The S&P 500 gained 24% in 2023, and is up more than 12% so far this year. Those are substantial numbers, and it’s tempting to think that these good times will just keep rolling along.
Ed Yardeni, the market expert behind Yardeni Research, is bullish – but he’s also both cautious and realistic. He believes that the markets will continue to post gains this year, albeit at a slower pace than we’ve seen recently. He puts a 5,400 target on the S&P 500 index, suggesting just a 1% gain from current levels.
“We are still in a bull market, but it will be slowing down from here. A few days ago people were asking me why I wasn’t raising my numbers. Now I feel comfortable that I didn’t,” Yardeni said. He notes that bond yields are high, always a sign that stocks will turn low, and that interest rates are dealing a bigger hit than had been previously expected.
In this environment, investors will turn toward defensive shares – and that frequently means dividend stocks. These stocks, especially the high-yield payers, ensure a reliable, inflation-beating income stream. And when the div payers have also outperformed the broader markets, the potential returns are sure to spark investor interest.
We’ve used the TipRanks platform to look up the Street-level view of two such stocks, high-yielding dividend payers – up to 11%, in one case – that also boast recent outperformance and Strong Buy consensus ratings. Here are the details.
Star Bulk Carriers(SBLK)
We’ll start in the world of cargo haulage, specifically, oceangoing bulk freight, with Star Bulk Carriers. This company, based in Greece, is the owner-operator of a fleet of dry bulk carriers. These vessels, spanning from modest 500 DWT (Dead Weight Tonnage) crafts to colossal oceangoing behemoths surpassing 200,000 tons, serve as the backbone of global maritime trade, transporting an array of unpackaged bulk goods like iron ore, coal, grains, and steel products, alongside materials such as phosphates and bauxite.
With a robust ‘on the water fleet’ consisting of 163 carriers, Star Bulk’s lineup includes a variety of sizes, from the approximately 50,000 DWT Supramax vessels to the towering ~210,000 DWT Newcastlemax giants. Among its fleet, the company’s most prevalent ships include 49 Ultramax vessels, ranging from 60,000 to 66,000 DWT, and 41 Kamsarmax ships, boasting capacities of 80,000 to 83,000 DWT.
Oceangoing travel takes a toll on ships, and the world’s bulk carriers work hard to maintain modern fleets. Star Bulk, in addition to the ships it has in operation, has 8 more under construction at shipyards in Japan, the Philippines, and China. Three of these ships will be delivered during 2H24, two in 2025, and the remainder in 2026.
Star Bulk’s current fleet includes ships brought in through its acquisition of Eagle Bulk Shipping. The acquisition, through an all-stock transaction, was completed this past April. The large size of this company’s active fleet makes Star Bulk the largest dry bulk carrier to be traded on the NASDAQ.
Not only is Star Bulk a leader in its niche, its stock has also strongly outperformed the larger NASDAQ index this year. For the year-to-date, SBLK shares are up approximately 22%; in that same time, the NASDAQ has posted a gain of 14%.
In late May, Star Bulk reported its 1Q24 financial results. The company showed a top line of $259.39 million in voyage revenues, up more than 15% year-over-year and beating the forecast by over $53 million. At the bottom line, the company’s non-GAAP earnings per share was reported as 87 cents per share; while this missed expectations by 3 cents, it was up considerably from the 36-cent non-GAAP EPS reported in the prior-year quarter.
Star Bulk maintains a regular dividend policy, with payments based on the company’s total cash balance, minimum cash balance per vessel, and total number of vessels. Based on these factors, the company on May 22 declared a dividend of 75 cents per common share, up significantly from the previous quarter. Based on the current payment, the company’s dividend gives a forward yield of 11%.
This high-yield dividend stock has caught the attention of Stifel analyst Benjamin Nolan, who is rated among the top 1% of the Wall Street stock analysts by TipRanks. Nolan is impressed by Star Bulk’s ability to expand its fleet and believes that the company presents a solid opportunity for investors.
