In this article, we discuss the 10 extreme dividend stocks with upside potential. If you want to skip our detailed analysis of these stocks, go directly to the 5 Extreme Dividend Stocks With Upside Potential.
Growth stocks have exploded in value at the marketplace over the past few months due in part to the influx of retail investors who favor investments in risky plays to indulge their “get rich quick” dreams. This influence is not only limited to retail investors but extends right up to hedge funds. Overall, in this growth-focused environment, dividend stocks have been pushed to the back in the hullabaloo around technology. However, amid inflation fears and murmurs about a tech bubble, dividend plays are making a steady comeback.
According to a report in the Financial Times, between September last year through to April this year, the Russell 1000 Value Index gained more than 31%, comparing favorably to the 14% return of the growth counterpart over the period. Most economic experts predict that interest rates will rise in the coming months on the back of supply chain disruptions and high demand for goods that are pushing prices to new highs. This means more correction in value for growth stocks and a shift towards dividend stocks at the market.
Some of the top dividend stocks to buy right now according to hedge funds include Johnson & Johnson (NYSE:JNJ), The Procter & Gamble Company (NYSE:PG), and The Coca-Cola Company (NYSE:KO), among others discussed in detail below. Almost 84% of the firms on the S&P 500 pay dividends. Historically, almost 43% of the returns generated by these firms, many of which operate in the growth domain, have come from dividends.
Source:Pixabay
Our Methodology
With this context in mind, here is our list of the 10 extreme dividend stocks with upside potential. The stocks were picked from among the top holdings of the Global X SuperDividend ETF (NYSE:SDIV) at the end of the second quarter of 2021. The forward dividend yield of each company is mentioned alongside other details for further clarity.
The list is compiled according to the number of hedge funds having stakes in each company. Data from the 873 funds tracked by Insider Monkey was used for this purpose.
Why pay attention to hedge fund holdings? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Extreme Dividend Stocks With Upside Potential
10. Gladstone Commercial Corporation (NASDAQ:GOOD)
Number of Hedge Fund Holders: 6
Forward Dividend Yield: 6.96%
Gladstone Commercial Corporation (NASDAQ:GOOD) revealed earlier this month that it had achieved portfolio occupancy of more than 97% in September with over 99% of cash base rents paid and collected over the period. The company, one of the extreme dividend stocks with upside potential, mostly focuses on investments in industrial and office spaces. So far this year, the company has invested $46 million into industrial properties with an average capitalization rate of 7% and an average lease term of over 15 years.
Investment advisors like Colliers, Aegis and B Riley are all positive on Gladstone Commercial Corporation (NASDAQ:GOOD) stock. The firm declared a monthly dividend of $0.1252 per share in July this year, in line with previous.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Renaissance Technologies is a leading shareholder in Gladstone Commercial Corporation (NASDAQ:GOOD) with 2 million shares worth more than $49 million.
At the end of the second quarter of 2021, 6 hedge funds in the database of Insider Monkey held stakes worth $52 million in Gladstone Commercial Corporation (NASDAQ:GOOD), down from 7 in the preceding quarter worth $49 million.
Just like Johnson & Johnson (NYSE:JNJ), The Procter & Gamble Company (NYSE:PG), and The Coca-Cola Company (NYSE:KO), Gladstone Commercial Corporation (NASDAQ:GOOD) is one of the dividend stocks on the radar of elite investors.
9. Apollo Commercial Real Estate Finance, Inc. (NYSE:ARI)
Number of Hedge Fund Holders: 9
Forward Dividend Yield: 9.07%
Apollo Commercial Real Estate Finance, Inc. (NYSE:ARI) is another real estate investment trust that seems to be a top dividend pick of hedge funds. The company declared a quarterly dividend of $0.35 per share last month, in line with previous. The revenue for the second quarter was close to $76 million, up 7% year-on-year and beating estimates by $6.5 million. In the first six months of the year, the firm committed to deals worth more than $1.4 billion across North America and Europe.
Announcing the second quarter earnings, Stuart Rothstein, the CEO of Apollo Commercial Real Estate Finance, Inc. (NYSE:ARI), said that the company had funded new deals with the capital generated from $553 million worth of loan repayments.
At the end of the second quarter of 2021, 9 hedge funds in the database of Insider Monkey held stakes worth $15 million in Apollo Commercial Real Estate Finance, Inc. (NYSE:ARI), down from 11 in the preceding quarter worth $44 million.
Out of the hedge funds being tracked by Insider Monkey, Boston-based investment firm Arrowstreet Capital is a leading shareholder in Apollo Commercial Real Estate Finance, Inc. (NYSE:ARI) with 567,745 shares worth more than $9 million.
