2 “active buy” dividend stocks that outperformed this

Stocks rose this week ahead of today’s inflation data. The earnings reflected investors’ optimism that inflation would continue to fall, a view that was backed up by actual numbers.

The price growth rate in December decreased by 0.1% compared to the previous month and increased by 6.5% year on year. They were exactly in line with forecasts and indicate a slowdown in inflation in the future.

Slower pace is good news. With this contraction – annual inflation gains well below its 40-year high of 9% recorded in June 2022 – investors and economists see more reason to believe the Federal Reserve will also slow down its move to raise interest rates. While Fed Chairman Jerome Powell has already signaled that the central bank will prioritize fighting inflation and keep rates higher as needed, there is hope that the Fed will back off on recent rapid interest rate hikes. We’ll know for sure later this month – the Fed’s Open Market Committee, which sets the key fund rate, is due to meet on January 31st/February 1st.

Whatever the Fed does, investors should look for defensive moves to protect themselves – and that will draw us to dividend stocks – and especially high-yielding dividend stocks. We used the TipRanks database to find two dividend payers that offer yields above the current inflation rate. And what’s even better, they both have a “Strong Buy” consensus rating from the broader analyst community. Let’s take a closer look.

Ladder Capital Corporation (LADR)

We’ll start with Ladder Capital, a real estate investment fund (REIT) focused on the commercial real estate market. The company’s asset portfolio is valued at approximately $5.9 billion and consists primarily of commercial real estate loans and flexible capital solutions. Ladder also owns and manages commercial real estate, leaning towards pure commercial leases. The company, which has been in business since 2008, describes its “core competency” as lending to commercial real estate.

In the most recent Q3 2022 reporting quarter, Ladder performed better than expected, with pre-tax GAAP earnings of $31.3 million, or 23 cents per diluted share. The company’s net interest income was $28.89 million, more than $6 million more than the previous quarter. At the same time, real estate operating income declined by about $1 million quarter-on-quarter to $27.68 million, indicating that the overall economic environment is adding value to the business.

However, of particular interest to dividend investors is Ladder’s distributable earnings, which directly support the dividend payout, which totaled $34.3 million, or 27 cents per share, in the third quarter. In fact, it was a quarter less than a quarter; Distributable EPS for Q2 was 34 cents, although it was nearly double the Q3 2021 result of 14 cents per share.

In mid-December, Ladder announced its next dividend payment due on January 17th. The dividend on common shares is set at 23 cents per share, which is fully covered by distributable earnings per share. At this rate, the annualized dividend is 92 cents per common share, giving a yield of 8.55%. This return is more than 4 times the average of S&P listed companies and outperforms inflation by almost 2 points, providing a real rate of return for investors.

Tracking LADR for JMP Securities, analyst Stephen Delaney is bullish on the stock. He believes the company is well positioned to weather whatever challenges the economy is facing and deliver solid results for investors.

“Ladder began lending more aggressively in Q2 2021 when market conditions turned attractive after an initial disruption due to COVID in early 2020, but the company is now slowing lending again as the economic picture has worsened. The company has increased liquidity and should be able to take advantage of any market opportunities that may emerge in the first half of 2023 as the Fed completes its current tightening cycle,” DeLaney said.

“We believe that LADR shares offer an attractive investment opportunity over the next 12-24 months as the company meets its key goals of increasing its core transitional loan portfolio and generating a net rental asset return, which should result in improved distributable earnings. until 2023,” the analyst concluded.

Tracking this bullish stance, DeLaney gives the stock a Better (i.e. Buy) rating with a target price of $12.50, implying a 15% annual upside potential. Based on the current dividend yield and the expected price increase, the potential total return on the stock is around 24%. (To view Delaney’s track record, click here)

Overall, Ladder has received 4 recent reviews from Street analysts, and these reviews include 3 buys and 1 hold (i.e., neutral) – a strong buy consensus rating. The shares are trading for $10.86, with an average target price of $12.63 suggesting a 16 percent gain over the year. (See Forecast of LADR reserves)

Rhythm Capital (RHYTHM)

Next up is Rithm Capital, another real estate investment fund. In the summer of 2021, Rithm underwent a restructuring and now operates as an internally managed REIT. The company operates in both mortgage lending and mortgage services, and its portfolio includes loans, real estate securities, and residential and commercial mortgages. The company also invests in MSRs, which represent about 26% of the portfolio.

Rithm’s total portfolio currently stands at $7.53 billion in net worth and the company manages $35 billion in assets. In its latest financial results for Q3 2022, Rithm reported more than $153 million in profit available for distribution at a price of 32 cents per common share. That figure, which confirms the dividend payout, rose about 5% year on year from $145.8 million and easily covered the $118.4 million in common stock dividends paid in the third quarter. The next dividend of 25 cents per common share was declared at the end of December, payable on January 27th. The annualized payout is $1 and returns 11.3%, which is 5 times the broad market average and nearly 5 points above the official December annual inflation rate.

All of this brought Rithm to the attention of B. Riley analyst Matt Howlett, who says of the company: “While the current macro environment is problematic, RITM has cut costs, introduced interest rate hedging and reduced balance sheet risk. We have confidence in Nirenberg’s CEO’s ability to protect the company in times of crisis, as well as enable it to take advantage of new opportunities. With RITM trading at a reported book value of 0.74x, we believe the current valuation represents an attractive entry point. We also expect dividend coverage over our modeling horizon (2024).”

To that end, Howlett gives RITM a Buy rating on this bullish outlook and quantifies it with a $12 price target to indicate upside potential of 36% next year. (To view Howlett’s track record, click here)

Overall, 7 Wall Street analysts have recently rated RITM shares and their reviews are unanimously positive, confirming the consensus rating of the stock as “Swift Buy”. RITM’s average target price is $11.71, implying a ~33% annual gain from the current trading price of $8.82. (See RITM stock forecast)

For good stock trading ideas at attractive prices, visit TipRanks Best Stocks to Buy, the tool that brings together all of TipRanks stock analytics.

Denial of responsibility: The opinions expressed in this article are solely those of selected analysts. The content is for informational purposes only. It is very important to do your own analysis before making any investment.

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