The recent fluctuations in the stock market have prompted investors to consider high-yield dividend stocks. Amid concerns surrounding the U.S. regional banking sector, some analysts are highlighting opportunities in this area as a defensive investment strategy. Piper Sandler has identified two standout dividend stocks with promising returns for investors.
Piper Sandler Highlights High-Yield Dividend Stocks
Amid economic uncertainties, Piper Sandler analyst Crispin Love has pinpointed two dividend stocks worth considering. These stocks not only present reliable dividends but also show significant growth potential. The focus on dividend stocks reflects an increasing preference for stable investments during volatile market periods.
Annaly Capital (NLY)
Annaly Capital (NLY) is a prominent real estate investment trust (REIT) specializing in mortgage-related assets. Based in New York, it manages a diversified portfolio valued at approximately $89.5 billion. A large portion of this portfolio is allocated to agency mortgage-backed securities (MBS), which account for 89% of total assets.
- Portfolio Value: $89.5 billion
- Agency MBS Investment: $79.5 billion
- Residential Credit: $6.6 billion
- Mortgage Servicing Rights: $3.3 billion
For the second quarter, Annaly reported an adjusted earnings per share (EPS) of $0.73, surpassing analyst expectations. The company declared a dividend of $0.70, which offers investors an attractive yield of 13.6%. This yield significantly outperforms the sector average of 3.3%.
Love maintains an Overweight rating with a target price of $22.50 for NLY, indicating an upside of approximately 8%. Including the dividend, potential investor returns could exceed 20%.
Rithm Capital (RITM)
Next on Piper Sandler’s radar is Rithm Capital (RITM), a company that operates as both a REIT and an asset manager. It engages in mortgage origination, servicing, and real estate investment. Rithm Capital also manages assets through subsidiaries like Newrez and Sculptor Capital Management.
- Total Portfolio: Roughly $80 billion
- Balance Sheet Assets: $44 billion
- Assets Under Management: $36 billion
In the second quarter, Rithm reported earnings available for distribution (EAD) of $0.54 per share—15% higher than the previous year. The company’s dividend payout of $0.25 yields 9.3%, which is well-covered by its earnings.
Piper Sandler’s Love recommends Rithm as an Overweight (Buy), with a price target of $15, predicting gains of 38.5% in the upcoming year. When including dividends, potential returns for investors are projected to reach the high 40% range.
Conclusion
The bull market’s recent pause has shifted attention to high-yield dividend stocks like Annaly Capital and Rithm Capital. Both companies offer compelling investment opportunities, with strong earnings performance and attractive dividend yields that significantly exceed sector averages. As investors navigate uncertain economic waters, these dividend stocks present a viable strategy for income generation and potential capital appreciation.
