2 under-the-radar dividend stocks with a dividend yield of 8% – or better

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While the big stocks may attract attention and headlines, they’re not the only game in town. And sometimes the market giants aren’t even the best place to get a solid return on that initial investment. There are small- to mid-cap stocks in the market that can offer an unbeatable combination for income-conscious investors: equity valuation and high-yield dividend yields.

However, these stocks can go undercover and slip under investors’ radar for a variety of reasons, everything from living in unusual business niches to consistently failing to make profits, but sometimes the reason can be much more mundane: they’re just smaller companies. Inevitably, some healthy stocks will be overlooked.

With this in mind, we used the TipRanks platform to pinpoint two lesser-known stocks with dividend yields above 8%. Even better, they both have Buy ratings from The Street analysts and solid upside potential. Let’s take a closer look at that.

Crescent Capital BDC, Inc. (CCAP)

We’ll start with Crescent Capital, a BDC company that’s part of the larger Crescent Group. Crescent Capital BDC provides a range of financial services to mid-market private companies, the kind of companies that have long been the driving force behind the overall U.S. economy, but are often too small to access comprehensive credit and financing services from the U.S. traditional banking sector. Crescent serves this base through borrowing, stock purchases and debt investments; the company’s portfolio has a total fair value of more than $1.29 billion and has a strong bias towards unitranche first liens (62.7%) and senior secure first lien (25.4%).

Crescent Capital will report its fourth quarter financial results in February; analysts forecast net earnings of 44 cents per share. It’s interesting to note that the company has surpassed EPS guidelines by approximately 21% in each of the last two reported quarters. In the most recent, 3Q22, the company posted total investment income of $29 million, up 13% year-over-year, and net investment income of $16 million, up 26% y/y. Net investment income per common share for the third quarter was 52 cents compared to the 45 cents reported in the same quarter last year.

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In November, Crescent Capital announced its Q4 dividend, which was paid last January 17. The payment was set at 41 cents per common share and the annualized rate of $1.64 gives a yield of 11.5%. This yield is nearly 5 points higher than December’s 6.5% annualized inflation, and nearly 6x the average dividend paid by S&P-listed companies. It should be noted that since the fourth quarter of 2021, in addition to the regular quarterly dividend of 41 cents, Crescent Capital has also consistently paid a special dividend of 5 cents.

The Fed is committed to fighting inflation through higher interest rates, and Raymond James five-star analyst Robert Dodd sees this as a net gain for Crescent. He writes, “Rising base rates should support revenue in 4Q22. The profit benefit of higher rates is the upside of inflation, the downside is margin pressure and its impact on some portfolio companies. We do expect portfolio deterioration and accruals and accruals to rise as we approach the end of the year (for all BDCs), but we believe the interest rate benefits outweigh the potential negative impact of accruals and accruals in the short/medium term will overshadow.”

In the end, Dodd says, “We see attractive risk/reward, with positive interest rate sensitivity and strong credit quality – for a BDC trading at a significant discount to current NAV/share, and at a discount multiple of its peer group. ”

Looking ahead, Dodd gives CCAP stock an Outperform rating (i.e. Buy) and his price target, set at $18, implies ~25% annual gains ahead. Based on the current dividend yield and expected price increase, the stock has a potential total return profile of ~36%. (Click here to view Dodd’s track record)

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Overall, this BDC has picked up 3 recent analyst reviews – and they’re all positive, supporting a unanimous Strong Buy consensus rating. The shares are priced at $14.42, with an average price target of $17.67, suggesting ~22% upside potential over the next 12 months. (See CCAP inventory forecast)

Piedmont Office Realty Trust (PDM)

From the BDC world, we will shift our focus to a Real Estate Investment Trust (REIT), another leading sector among dividend payers. Piedmont Office is a “fully integrated and self-managed” REIT focused on the ownership and management of high-end Class A office buildings in high-growth Sunbelt cities such as Orlando, Atlanta and Dallas. The company also has a strong presence in the Northeast, in Boston, New York and DC. In addition to existing office space, Piemonte owns prime lots, totaling 3 million square feet, for custom or pre-let projects.

On February 8, Piemonte will publish its results for 4Q22 and FY2022. The company has already released a full-year forecast of $73 million to $74 million in net income, and core funds from operations per diluted share of $1.99 to $2.01. With these numbers in mind, we can look back at 3Q22, the last reported quarter.

In that quarter, the company had net income of $3.33 million; the first three quarters of 2022 saw net income of $71.26 million. Net earnings per share for the quarter were 3 cents, well below the forecast of 6 cents. The company’s core funds from operations — an important metric for dividend investors, as it funds the payments — for the third quarter remained in line with last year’s results, at $61.35 million. Core FFO came in at 50 cents per share in 3Q22.

Although Piemonte’s earnings have declined over the past year, the company had no problem covering the dividend payment of 21 cents of common stock. The dividend was declared in October and paid on January 3 of this year. At 84 cents per common share, the annualized payment yields 8.5%, outpacing inflation by as much as 2 points. Piemonte has a long history of keeping its dividend reliable; the company has been paying a regular quarterly dividend since 2009 and has maintained the current payment since 2014.

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In assessing the outlook for Piedmont, Baird analyst Dave Rodgers explains why this REIT remains a top pick: “We believe PDM is among the best positioned to outperform in 2023. supporting large-scale tenants 1) PDM’s focus on adding value and repositioning assets; 2) the average size of the tenant on site; and 3) the average size of 8 ksf for leases to expire in 2023.”

“While we expect leasing to be an opportunity for PDM, the bigger catalyst in our view is the likely recovery of the investment sales market in the near term,” Rodgers added.

Rodgers then gives PDM stock an Outperform (ie Buy) rating, with a price target of $13, indicating that he is confident of a 28% upside on the one-year horizon. (Click here to view Rodgers track record)

This stock has a moderate buy rating by analyst consensus, based on 3 recent ratings, including 2 buy and 1 hold. The $13.67 average price target suggests 35% upside potential from the current trading price of $10.12. (See PDM inventory forecast)

To find great ideas for dividend stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ stock insights.

disclaimer: The opinions expressed in this article are solely those of the named analysts. The content is for informational purposes only. It is very important to do your own analysis before making an investment.

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