Despite talk of possible rate cuts from the Federal Reserve next year, the macro environment remains highly volatile with several analysts saying the US economy is not out of the woods yet. Wells Fargo in its 2024 market outlook report said it expects an economic slowdown in 2024 in the US. Wells Fargo expects annual growth rate to come in at just 0.7% in 2024, compared to its previous forecast of 2.2%.
Wells Fargo said that economic headwinds were exacerbated in 2023 by worker strikes, increasing oil prices, resumption of student-loan repayments and outsized budget deficits.
However, Wells Fargo said that a decline in interest rates could rekindle consumer spending and things could start to get back to normal near the end of 2024.
Photo by Karolina Grabowska: https://www.pexels.com/photo/hands-holding-us-dollar-bills-4968630/ Methodology For this article we first used a stock screener to identify dividend stocks with over 8% dividend yield, Buy or better ratings from Wall Street analysts and analyst price targets that are at least 20% more than their current trading prices. From the resultant dataset we picked 12 dividend stocks with the highest number of hedge fund investors. These are extremely high yield dividend stocks with upside potential in their stock prices.
TXO Partners LP (NYSE:TXO) explores for oil and natural gas. In November, TXO Partners LP (NYSE:TXO) upped its dividend by 8.3%. As of December 16, the stock’s dividend yield is about 11.2%.
As of the end of the third quarter of 2023, just one hedge fund in Insider Monkey’s database had stakes in TXO Partners LP (NYSE:TXO).
Companies like TXO tend to go out of favor during troubled times, unlike mature companies like The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL), and PepsiCo, Inc. (NASDAQ:PEP).
Number of Hedge Fund Investors: 2
Carl Icahn’s Icahn Enterprises LP Common Stock (NASDAQ:IEP) had a tough time in 2023. Icahn Enterprises LP Common Stock (NASDAQ:IEP) had to cut its dividend by half and billionaire Icahn kept selling the stock. But the stock still has a high forwarded dividend yield (over 25%) while its price target for the next 12 months set by Wall Street analysts is $26.
As of the end of the third quarter of 2023, just two hedge funds had stakes in Icahn Enterprises LP Common Stock (NASDAQ:IEP).
The company talked about its state of business during Q3 earnings call:
Food Packaging adjusted EBITDA improved by $3 million or 27% for Q3 ’23 as compared to prior year quarter primarily due to improved gross margin management and reductions in distribution costs. Home Fashion adjusted EBITDA increased by $8 million as compared to prior year quarter, primarily due to lower material costs and pricing initiatives. The Pharma segment’s adjusted EBITDA for Q3 ’23 improved by $8 million as compared to prior year quarter, mainly due to margin improvement.
Read the full earnings call transcript here.
Instead of Icahn Enterprises, analysts have been recommending mature dividend stocks like The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL), and PepsiCo, Inc. (NASDAQ:PEP) in 2023.
Number of Hedge Fund Investors: 6
Portman Ridge Finance Corp (NASDAQ:PTMN) is a high dividend yield stock with upside potential.
As of the end of the third quarter of 2023, six hedge funds tracked by Insider Monkey had stakes in Portman Ridge Finance Corp (NASDAQ:PTMN).
Answering a question about Portman Ridge Finance Corp’s (NASDAQ:PTMN) dividend, CEO Ted Goldthorpe said:
“I would say we feel really good about our dividend. Even if the Fed cuts rates which we don’t obviously speculate on because that’s not our thing. The dividend is pretty protected down to a pretty big reduction in short-term rates. So again, we assess every quarter — obviously, we’re comfortably over earning our dividend in a period of time where we’re getting — So I think we feel good about where our dividend is. And I don’t — again, we’ll assess it at year-end and see if there’s — see where we are in terms of spillover income.”
Read the full earnings call transcript here.
Number of Hedge Fund Investors: 7
A total of seven hedge funds in Insider Monkey’s database of 910 hedge funds had stakes in AFC Gamma Inc (NASDAQ:AFCG) which provides financial solutions to the cannabis industry.
Earlier this month AFC Gamma Inc (NASDAQ:AFCG) announced a dividend of $0.48 per share. The stock’s dividend yield came in at over 15%.
Number of Hedge Fund Investors: 9
New York Mortgage Trust Inc (NASDAQ:NYMT) ranks 8th in our list of the extreme dividend stocks with upside potential. While New York Mortgage Trust Inc (NASDAQ:NYMT) recently cut its dividend by about 33%, its forward dividend yield is still about over 8%.
As of the end of the third quarter of 2023, 9 hedge funds out of the 910 hedge funds tracked by Insider Monkey had stakes in New York Mortgage Trust Inc (NASDAQ:NYMT).
New York Mortgage Trust Inc (NASDAQ:NYMT) talked about important business updates during Q3 earnings call:
We are being selective about where we invest and remain steadfast on asset management. In the quarter, we substantially increased asset acquisitions, purchasing $1.1 billion of assets, with $946 million of those concentrated in agency MBS. This activity was greater than last year’s peak of acquisitions in the second quarter of 2022, before we slowed down our investment pipeline. Away from agencies, our BPL bridge volumes have also grown at $179 million in the quarter from $100 million in the prior quarter. The overall investment portfolio is now $4.7 billion as of the end of the third quarter, up from $4 billion. The conservative positioning that we undertook in 2022 preserved liquidity and allowed for capital return through portfolio pay-downs.
Read the entire earnings call transcript here.
Number of Hedge Fund Investors: 9
LNG company Cool Company Ltd (NYSE:CLCO) ranks 7th in our list of the extreme dividend stocks with upside potential.
Cool Company Ltd (NYSE:CLCO) stock has a dividend yield of about 13% as of December 16.
Number of Hedge Fund Investors: 12
Texas-based Kimbell Royalty Partners LP (NYSE:KRP) is a high-yield dividend stock. Kimbell Royalty Partners LP (NYSE:KRP) made moves earlier this year with its acquisition of mineral right assets in the Permian.
In October, Raymond James gave a Strong Buy rating to the stock.
As of the end of the third quarter of 2023, 12 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Kimbell Royalty Partners LP (NYSE:KRP). The biggest stakeholder of Kimbell Royalty Partners LP (NYSE:KRP) was Thomas E. Lynch’s Mill Road Capital Management which owns a $26 million stake in Kimbell Royalty Partners LP (NYSE:KRP).
Unlike The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL), and PepsiCo, Inc. (NASDAQ:PEP), KRP is a high dividend yield stock with not a very impressive dividend growth record.
The company talked about some important business updates during Q3 earnings call:
On the expense side, general and administrative expenses for Kimbell were $10.4 million, $7 million of which was cash G&A expense. Excluding the impact of approximately $1.5 million in transaction-related expenses associated with the acquired production and including a full quarter impact of the acquired production, cash G&A per BOE was $2.55, a new record low for the company. Third quarter net income was approximately $18.5 million and net income attributable to common units was approximately $13.6 million, as compared to $17.8 million and $13.5 million, respectively, from last quarter. Total third quarter consolidated adjusted EBITDA was $55.8 million, up from $45 million last quarter, including the acquired production from the effective date of June 1, 2023, through September 30, 2023, Q3, 2023 consolidated adjusted EBITDA was $71.6 million.
Read the entire earnings call transcript here.
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Disclosure. None. 12 Extreme Dividend Stocks With Upside Potential was initially published on Insider Monkey.
