We've made more than half of our earnings, and more than 80 percent of our publicly traded S&P companies have exceeded expectations, revenue, or both. Wall Street forecasts profits for the third quarter to grow by more than 35 percent year-on-year, and another positive aspect is that the U.S. Consumer Confidence Index rose last month, with Data for October at 113.8, better than expected at 108 and beating 109.8 in September. The October gains mark a reversal of a three-month decline.
Chief market technician Craig Johnson said risk appetite in U.S. equities remains and that corporate earnings have been a key catalyst behind the recent record rally as strong demand continues to offset well-known supply constraints and pricing pressures. Against this backdrop, Crispinoff, a stock analyst at Pepper Sandler, has been looking for the "right" buying opportunity in the market, and his choice deserves careful consideration. Interestingly, he has always looked to high-yield dividend payers as an investment option. Analysts' draft picks three little extra lights — a strong buy stock with a dividend yield of 7% or more. Let's take a closer look.
Hercules Capital ( HTGC )
The first is Hercules Capital. This business development company (BDC) lives in a unique area of professional finance, investing in venture capital debt. That said, Hercules offers financing options for pre-IPO startups and another option for venture capitalists. In the 18 years since its inception, Hercules has funded more than 540 businesses and raised $12 billion in cumulative financing. Hercules' investments are focused on science-oriented client companies. The current dividend consists of a regular payment of 33 cents per share (up 1 cent from the previous quarter) and matching earnings per share — and a special payment of 7 cents. At an annualized interest rate of $1.60, the dividend yield is 7.4%.
Ellington Financial (EFC)
The second dividend stock we're looking at is Reit Ellington Financial. These companies are known for their reliable and high dividend payments. Ellington takes a broad approach to the REIT niche, investing in commercial and residential mortgages, equity investments and mortgage-backed securities. Speaking of earnings, the company's earnings per share have declined over the past few quarters, from a high of $1.44 in the fourth quarter of 2020 to 75 cents in the second quarter of 2021, the previous reporting quarter. 2Q21 earnings per share were also down 10 cents from the same period last year. However, earnings supported the dividend, which was paid at 15 cents per share at the end of October. Dividends are paid monthly, so annualized to $1.80. At this rate, forward yields are as high as 9.9%.
Ellington Home Mortgage (Earned)
The last one on our list is another REIT, Ellington Residential Mortgage. The company, like the similarly named EFC above, is a subsidiary of Ellington Management Group; what sets it apart is the focus of its real estate portfolio. EARN has invested around the acquisition and management of residential mortgages and real estate assets. The company primarily focuses on residential MBS that are guaranteed by principal and interest by U.S. government agencies or U.S. government-funded entities. With dividend payments in October, EARN has made changes to its dividend payment policy. Third-quarter payments were made in September at 30 cents per share; for October, the company has switched to a monthly format while keeping the overall rate unchanged. In other words, EARN paid a dividend of 10 cents in October and plans to pay it monthly in the future. At the current monthly rate, the dividend is annualized to $1.20 and yields as high as 9.8%.
Overall, analysts are unanimous, based on buy – 3 – the stock has a strong buy consensus rating. The stock price is $12.19 with an average price target of $12.5. As with high-yield dividend payers, the return here is in the distribution.