In this article, we will take a detailed look at the 12 Extreme Dividend Stocks With Upside Potential. For a quick overview of such stocks, read our article 5 Extreme Dividend Stocks With Upside Potential.
Despite talk of possible rate cuts from the Federal Reserve next year, the macro environment remains highly volatile with several analysts saying the US economy is not out of the woods yet. Wells Fargo in its 2024 market outlook report said it expects an economic slowdown in 2024 in the US. Wells Fargo expects annual growth rate to come in at just 0.7% in 2024, compared to its previous forecast of 2.2%.
Wells Fargo said that economic headwinds were exacerbated in 2023 by worker strikes, increasing oil prices, resumption of student-loan repayments and outsized budget deficits.
However, Wells Fargo said that a decline in interest rates could rekindle consumer spending and things could start to get back to normal near the end of 2024.
Our bias remains for modest dollar upside in the first half of 2024, supported by a flight to quality during a global economic slowdown. We also expect the dollar to find support while U.S. interest rates exceed those in the eurozone and Japan. A global economic pivot to recovery later in 2024 should rekindle risk appetite and bring a slightly weaker dollar as capital flows diversify away from the U.S. A moderating interest-rate environment in emerging markets may provide a broad negative driver to emerging-market currencies in 2024. Still, we believe a global economic recovery in the second half of 2024 may benefit emerging markets and help offset the interest-rate environment to drive emerging- market currency gains.
Photo by Karolina Grabowska: https://www.pexels.com/photo/hands-holding-us-dollar-bills-4968630/
Methodology
For this article we first used a stock screener to identify dividend stocks with over 8% dividend yield, Buy or better ratings from Wall Street analysts and analyst price targets that are at least 20% more than their current trading prices. From the resultant dataset we picked 12 dividend stocks with the highest number of hedge fund investors. These are extremely high yield dividend stocks with upside potential in their stock prices.
12. TXO Partners LP (NYSE:TXO)
Number of Hedge Fund Investors: 1
TXO Partners LP (NYSE:TXO) explores for oil and natural gas. In November, TXO Partners LP (NYSE:TXO) upped its dividend by 8.3%. As of December 16, the stock’s dividend yield is about 11.2%.
As of the end of the third quarter of 2023, just one hedge fund in Insider Monkey’s database had stakes in TXO Partners LP (NYSE:TXO).
Companies like TXO tend to go out of favor during troubled times, unlike mature companies like The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL), and PepsiCo, Inc. (NASDAQ:PEP).
11. Icahn Enterprises LP Common Stock (NASDAQ:IEP)
Number of Hedge Fund Investors: 2
Carl Icahn’s Icahn Enterprises LP Common Stock (NASDAQ:IEP) had a tough time in 2023. Icahn Enterprises LP Common Stock (NASDAQ:IEP) had to cut its dividend by half and billionaire Icahn kept selling the stock. But the stock still has a high forwarded dividend yield (over 25%) while its price target for the next 12 months set by Wall Street analysts is $26.
As of the end of the third quarter of 2023, just two hedge funds had stakes in Icahn Enterprises LP Common Stock (NASDAQ:IEP).
The company talked about its state of business during Q3 earnings call:
Food Packaging adjusted EBITDA improved by $3 million or 27% for Q3 ’23 as compared to prior year quarter primarily due to improved gross margin management and reductions in distribution costs. Home Fashion adjusted EBITDA increased by $8 million as compared to prior year quarter, primarily due to lower material costs and pricing initiatives. The Pharma segment’s adjusted EBITDA for Q3 ’23 improved by $8 million as compared to prior year quarter, mainly due to margin improvement.
Now turning to our liquidity. We maintain liquidity at the holding company and at each of our operating subsidiaries to take advantage of attractive opportunities. We ended the quarter with cash, cash equivalents, our investment in the investment funds and revolver availability totaling approximately $6.8 billion. Our subsidiaries have approximately $1.1 billion in cash and $329 million of undrawn credit facilities to enable them to take advantage of attractive opportunities. In summary, we continue to focus on building asset value and maintaining liquidity to enable us to capitalize on opportunities within and outside our existing operating segments.
Read the full earnings call transcript here.
Instead of Icahn Enterprises, analysts have been recommending mature dividend stocks like The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL), and PepsiCo, Inc. (NASDAQ:PEP) in 2023.
10. Portman Ridge Finance Corp (NASDAQ:PTMN)
Number of Hedge Fund Investors: 6
Portman Ridge Finance Corp (NASDAQ:PTMN) is a high dividend yield stock with upside potential.
As of the end of the third quarter of 2023, six hedge funds tracked by Insider Monkey had stakes in Portman Ridge Finance Corp (NASDAQ:PTMN).
Answering a question about Portman Ridge Finance Corp’s (NASDAQ:PTMN) dividend, CEO Ted Goldthorpe said:
“I would say we feel really good about our dividend. Even if the Fed cuts rates which we don’t obviously speculate on because that’s not our thing. The dividend is pretty protected down to a pretty big reduction in short-term rates. So again, we assess every quarter — obviously, we’re comfortably over earning our dividend in a period of time where we’re getting — So I think we feel good about where our dividend is. And I don’t — again, we’ll assess it at year-end and see if there’s — see where we are in terms of spillover income.”
