We recently published a list of 10 Best Dividend Stocks Yielding at Least 7% According to Analysts. In this article, we are going to take a look at where Bloomin’ Brands, Inc. (NASDAQ:BLMN) stands against other best dividend stocks yielding at least 7% according to analysts.
Investors focused on dividends should be cautious about simply selecting stocks with the highest yields, as this approach can be risky. An unusually high yield often signals potential trouble, since dividend yields rise when stock prices fall. In many cases, an exceptionally high yield may be the result of a stock experiencing a significant decline in value. When a company’s share price drops sharply, it raises concerns about whether its dividend payments can be maintained at their current levels.
Dan Lefkovitz, a strategist for Morningstar Indexes, made the following comment about extremely high yields in the firm’s recent report:
“It’s really critical to be selective when it comes to buying dividend-paying stocks and chasing yield. Looking for the most yield-rich areas of the market can often lead you into troubled areas and dividend traps—companies that have a nice-looking yield that is ultimately unsustainable. You have to screen for dividend durability and reliability going forward.”
However, this has not always been the case. Many companies have maintained strong dividend yields along with consistent dividend growth histories. In addition, high yields are not inherently negative. In fact, dividend yield is a key factor in dividend investing, as it indicates the income an investor can expect relative to the stock’s price.
To fully capitalize on high-yield stocks, investors should also evaluate other metrics such as cash flow, payout ratio, and dividend growth. When these fundamentals are strong, high-yield stocks can remain attractive. Some studies highlight the long-term benefits of high-yield stocks, suggesting that as dividend yields rise, overall returns tend to increase while risk declines. Research from Hartford Funds, which considered annualized standard deviation as a measure of return volatility, found that between December 1969 and March 2024, high-dividend portfolios achieved an annualized return of 12.3%, compared to 10.5% for mid-dividend portfolios and 9.7% for low-dividend portfolios. The respective annualized standard deviations were 14.1%, 16%, and 20.8%, indicating that higher-yield portfolios experienced lower historical risk.
READ ALSO: 10 Best Foreign Stocks With Dividends For Passive Income
In addition, a company’s dividend payout ratio serves as an important indicator of its capacity to manage its dividend policy. Firms that only just cover their dividends or allocate most of their earnings to dividends could face risks due to competitive pressures, as their cash flow might not be sufficient to meet operational needs. Companies with high payout ratios may experience slower growth in the future, which could affect both their stock price appreciation and their ability to increase dividends. A study by Nuveen, covering the period from December 2003 to December 2023, found that companies with the highest payout ratios have not been the strongest long-term performers. In contrast, companies with medium to medium-high payout ratios tended to perform better over time. This suggests that companies with strong balance sheets and solid fundamentals make for more promising dividend investments in a portfolio.
Our Methodology
For this list, we screened for dividend stocks with yields higher than 7% as of February 5. From this group, we further refined our selection criteria by identifying stocks with a projected upside potential of over 6% based on analyst price targets, as of February 5. The stocks are ranked according to their upside potential. We also considered hedge fund sentiment around each stock using Insider Monkey’s data for Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
The golden glow of the exterior of a modern Upscale Casual Dining restaurant reflecting on a busy street.
Bloomin’ Brands, Inc. (NASDAQ:BLMN)
Upside Potential as of February 5: 16.9%
Dividend Yield as of February 5: 7.71%
Bloomin’ Brands, Inc. (NASDAQ:BLMN) is a Florida-based restaurant holding company that owns four brands: Outback Steakhouse, Fleming’s Prime Steakhouse & Wine Bar, Carrabba’s Italian Grill, and BonefishGrill. On November 6, the company entered into a Purchase Agreement with Vinci Partners to strategically re-franchise its Brazilian operations, selling a 67% stake for around $243 million. Analysts believe this move will streamline BLMN’s business and enhance operational efficiency by allowing the company to concentrate on its domestic market. With an upside potential of nearly 17%, BLMN is one of the best dividend stocks on our list.
Bloomin’ Brands, Inc. (NASDAQ:BLMN) is undergoing a leadership transition, with Michael Spanos recently stepping in as CEO to revitalize the business. Known for successfully guiding well-established companies through difficult periods, he brings a strong focus on customer-centric strategies. In addition, the company is in the process of franchising its Brazilian operations.
Bloomin’ Brands, Inc. (NASDAQ:BLMN) has been paying regular dividends to shareholders since 2015. The company had a strong cash position, as it ended the quarter with over $83.6 million available in cash and cash equivalents. It currently offers a quarterly dividend of $0.24 per share and has a dividend yield of 7.71%, as of February 5.
The number of hedge funds tracked by Insider Monkey owning stakes in Bloomin’ Brands, Inc. (NASDAQ:BLMN) grew to 27 in Q3 2024, from 23 in the previous quarter. The consolidated value of these stakes is over $284.6 million. With over 8.4 million shares, Starboard Value LP was the company’s leading stakeholder in Q3.
Overall, BLMN ranks 4th on our list of best dividend stocks yielding at least 7% according to analysts. While we acknowledge the potential for BLMN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BLMN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
