Investors looking to enhance the income potential of their portfolios could consider investing in dividend stocks with high yields. However, selecting the right stocks requires more than just chasing high yields. The key is to focus on companies with a strong balance sheet, consistent earnings growth, and solid cash flow, which are crucial indicators of a company’s ability to maintain its payouts.
In addition, focusing on stocks backed by a “Strong Buy” consensus rating from analysts could be a smart strategy. Analysts’ confidence in a company’s future performance often signals financial stability and the potential for reliable returns.
Against this background, Pangaea Logistics Solution (PANL) and Rithm Capital (RITM) appear attractive for their high yields of more than 7% and their focus on enhancing shareholder value. Moreover, these stocks sport “Strong Buy” consensus ratings from analysts. Let’s take a closer look.
Dividend Stock #1: Pangaea Logistics Solution
Pangaea Logistics (PANL) offers ocean transportation services. Its integrated shipping and logistics model enables it to consistently deliver above-market returns and supports its distributions. Further, by offering a full suite of services, including cargo loading, discharge, and port terminal operations, Pangaea generates efficiencies that translate into long-term profitability and strong dividend payouts.
The company’s long-term, cargo-based contracts add stability to its operations. These multi-year agreements provide revenue visibility, reducing the company’s exposure to volatile market swings. Additionally, its strategic focus on maintaining high fleet utilization enhances operating leverage and earnings potential.
The company’s significant presence in niche markets and less commoditized trade routes provides a competitive edge, allowing it to command higher freight rates and margins. Moreover, its ability to transport a diverse range of cargoes and service less-common ports creates a pricing advantage, which in turn supports strong cash flows and dividend payouts.
Beyond organic growth, Pangaea is expanding its fleet and operations through strategic acquisitions, such as combining its fleet with that of Strategic Shipping. Further, with a focus on scaling its logistics network across new and existing ports, the company continues to build on its integrated shipping model. Its asset-light, cargo-focused business provides both cost efficiency and operational flexibility, ensuring profitability through market cycles.
Its dividend payout has surged from just $0.02 per share in 2020 to $0.40 per share in 2023, driven by expanding margins and robust cash generation. Even in the face of volatility in the dry bulk market, the company’s financial discipline ensures solid dividend coverage.
Analysts have assigned Pangaea Logistics stock a “Strong Buy” rating, and its high forward dividend yield of 7.63% makes it appealing to income investors.
Dividend Stock #2: Rithm Capital
Rithm Capital (RITM) is an asset manager specializing in real estate, credit, and financial services. The company’s core business remains strong, consistently delivering stable earnings that support its attractive dividend payouts. Moreover, by streamlining its corporate structure and focusing on fee-based earnings, Rithm is positioning itself for sustained growth and stability.
Notably, the company’s strong balance sheet and ample liquidity enable it to capitalize on lucrative investment opportunities. A significant step in this direction was its 2023 acquisition of Sculptor Capital Management, a global alternative asset manager. This strategic move expanded Rithm’s asset management capabilities into new verticals and bolstered its private capital business. The growth in Rithm’s assets under management (AUM) and the increase in associated fee earnings are key to its expansion strategy and payouts.
The company’s mortgage arm, Newrez, continues to deliver solid earnings. Rithm acquired Specialized Loan Servicing to strengthen Newrez’s servicing platform. This acquisition enhanced Rithm’s mortgage servicing rights (MSR) portfolio and expanded its presence in mortgage origination and servicing across multiple channels.
Newrez recently delivered another impressive performance, with fourth-quarter pre-tax income reaching approximately $280 million, a 12% sequential increase, achieving a 20% return on equity (ROE). For 2024, Newrez recorded nearly $1 billion in pre-tax income, marking a 26% year-over-year surge with a 19% ROE. These numbers reflect the strength of Rithm’s platform, which now has $844 billion in total servicing and $59 billion in funded volume.
Looking ahead, Rithm is focused on scaling its B2B platforms through new partnerships, increasing market share with existing clients, and pursuing strategic MSR and platform acquisitions. Moreover, AI-driven efficiencies and technological advancements will enhance its operational performance, supporting its profitability.
Despite market volatility, Rithm’s book value per share has climbed 11% since Q1 2021, all while maintaining consistent dividend payouts totaling $5.8 billion to shareholders.
Wall Street remains bullish on Rithm’s future, with analysts assigning it a “Strong Buy” rating. Moreover, the stock offers a compelling forward dividend yield of 8.4%.
