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Add These 2 Stocks Yielding More Than 7% to Your Income Portfolio

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Dividend investing is a great strategy for investors looking for regular income. Dividends are payments made by companies to their shareholders out of their profits. Typically, dividends are paid out quarterly.

A dividend is considered “high” if it is about 3%. Often, more risk is associated with high yield stocks, compared to stocks that pay under 3%. Just because a company has a high yield does not necessarily mean it is a worthwhile investment as it turns out. However, there are companies that have these high yields and solid business models, making them an ideal income investment.

Today I’ll analyze two dividend stocks with yields north of 7%,: Sibanye Stillwater Limited (SBSW) and New Residential Investment Corp. (NRZ). Both of these companies have healthy financials and discounted valuations

Sibanye Stillwater Limited (SBSW

SBSW, formerly Sibanye Gold Limited, is an independent South African global precious metal mining company, engaged in producing a mix of metals that includes gold, platinum group metals, and by-products. SBSW’s operations are mainly in Africa and the Americas. SBSW’s reserves include over 66 million ounces of platinum group metals and over 11 million proven ounces of gold. Besides, SBSW is one of the world’s leaders in gold output and a dominant player for the platinum group, with total gold production of 983,000 ounces and 2.78m ounces of platinum group metals produced in 2020.

Since the beginning of the year, SBSW’s shares have been beaten, dipping 21.2% and underperforming the Invesco DB Base Metals Fund (DBB), which gained 22.4% year-to-date.

In terms of financials, the precious metal mining company’s fundamental picture has improved significantly in 2021, but its operations should decelerate in the coming year. Indeed, analysts are expecting a surge of SBSW’s top line in 2021, up 30.75% in 2021 to 166.5m ZAR, which should decrease to 159m ZAR in 2022, corresponding to a moderate decline of 4.5% year-on-year.

More interestingly, SBSW’s 2021 bottom-line should increase by a whopping 43.6% year-on-year to 42.09m ZAR in 2021, before declining 13.5% to 36.3m ZAR in 2022, representing a yearly net margin of 22.3%.

In each of the last two quarterly reports, SBSW’s EPS figures beat analyst consensus, indicating the positive macro backdrop of precious metals that has developed since the beginning of the pandemic. 

With this in mind, the management of SBSW boosted the company’s balance sheet in the past two years. The precious metal mining specialist transitioned from net debt of 18.1m ZAR in 2019 to a net cash position of 29.5m ZAR in 2021, providing healthier grounds for the company’s future growth prospects. In addition, SBSW is expected to lift considerably CAPEX in 2021, up from 9.6m ZAR in 2020 to 12.81m ZAR in 2021, representing an appreciation of 33.4% year-on-year. 

Despite its enhancing financial metrics, SBSW’s shares lost more than 20% this year. This steep decline has provided a cheap entry point. Indeed, the company is currently trading at a 2022e P/E ratio of only 3.72x and a 2022e EV/EBITDA of 1.27x. Besides, SBSW provides an attractive dividend yield of 10.7% at the current market price, which looks sustainable given the company’s healthy balance sheet and its high net margins. 

New Residential Investment Corp. (NRZ)

NRZ is a leading provider of capital and services to the mortgage and financial services industry. The company’s investments include mortgage servicing rights, servicer advances, real estate securities, residential mortgage loans, consumer loans, and corporate loans. The company has built a diversified, hard-to-replicate portfolio with high-quality investment strategies that have generated returns across different interest rate environments over time. Since its inception in 2013, the company has a proven track record of performance, growing and protecting the value of its assets while generating attractive risk-adjusted returns and delivering over $3.7 billion in dividends to shareholders

NRZ’s stock advanced moderately year-to-date, lifting by 9.3%, but underperformed its benchmark the iShares Mortgage Real Estate ETF (REM), which climbed 15.7% since the beginning of the year. 

The REIT has surprisingly navigated the pandemic without a significant impact on its top-line growth. NRZ’s net sales increased by 20.5% to $1.94b in 2020 and are expected to jump by 56.5% to $3.04b in 2022. NRZ’s bottom line incurred a massive loss of $1.46b in 2020 but should recover to its pre-Covid 19 levels, reaching $651m in 2021, up 18.3% compared to 2019.

On August 23rd, NRZ announced the acquisition completion of Caliber Homes Loans Inc, a mortgage originator, and servicer. The company said it plans to merge its platform, Newrez LLC, and Caliber’s mortgage and originator platform, expecting to add roughly $150b in the unpaid principal balance of mortgage servicing rights and technological enhancements which should boost its revenues in the foreseeable future. With this acquisition, NRZ is planning on lifting its mortgage origination business that should enhance NRZ’s loan flexibility, given that these loans can be sold to other counterparts.

The company is at a decent valuation for the time being. With a 2022e P/B ratio of 0.89x, the company trades at a discount of 11% compared to its book value. Besides and even if the company slashed its dividend per share by nearly 50% since 2018, NRZ offers a high dividend yield of 7.86% that is nearly twice covered by its net revenues.

Cristian Docan

Cristian is an experienced investment analyst and financial writer. Prior to Wealthpop.com, Cristian spent three years as a consultant providing investment research and content to financial services companies and online publications on the Oil & Gas sector. Cristian enjoys researching and writing about stocks and the markets. He takes a fundamental, technical and quantitative approach in evaluating stocks for readers. Previously, Cristian was Power Portfolio Manager at Engie Global Markets. Cristian started his career in portfolio management at Société Privée de Gestion de Patrimoine, an independent wealth management firm. He received a Bachelor Degree in Economics and Management at Université Panthéon-Assas University and a Master of Science in Financial Markets at INSEEC Business School.

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