11 Very High Yield Dividend Stocks With Upside Potential

Published on April 16, 2023 at 4:26 pm by Fahad Saleem in Hedge Funds, News

In this article, we will take a look at the top 11 very high yield dividend stocks with upside potential. To see more such companies, go directly to 5 Very High Yield Dividend Stocks With Upside Potential.

Dividend stocks remained the favorite stock picks of investors last year amid rising volatility, inflation and geopolitical risks. While the start of 2023 was brimming with optimism, causing tech stocks to rally, fresh data is pointing to continually stubborn inflation which will force the Federal Reserve to raise interest rates at least one more time in 2023, according to analysts. This scenario has brought dividend stocks in the limelight again in 2023.

The Importance of High Dividend Stocks in 2023

Jeffrey Kleintop, chief global investment strategist at Charles Schwab, gave an interview to Bloomberg in December 2022 in which he talked about high dividend stocks and scenarios where the Federal Reserve might not be able to pause rate hikes like everyone was expecting near the end of 2022.

Kleintop said during his interview that he believed volatility is going to remain high in 2023.

“What investors should be doing is focusing on what’s worked over the last six months, really, what’s worked in 2022… and that is high dividend paying stocks,” Kleintop said.

Kleintop also said that high dividend stocks outperformed in 2022 and they were continuing to do so in the last quarter of 2022. He further added that high dividend stocks were performing well in Asia, Europe, US and Canada.

Another interesting point highlighted by the analyst is that for investors looking to buy high dividend stocks, markets outside of the US is where they should look at. Kleintop said that the US markets are usually home to high-growth tech stocks. According to Kleintop, international markets outperformed the US stock market in 2022 for the first time in a decade, and this could become a trend in the future.

While the analyst at that time said the he’d welcome any rate hike pauses, he cautioned that things could change if something happens outside of the Federal Reserve’s control. The analyst said that he was surprised no one was asking Jerome Powell about the possible implications of the reopening of China on commodity prices and overall inflation. Kleintop rightly said at the time that millions of people coming back to the economy after a long shutdown could cause a spike on global CPI and make it impossible for the central banks to stop their rate hikes.

In hindsight, Jeffrey Kleintop’s comments look prescient as latest data has shown that inflation is not slowing down as much as the Federal Reserve had expected and labor markets in the US remain strong. Other factors that seem to be out of control of the Federal Reserve is the rising consumer spending on travel and tourism.

Very High Yield Dividend Stocks With Upside Potential

Photo by Dan Dennis on Unsplash

Our Methodology

For this article we scoured Insider Monkey’s database of 943 hedge funds’ holdings and picked 11 most popular dividend stocks among these hedge funds with yields over 8% and one-year average price targets showing significant upside potential from the current levels. With each stock we have mentioned the number of hedge fund investors as of the end of the fourth quarter of 2022 and one-year price target by analysts as of March 7, taken from Yahoo Finance. The list is ranked in ascending order of the number of hedge fund investors.

Very High Yield Dividend Stocks With Upside Potential

11. PennyMac Mortgage Investment Trust (NYSE:PMT)

Number of Hedge Fund Holders: 4

One-Year Average Price Estimate: $14.78

PennyMac Mortgage Investment Trust (NYSE:PMT) is a mortgage REIT. It’s a popular dividend stock with upside potential.

However, in December, PennyMac Mortgage Investment Trust (NYSE:PMT) cut its dividend by about 14.9%. The stock’s dividend yield is still above 10%.

Recently, PennyMac Mortgage Investment Trust (NYSE:PMT) shares came under pressure after the company posted weak Q4 results. However, investment firm Jones Research’s analyst Jason Stewart reiterated a Hold rating for PennyMac Mortgage Investment Trust (NYSE:PMT) as he believes the risk/reward of Pennymac Mortgage’s (PMT) shares is more balanced now than ever.

A total of 14 hedge funds tracked by Insider Monkey reported owning stakes in PennyMac Mortgage Investment Trust (NYSE:PMT). The net worth of these stakes was $19 million.

10. Ares Commercial Real Estate Corporation (NYSE:ACRE)

Number of Hedge Fund Holders: 6

One-Year Average Price Estimate: $13.17

Ares Commercial Real Estate Corporation (NYSE:ACRE) is a popular dividend stock, with a dividend yield of over 11%. In February, Ares Commercial Real Estate Corporation (NYSE:ACRE) declared a quarterly dividend of $0.33 per share, in line with the previous dividend. The dividend is payable on April 18. Ares Commercial Real Estate Corporation (NYSE:ACRE) also announced a supplemental cash dividend of $0.02.

