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A number of factors are coming together in the market picture, and indicate a possible change in conditions in the mid-term. These include increases in commodity prices, specifically, oil prices, which have rallied recently. In addition, the January jobs numbers, released earlier this month, were disappointing at best – and grim, at worst. They, do, however, increase the chance that President Biden and the Democratic Congress will push a large-scale COVID relief package through to fruition. These factors are likely to pull in varying directions. The rise in oil prices suggests an upcoming squeeze in supply, while the possibility of further stimulus cash bodes well for fans of market liquidity. These developments, however, point toward a possible price reflationary climate. Against this backdrop, some investors are looking for ways to rebuild and defend their portfolios. And that will bring us to dividends. By providing a steady income stream, no matter what the market conditions, a reliable dividend stock provides a pad for your investment portfolio when the share stop appreciating. And so, we’ve opened up the TipRanks database and pulled the details on two stocks with high yields – at least 7%. Even better, these stocks are seen as Strong Buys by Wall Street’s analysts. Let’s find out why. Williams Companies (WMB) The first stock we'll look at is Williams Companies, a natural gas processing firm based in Oklahoma. Williams controls pipelines for natural gas, natural gas liquids, and oil gathering, in a network stretching from the Pacific Northwest, through the Rockies to the Gulf Coast, and across the South to the Mid-Atlantic. Williams’ core business is the processing and transport of natural gas, with crude oil and energy generation as secondary operations. The company’s footprint is huge – it handles almost one-third of all natural gas use in the US, both residential and commercial. Williams will report its 4Q20 results late this month – but a look at the Q3 results is informative. The company reported $1.93 billion at the top line, down 3.5% year-over-year but up 8.4% quarter-over-quarter, and the highest quarterly revenue so far released for 2020. Net earnings came in at 25 cents per share, flat from Q2 but up 38% year-over-year. The report was widely held as meeting or exceeding expectations, and the stock gained 7% in the two weeks after it was released. In a move that may indicate a solid Q4 earnings on the way, the company declared its next dividend, to be paid out on March 29. The 41-cent per common share payment is up 2.5% from the previous quarter, and annualizes to $1.64. At that rate, the dividend yields 7.1%. Williams has a 4-year history of dividend growth and maintenance, and typically raises the payment in the first quarter of the year. Covering the stock for RBC, 5-star analyst TJ Schultz wrote: “We believe Williams can hit the low-end of its 2020 EBITDA guidance. While we expect near-term growth in the NE to moderate, we think WMB should benefit from less than previously expected associated gas from the Permian. Given our long-term view, we estimate Williams can remain comfortably within investment grade credit metrics through our forecast period and keep the dividend intact.” To this end, Schultz rates WMB an Outperform (i.e. Buy), and his $26 price target suggests an upside of 13% in the next 12 months. (To watch Schultz’s track record, click here) With 8 recent reviews on record, including 7 Buys and just 1 Hold, WMB has earned its Strong Buy analyst consensus rating. While the stock has gained in recent months, reaching $23, the average price target of $25.71 implies it still has room for ~12% growth this year. (See WMB stock analysis on TipRanks) AGNC Investment (AGNC) Next up is AGNC Investment, a real estate investment trust. It’s no surprise to find a REIT as a dividend champ – these companies are required by tax codes to return a high percentage of profits directly to shareholders, and frequently use dividends as the vehicle for compliance. AGNC, based in Maryland, focuses on MBSs (mortgage-backed securities) with backing and guarantees from the US government. These securities make up some two-thirds of the company’s total portfolio, or $65.1 billion out of the $97.9 billion total. AGNC’s most recent quarterly returns, for 4Q20, showed $459 million in net revenue, and a net income per share of $1.37. While down yoy, the EPS was the strongest recorded for 2020. For the full year, AGNC reported $1.68 billion in total revenues, and $1.56 per share paid out in dividends. The current dividend, 12 cents per common share paid out monthly, will annualize to $1.44; the difference from last year’s higher annualization rate is due to a dividend cut implemented in April in response to the coronavirus crisis. At the current rate, the dividend gives investors a robust yield of 8.8%, and is easily affordable for the company given current income. Among AGNC's bulls is Maxim analyst Michael Diana who wrote: “AGNC has retained a competitive yield on book value relative to other mortgage REITs (mREITS), even as it has out-earned its dividend and repurchased shares. While turmoil in the mortgage markets at the end of March resulted in losses and lower book values for all mortgage REITs, AGNC was able to meet all of its margin calls and, importantly, take relatively fewer realized losses and therefore retain more earnings power post-turmoil.” Based on all of the above, Diana rates AGNC a Buy, along with an $18 price target. This figure implies a ~10% upside potential from current levels. (To watch Diana’s track record, click here) Wall Street is on the same page. Over the last couple of months, AGNC has received 7 Buys and a single Hold -- all add up to a Strong Buy consensus rating. However, the $16.69 average price target suggests shares will remain range bound for the foreseeable future. (See AGNC stock analysis on TipRanks) To find good ideas for dividend stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights. Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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