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Charles Schwab says High Yield Stocks are the best bet right now; Here are two names that analysts like

As we close into the final quarter of 2022, investors are looking for an answer to one question: is June a bottom for stocks or do they have plenty of room to fall? That is a serious question and may not have an easy answer. Markets are facing a range of headwinds, from the high inflation and rising interest rates we’ve become accustomed to to the increasingly strong dollar that will weigh on upcoming Q3 earnings.

Weighing in on current conditions from Charles Schwab, an $8 trillion brokerage, chief global investment strategist Jeffrey Kleintop noted that these key factors are on investors’ minds. , before going down firmly on the bullish view of high-yield stocks.

“We talk about the characteristics of stocks that are doing better across sectors and that tend to be value factors and high quality factors. What I’ve been focusing on most recently are people. paying high dividends… They’ve done a great job, and often high Dividends are a sign of good cash flow and a good balance sheet, and investors are looking for that,” notes Kleintop.

So, let’s take a look at two of the market’s dividend champions, the high-yielding dividend payers that Street analysts want to continue. Based on TipRanks databaseboth stocks hold a Strong Buy rating from analysts’ consensus – and both offer dividends of up to 8%, high enough to provide investors with a degree of inflation protection. .

Ares Capital Corporation (ARCC)

The first is Ares Capital, a business development company (BDC) focused on the SME sector. Ares provides access to capital, credit and financial tools and services to companies that may have difficulty accessing services from large banking firms. Ares’ target customer base is the small businesses that have long been the engine of much of the US economy.

On a macro level, Ares has outperformed the markets as a whole so far this year. The company’s stock is down – but only 3% so far. This compares with the S&P 500’s 16% drop in the same time frame.

Ares has achieved this remarkable performance through the quality of its portfolio. The company’s portfolio, as of the end of the second quarter of calendar year 22, has a fair value of $21.2 billion, including loans and equity investments in 452 companies. The portfolio is diversified across asset classes, industries and geographies, giving it a solid defense in today’s uncertain market environment.

The company reported total investment income of $479 million for the second quarter, up $20 million, or 4.3%, from the year-ago quarter. This resulted in net GAAP earnings of $111 million and core EPS of 46 cents.

The latter two results were both down year-on-year – but enough to fund the company’s dividend, announced in July at 43 cents per common share, for a September 30 payout. annual dividend up to $1.72 and yield 8.7%. In addition to the common stock dividend, the company will also pay a pre-authorized special dividend of 3 cents. Ares has a history of holding a reliable quarterly dividend since 2004.

Includes Ares for Truist, analyst Michael Ramirez describes the company’s recent quarterly earnings as “affected by greater market volatility”, resulting in “more attractive terms for new products coupled with higher yields – leading confidence to raise regular dividends.”

Going forward, in more detail, Ramirez added, “We continue to expect an improved NII to create a buffer between regular and additional earnings and dividends through the second half of 2022. Additionally, we do. predicts total portfolio yields will benefit from higher near-term interest rates with existing Fed Funds futures with an expectation of around 200bps rate hike in the second half of 2022.”

The analyst’s comments point to the possibility of even better performance – and he backs them up with a Buy rating on the stock and a $22 price target that shows confidence in a 12% one-year gain. Based on current dividend yield and expected price appreciation, the stock has a total potential return of ~21%. (To see Ramirez’s record, click here)

Overall, the Strong Buy consensus rating on ARCC is unanimous, based on 6 positive analyst reviews established in recent weeks. The stock is priced at $19.59, and their current $21 price target implies a modest 7% gain from that level. (View ARCC stock forecast on TipRanks)

Williams Companies (WMB)

The next company to look at, Williams Company, is a major player in natural gas pipelines. Williams controls natural gas pipelines, natural gas liquids, and oil collection, in a network that stretches from the Pacific Northwest, through the Rockies to the Gulf Coast, and across the South to Mid-Atlantic. Williams’ core business is natural gas processing and transportation, with crude oil and energy production as secondary operations. The company’s footprint is huge – it processes nearly a third of all natural gas used in the US, both residential and commercial.

The company’s natural gas business has delivered good results in terms of revenue and profit. For the most recent quarter, 2Q22, showed total revenue of $2.49 billion, up 9% year over year from the $2.28 billion reported in the previous quarter. Adjusted net income of $484 million resulted in adjusted diluted EPS of 40 cents. This EPS increased 48% year-on-year and was 37% higher than forecast.

Rising natural gas prices and solid financial results have boosted the company’s stock – and while the broader markets are all down year-to-date, WMB stock is up 26%.

The company is also paying a regular dividend, and in its most recent statement, in July for a September 26 payout, management set the payout at 42.5 cents. This marks the third consecutive quarter at this level. Annual dividend up to $1.70 and yield 5.3%. Even better, Williams has a history of keeping reliable dividend payments – never missing a quarter – since 1989.

This stock has attracted the attention of Justin Jenkins, a 5-star analyst from Raymond James, who writes of WMB: “The compelling combination of core business stability and operating leverage of Williams Company (WMB) through G&P, marketing, manufacturing, Project output and implementation has not yet been appreciated. In our opinion, the large cap of WMB, C-Corp. Potential acquisitions and joint venture optimization provided additional catalysts throughout the year, underpinning a higher-than-expected valuation. “

Jenkins maintains a Strong Buy rating on WMB stock and his $42 price target implies a 31% gain over the next 12 months. (To see Jenkins’ achievements, click here)

Jenkins disagrees with seeing Williams as a Strong Buyer; that’s a consensus rating, based on 10 recent analyst reviews, including 9 Buys and 1 Sells. The stock has an average target price of $38.90, showing a ~22% return in one year from its current trading price of $32. (View WMB stock forecast on TipRanks)

To find good ideas for trading dividend stocks at attractive valuations, visit TipRanks’ Best stocks to buya newly launched tool that unifies all TipRanks equity insights.

Disclaimer: The opinions expressed in this article are those of prominent analysts only. Content is used for informational purposes only. It is very important to do your own analysis before making any investments.

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