)
Real Estate Investment Trusts are a natural place to start looking for high-yielding dividend stocks. These companies, which buy up, own, and operate various combinations of residential and commercial properties or mortgages and mortgage-backed securities. By law, REITs are required to return the bulk of their profits to their shareholders, and dividends are natural way to do this.
Innovative Industrial Properties lives up to its name. The company is an REIT, but has focused on a new niche: the cannabis industry. The company owns light industrial properties which are then leased to commercial cannabis growers. The marijuana industry is quickly developing a strong cash stream as legalization marches on, and IIRP is harvesting profits of its own. For the third quarter, reported in early November, the company showed an 8-cent forecast beat on EPS, reporting profits of 55 cents per share on $11.56 million in total revenue. The top-line number was 8% over expectations.
So, IIPR’s financial foundation is firm. Good. But for investors, the better news comes from the dividend – as the company’s profits rise, so do the dividend payments. The company paid out three dividends in 2019, and raised the ante each time, moving from 45 cents to 78 cents to 1 dollar on December 30. Reliable payments and steady increases are sure to attract dividend hunters.
The yield is fine, too. At its current payment, IIPR’s dividend yields an impressive 5.33%, more than two and half times higher than the average dividend, just 2%, found on the S&P 500.
As for upside potential, Compass Point’s 4-star analyst Merrill Ross lays out the case: “In the past two weeks, public cannabis MSOs have reported rapidly growing sales and, in some cases, positive cash flows as they make headway in states where medical use is legalized and where recreational use is either on the cusp of legalization or in its infancy... We believe that IIPR can more than double its portfolio from the current level in the next 12 months…”
Ross puts a Buy rating on the stock, of course, and her $130 price target suggests a whopping 73% upside potential. (To watch Ross’s track record, click here.)
IIPR’s three most recent analyst reviews, split between 2 Buys and 1 Hold, give the stock a consensus rating of Moderate Buy. Shares are priced at $75, and the $140.50 average price target indicates a most impressive 87% growth potential on the upside. (See Innovative’s stock analysis at TipRanks)