Read the full earnings call transcript here.
9. AFC Gamma Inc (NASDAQ:AFCG)
Number of Hedge Fund Investors: 7
A total of seven hedge funds in Insider Monkey’s database of 910 hedge funds had stakes in AFC Gamma Inc (NASDAQ:AFCG) which provides financial solutions to the cannabis industry.
Earlier this month AFC Gamma Inc (NASDAQ:AFCG) announced a dividend of $0.48 per share. The stock’s dividend yield came in at over 15%.
8. New York Mortgage Trust Inc (NASDAQ:NYMT)
Number of Hedge Fund Investors: 9
New York Mortgage Trust Inc (NASDAQ:NYMT) ranks 8th in our list of the extreme dividend stocks with upside potential. While New York Mortgage Trust Inc (NASDAQ:NYMT) recently cut its dividend by about 33%, its forward dividend yield is still about over 8%.
As of the end of the third quarter of 2023, 9 hedge funds out of the 910 hedge funds tracked by Insider Monkey had stakes in New York Mortgage Trust Inc (NASDAQ:NYMT).
New York Mortgage Trust Inc (NASDAQ:NYMT) talked about important business updates during Q3 earnings call:
We are being selective about where we invest and remain steadfast on asset management. In the quarter, we substantially increased asset acquisitions, purchasing $1.1 billion of assets, with $946 million of those concentrated in agency MBS. This activity was greater than last year’s peak of acquisitions in the second quarter of 2022, before we slowed down our investment pipeline. Away from agencies, our BPL bridge volumes have also grown at $179 million in the quarter from $100 million in the prior quarter. The overall investment portfolio is now $4.7 billion as of the end of the third quarter, up from $4 billion. The conservative positioning that we undertook in 2022 preserved liquidity and allowed for capital return through portfolio pay-downs.
This has afforded us the ability to meaningfully scale up investment activity, now with wider yields and spreads available in the market. We continue to favor agency RMBS with its historical wide spreads due to technical headwinds. We are also focused on expanding our investments in BPL bridge, given its high yield and shorter duration. Delving first into agency RMBS.
Read the entire earnings call transcript here.
7. Cool Company Ltd (NYSE:CLCO)
Number of Hedge Fund Investors: 9
LNG company Cool Company Ltd (NYSE:CLCO) ranks 7th in our list of the extreme dividend stocks with upside potential.
Cool Company Ltd (NYSE:CLCO) stock has a dividend yield of about 13% as of December 16.
6. Kimbell Royalty Partners LP (NYSE:KRP)
Number of Hedge Fund Investors: 12
Texas-based Kimbell Royalty Partners LP (NYSE:KRP) is a high-yield dividend stock. Kimbell Royalty Partners LP (NYSE:KRP) made moves earlier this year with its acquisition of mineral right assets in the Permian.
In October, Raymond James gave a Strong Buy rating to the stock.
As of the end of the third quarter of 2023, 12 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Kimbell Royalty Partners LP (NYSE:KRP). The biggest stakeholder of Kimbell Royalty Partners LP (NYSE:KRP) was Thomas E. Lynch’s Mill Road Capital Management which owns a $26 million stake in Kimbell Royalty Partners LP (NYSE:KRP).
Unlike The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL), and PepsiCo, Inc. (NASDAQ:PEP), KRP is a high dividend yield stock with not a very impressive dividend growth record.
The company talked about some important business updates during Q3 earnings call:
On the expense side, general and administrative expenses for Kimbell were $10.4 million, $7 million of which was cash G&A expense. Excluding the impact of approximately $1.5 million in transaction-related expenses associated with the acquired production and including a full quarter impact of the acquired production, cash G&A per BOE was $2.55, a new record low for the company. Third quarter net income was approximately $18.5 million and net income attributable to common units was approximately $13.6 million, as compared to $17.8 million and $13.5 million, respectively, from last quarter. Total third quarter consolidated adjusted EBITDA was $55.8 million, up from $45 million last quarter, including the acquired production from the effective date of June 1, 2023, through September 30, 2023, Q3, 2023 consolidated adjusted EBITDA was $71.6 million.
You will find a reconciliation of both consolidated adjusted EBITDA and cash available for distribution at the end of our news release. Today, we announced a cash distribution of $0.51 per common unit for the third quarter. This represents a cash distribution payment to common unitholders that equates to 75% of cash available for distribution and the remaining 25% will be used to paydown a portion of the outstanding borrowings under Kimbell’s secured revolving credit facility. We expect that approximately 55% of our third quarter 2023 distribution should not constitute dividends for U.S. federal income tax purposes, but instead are estimated to constitute nontaxable reductions, to the basis of each distribution recipients’ ownership interest in Kimbell common units.
Read the entire earnings call transcript here.
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Disclosure. None. 12 Extreme Dividend Stocks With Upside Potential was initially published on Insider Monkey.