“The company has begun integrating the Eagle Bulk merger and is beginning to realize cost synergy benefits. At the same time, the dry bulk market remains healthy supporting continued deleveraging and capital returns. We expect Star Bulk to continue to monetize older assets at elevated prices while opportunistically utilizing their shares as equity currency in dry bulk M&A opportunities similar to the Eagle deal. Ultimately, we expect market fundamentals to remain healthy and SBLK shares to be the most investable of the dry bulk names,” Nolan opined.
Nolan puts a Buy rating on SBLK shares, and quantifies that with a $30 target price, suggesting a one-year upside potential of 17.5%. With the dividend yield added in, the potential return here approaches 28.5%. (To watch Nolan’s track record, click here)
Overall, there are 4 recent analyst reviews of this stock, and the 3 to 1 breakdown in favor of Buy over Hold gives the shares a Strong Buy consensus rating. The stock is selling for $25.52 and the average target price of $29.75 implies a one-year gain of nearly 17%. (See SBLK stock forecast)
Frontline, Ltd. (FRO)
The next stock we’ll look at, Cyprus-based Frontline, is another shipping company – but of a very different breed than Star Bulk above. Frontline concentrates on the tanker segment and operates one of the industry’s largest fleets of ocean-going tankers for crude oil and other hydrocarbon fuel products. Frontline’s fleet is currently made up of 82 vessels in operation, including 110,000 DWT Aframax vessels, Suezmax vessels of 157,000 to 158,000 DWT, and, making up the largest part of the fleet with 41 ships, VLCCs of 300,000 DWT.
VLCCs, or “Very Large Crude Carriers,” are dedicated to transporting crude oil exclusively. Suezmax vessels, the largest capable of navigating the Suez Canal, and Aframax tankers, renowned for shuttling crude oil efficiently across the globe and accessing most port facilities, complete Frontline’s diverse fleet.
Last year, in October-November, Frontline made a merger offer for Euronav, a Belgian tanker company, but ended up withdrawing the offer. Frontline sold off its stake in Euronav, receiving $252.5 million in gross proceeds from the sale of its 13.7 million shares. However, Frontline also acquired 24 of Euronav’s 41 VLCCs, a move that was completed in the first quarter of this year. Measured by DWT, Frontline is now the largest pure-play tanker company on the public trading markets.
Turning to the financial side, we find that Frontline reported a 16% year-over-year increase in revenue, to $578.4 million. The revenue total supported an adjusted profit of $137.9 million, or 62 cents per share. While the revenue beat the forecast by almost $195 million, the non-GAAP EPS was 12 cents lower than had been expected. Nevertheless, despite the earnings miss, stock in FRO has gained over 41% so far this year.
The company’s earnings fully supported the common share dividend payment. This was declared on May 29 for 62 cents per share, and the forward yield, based on the annualized payment of $2.48, comes to 8.9%.
Frontline’s stock, much like Star Bulk’s, has seen a notable rise this year, boasting a gain of about 36%. The attention of investors has been captured, alongside one of the market’s leading analysts, Omar Nokta from Jefferies, who is ranked in the top 2% of Wall Street analysts by TipRanks.
In explaining his Buy rating on FRO, Nokta asserts, “We remain positive on Frontline’s prospects and for the tanker market in the coming years. While 1Q results were impacted by repositioning, we expect 2Q results to improve and for the full effect of the Euronav fleet to be realized beginning in 3Q. Tanker rates remain elevated and Frontline continues to generate sizable free cash flow with dividends as a key priority.”
Along with the Buy on the stock, Nokta sets a $30 price target, indicating potential for a gain of nearly 12% on the one-year horizon. With the dividend yield, the total return here approaches 21%. (To watch Nokta’s track record, click here)
Overall, all three of the recent analyst reviews here are positive, making the stock’s Strong Buy consensus rating unanimous. The shares are priced at $26.83 and have an average target price of $34.69, suggesting a 29% share appreciation in the year ahead. (See FRO stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