In addition to Johnson & Johnson (NYSE:JNJ), The Procter & Gamble Company (NYSE:PG), and The Coca-Cola Company (NYSE:KO), Apollo Commercial Real Estate Finance, Inc. (NYSE:ARI) is one of the dividend stocks that hedge funds are buying.
8. Capstead Mortgage Corporation (NYSE:CMO)
Number of Hedge Fund Holders: 10
Forward Dividend Yield: 5.64%
Capstead Mortgage Corporation (NYSE:CMO) primarily invests in short-duration mortgage securities guaranteed by the government. The company reported earnings per share of $0.09 and a net interest income of $16 million for the second quarter of 2021. Earlier this month, it declared an interim dividend of $0.014 per share. In June this year, the firm was added to the Russell Microcap Index, increasing the exposure of the company to investors.
Capstead Mortgage Corporation (NYSE:CMO), placed eighth on our list of extreme dividend stocks with upside potential, had announced in July that it would be merging with the Benefit Street Partners Realty Trust. The transaction in this regard will be closed in the fourth quarter.
At the end of the second quarter of 2021, 10 hedge funds in the database of Insider Monkey held stakes worth $42 million in Capstead Mortgage Corporation (NYSE:CMO), up from 8 in the preceding quarter worth $52 million.
Out of the hedge funds being tracked by Insider Monkey, Sydney-based investment firm Paradice Investment Management is a leading shareholder in Capstead Mortgage Corporation (NYSE:CMO) with 4 million shares worth more than $25 million.
Along with Johnson & Johnson (NYSE:JNJ), The Procter & Gamble Company (NYSE:PG), and The Coca-Cola Company (NYSE:KO), Capstead Mortgage Corporation (NYSE:CMO) is one of the dividend stocks attracting the attention of institutional investors.
7. Starwood Property Trust, Inc. (NYSE:STWD)
Number of Hedge Fund Holders: 11
Forward Dividend Yield: 7.54%
Prominent investment advisors like JPM Securities and JPMorgan have raised the price target on Starwood Property Trust, Inc. (NYSE:STWD) stock over the past few weeks, attesting to the progress the company has made in the post-pandemic economy. The company reported a revenue of over $290 million in the second quarter, up 9.5% year-on-year. Last month, it declared a quarterly dividend of $0.48 per share, in line with previous.
Starwood Property Trust, Inc. (NYSE:STWD) is one of the stocks that are poised to benefit from a plan by the US government to accelerate the distribution of rental assistance to people across the country who are at risk of eviction due to the pandemic.
Out of the hedge funds being tracked by Insider Monkey, Wisconsin-based investment firm Cardinal Capital is a leading shareholder in Starwood Property Trust, Inc. (NYSE:STWD) with 6 million shares worth more than $159 million.
At the end of the second quarter of 2021, 11 hedge funds in the database of Insider Monkey held stakes worth $169 million in Starwood Property Trust, Inc. (NYSE:STWD), up from 10 in the preceding quarter worth $176 million.
Johnson & Johnson (NYSE:JNJ), The Procter & Gamble Company (NYSE:PG), and The Coca-Cola Company (NYSE:KO) are some of the top dividend stocks to buy now, just like Starwood Property Trust, Inc. (NYSE:STWD).
6. Ready Capital Corporation (NYSE:RC)
Number of Hedge Fund Holders: 11
Forward Dividend Yield: 11.10%
Earlier this week, Ready Capital Corporation (NYSE:RC) became the second-largest non-bank lender of small business administration loans in the US. The company, one of the extreme dividend stocks with upside potential, passed $1 billion in these loans this month. So far this year, the company has handed out 489 loans with approval volume of over $616 million. The firm, which markets real estate finance services, declared a quarterly dividend of $0.42 per share last month.
In July, BTIG analyst Tim Hayes had maintained a Buy rating on Ready Capital Corporation (NYSE:RC) stock and raised the price target to $18.5 from $16.5, noting that the firm was continuing to scale and increase origination volumes.
Out of the hedge funds being tracked by Insider Monkey, California-based investment firm Farallon Capital is a leading shareholder in Ready Capital Corporation (NYSE:RC) with 1.2 million shares worth more than $19 million.
At the end of the second quarter of 2021, 11 hedge funds in the database of Insider Monkey held stakes worth $55 million in Ready Capital Corporation (NYSE:RC), up from 10 in the preceding quarter worth $43 million.
Johnson & Johnson (NYSE:JNJ), The Procter & Gamble Company (NYSE:PG), and The Coca-Cola Company (NYSE:KO) are some of the elite dividend stocks to buy now, in addition to Ready Capital Corporation (NYSE:RC).
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Disclosure. None. 10 Extreme Dividend Stocks With Upside Potential is originally published on Insider Monkey.