At the end of the fourth quarter of last year, 6 hedge funds tracked by Insider Monkey had stakes in Ares Commercial Real Estate Corporation (NYSE:ACRE). The aggregate value of these stakes was about $13 million.

9. Cherry Hill Mortgage Investment Corporation (NYSE:CHMI)

Number of Hedge Fund Holders: 6

One-Year Average Price Estimate: $7.38

Cherry Hill Mortgage Investment Corporation (NYSE:CHMI) is a mortgage REIT that ranks 9th in our list of the very high dividend stocks with upside potential.

In December, Cherry Hill Mortgage Investment Corporation (NYSE:CHMI) declared a quarterly dividend of $0.27 per share, the same as the previous quarter. Forward dividend yield at the time came in at 19.2%.

As of the end of the fourth quarter of 2022, 6 hedge funds tracked by Insider Monkey reported owning stakes in Cherry Hill Mortgage Investment Corporation (NYSE:CHMI), up from 4 hedge funds in the previous quarter. Among the most notable hedge fund stakeholders of Cherry Hill Mortgage Investment Corporation (NYSE:CHMI) included John Overdeck and David Siegel’s Two Sigma Advisors ($1.4 million stake) and Paul Marshall and Ian Wace’s Marshall Wace LLP ($1.1 million stake).

8. KKR Real Estate Finance Trust Inc. (NYSE:KREF)

Number of Hedge Fund Holders: 10

One-Year Average Price Estimate: $17.08

KKR Real Estate Finance Trust Inc. (NYSE:KREF) saw an uptick in hedge fund sentiment during the fourth quarter of 2022. 10 hedge funds tracked by Insider Monkey had reported owning stakes in KKR Real Estate Finance Trust Inc. (NYSE:KREF) at the end of December 2022, up from 7 hedge funds that had stakes in the company at the end of the third quarter. The biggest stakeholder of KKR Real Estate Finance Trust Inc. (NYSE:KREF) at the end of 2022 was Dmitry Balyasny’s Balyasny Asset Management which owns a $4.9 million stake in KKR Real Estate Finance Trust Inc. (NYSE:KREF).

In December, KKR Real Estate Finance Trust Inc. (NYSE:KREF) declared a quarterly dividend of $0.43 per share. Forward dividend yield at the time came in at 10.87%. The dividend is payable on January 13 for shareholders of record as of December 30.

7. Ready Capital Corporation (NYSE:RC)

Number of Hedge Fund Holders: 11

One-Year Average Price Estimate: $13.88

New York-based real estate financing company Ready Capital Corporation (NYSE:RC) ranks 7th in our list of the very high dividend stocks with upside potential. However, Ready Capital Corporation (NYSE:RC) was one of the many real estate firms that recently announced dividend cuts. In December, Ready Capital Corporation (NYSE:RC) declared a quarterly dividend of $0.40 per share, down about 4.8% from the previous dividend. The forward dividend yield still came in at 12.99%. The dividend was payable on January 31 to shareholders of record as of December 31.

As of the end of the fourth quarter of last year, 11 hedge funds tracked by Insider Monkey had stakes in Ready Capital Corporation (NYSE:RC). The total value of these stakes was about $7 million. The most notable hedge fund stakeholder of Ready Capital Corporation (NYSE:RC) was Daniel Katzner’s Skaana Management which owns a $2.2 million stake in the company.

6. Eagle Bulk Shipping Inc. (NASDAQ:EGLE)

Number of Hedge Fund Holders: 12

One-Year Average Price Estimate: $69.09

Earlier this month, Eagle Bulk Shipping Inc. (NASDAQ:EGLE) posted its fourth-quarter results and also announced a quarterly dividend of $0.60 per share. The dividend represented a decline from the previous dividend of $1.80 per share.

The latest dividend was payable on March 23, 2023, to shareholders of record at the close of business on March 15, 2023.

As of the end of the last quarter of 2022, 12 hedge funds tracked by Insider Monkey reported having stakes in Eagle Bulk Shipping Inc. (NASDAQ:EGLE). The net value of these stakes was about $257 million. The biggest hedge fund stakeholder of Eagle Bulk Shipping Inc. (NASDAQ:EGLE) was Paul Marshall and Ian Wace’s Marshall Wace LLP, which owns a $17 million stake in the company.

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