Jeff Erdmann says focus on dividend-paying stocks; Here are 2 names analysts love

This year began with a bang for stocks, a January rally that saw the S&P up 6% and the NASDAQ jump 11%. degree of caution. The headwinds of last year are still with us, in the form of stubbornly high inflation and interest rates at ten-year highs.

For the average investor, charting a course in these waters is no easy task. It is at this time that some expert advice can paint a clearer picture.

Introduce Jeff Erdmann of Merrill Private Wealth Management, who has been ranked by Forbes as the best wealth manager in the US every year since 2016. When he speaks, investors should listen.

Erdmann now believes in staying stable in your investments, holding on for the long term, buying on quality, avoiding leverage and, above all, never put yourself in the position of having to sell due to macro conditions. Erdmann also advises defending the stock profile, saying, “Rising dividend stocks are still our main stock style.”

We opened the TipRanks database to identify two dividend stocks that could get Erdmann’s approval. Due to strong past performance, fast-growing dividends, both companies are rated Strong Buy by analyst consensus. Not to mention, they both also offer double-digit upside potential. Let’s take a closer look.

Postal Real Estate Fund, Inc. (PSTL)

The first dividend-paying stock we’ll look at is the Postal Realty Trust, a real estate investment trust (REIT) whose primary focus, as the company’s name suggests, is to own real estate leased to the US Postal Service. Postal Realty is the largest such company in this niche with 1650 properties. The company owns over 5.2 million square feet of interior space and Postal Realty sells over $45.2 million in annual base rent.

On January 11, Postal Realty reported its results for Q4 2022 and all of 2022 and showed significant growth. During the year, the company purchased 320 properties, spending $123 million on purchases. During the fourth quarter, the company made 54 such acquisitions worth $20.2 million.

Postal Realty reported a 99.7% occupancy rate for its own portfolio, which most REITs would envy, and received 100% of the rent due. Quarterly revenue was $13.8 million and net income was 4 cents per share.

In terms of dividends, Post Realty’s last announcement and payout was in November 2022. The company paid out 23 cents per common share, or 92 cents on an annualized basis. At this rate, the payout is just under 6%, which is about 3 times higher than the average div payout among companies listed on the S&P. However, the most important characteristics of this dividend are its reliability and growth; the company went public in 2019 and has since reported 13 consecutive quarters of dividend growth.

In his PSTL analysis for Colliers Securities, analyst Barry Oxford is bullish on the stock. He notes that the Post Office is an extremely reliable customer and writes of the company: “Postal has a very reliable cash flow as all of their leases are backed by the US Postal Service, which has never missed a lease payment in its history. . We believe that investors in this type of market, given the economic/geopolitical risk, should value earnings confidence highly. In addition, in the face of rising inflation, Postal was able to increase rents by 5-6% on expiring leases, with a typical lease term of just 5 years. Given that rental payments are less than 2% of total operating costs, the Post Office does not typically push back (hard) on these increases.”

Oxford haunts optimistic comments; he gives the stock a Buy recommendation along with a $20 price target, implying PSTL is up for a 28% gain. Based on the current dividend yield and expected price appreciation, the potential total return on the stock is around 34% (to view Oxford’s track record, click here)

In total, PSTL has 5 analyst reviews. These include 4 Buy options and 1 Hold option for a Strong Buy consensus rating. Shares are trading at $15.62, with an average target price of $17.70 indicating ~15% annual upside potential. (See PSTL Reserve Forecast)

Armada Hoffler Properties, Inc. (AHH)

The second stock on our list, Armada Hoffler, is another REIT, this time vertically integrated, self-managed. Armada’s main focus is the acquisition, construction, development and management of high quality real estate for offices, shops and apartment buildings. The company operates primarily in the Mid-Atlantic and Southeast regions, where it also offers general construction and development services to third-party clients, as well as real estate development and construction, in addition to its own portfolio.

This portfolio of real estate investments was worth $1.58 billion at the end of Q3 2022, as reported in the last quarter, and generated a net income of 38 cents per diluted share for the company. That earnings per share is up 32 cents from last year. High occupancy and rising rents supported the company’s income; Armada reported that retail space occupancy in the third quarter was 98%, a record for the company, and rental rates for new apartments rose by 9%. The company will publish results for the 4th quarter of 2022 and the full year on February 14 this year.

Of particular interest to dividend investors is that Armada had normalized funds from operations (FFO), a metric that directly supports dividend payouts, of 29 cents per diluted share in the third quarter, and posted elevated FFO guidance for the full year 2022 in $1.18 to $1.18. $1.20 per share.

In terms of dividends, Armada announced a 19 cents payout on common stock in December and sent it on January 5 this year. The dividend of 19 cents is fully covered by the quarterly FFO. On an annualized basis, it is 76 cents and gives a yield of 6%. Return-minded investors should note that Armada has increased its dividend payout on common stock by 72% since the end of 2020.

Analyst Christopher Sakai covers the stock for Singular Research and is impressed with the company’s latest results.

“We believe AHH is well positioned to deliver strong normalized FFO growth over the medium to long term thanks to new construction projects, high occupancy and rent increases. The company raised its guidance for fiscal year 22 for the third consecutive quarter, suggesting sound management and favorable tailwinds for the business. AHH’s diversified, high-occupancy portfolio, coupled with strong industry momentum and forward-looking development, should lead to growth in net asset value and share price. Meanwhile, AHH maintains a stable balance sheet and is well covering the rising dividend,” said Sakai.

With a bullish outlook, Sakai is giving AHH a Buy rating and a target price of $17.50, indicating upside potential for the stock of around 36% over the next 12 months.

Overall, there are 5 recent analyst reviews for Armada and they all agree that this is a stock to buy, giving the stock a Strong Buy analyst consensus rating. The shares are trading at $12.84 and have an average price target of $14.80 suggesting ~17% gains on the yearly horizon. (See Armada 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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