Dividend yields are often the first metrics used to choose income investments. However, having traded stocks since 1999, I've come to realize that yields don’t paint the whole picture. Yields, for example, aren't guaranteed; companies can stop growing, cut, or even stop paying dividends. As a result, income investors should consider factors other than yield alone when stock picking.
How I Found The Following Companies
I utilized Barchart’s Free Stock Screener tool to select the cheapest, highest-rated and highest-yielding stocks with the following criteria:
- Minimum analyst rating: 4.5
- Analysts covering the stock: Min 8
- A TTM P/E: <10
And just to be 100% sure, I double-checked to see that the result's P/E was below the sector’s P/E.
Typically, I limit my analysis to sectors like Dividend Aristocrats, Kings, or REITs. This time, however, I want a comprehensive view of the overall market, so I included stocks listed in the NYSE, NYSE Arca, NASDAQ, OTC-US, and other non-common stocks.
As for my chosen criteria, I used the number of analysts to ensure we get consensus scores from many sources rather than only one or two. Meanwhile, the price-to-earnings ratio (P/E) is a good indicator of how cheap a stock is. However, P/E is relative and needs to be compared to the sector’s P/E to determine cheapness, which I did, and I included the sector's P/E in each result.
The result? 193 possible contenders.
I then clicked the “Div Yield(a)” column to get the list of today's cheapest, highest-rated stocks with the highest yields so you can decide if they’re worth buying.
Civitas Resources (CIVI)
Civitas Resources is an oil and gas company that acquires, explores, develops, and produces crude and natural gas products. The company operates in the Denver-Julesburg and the Permian Basin. Moreover, Civitas is also the first carbon-neutral energy producer in Colorado and has an expansive ESG framework that guides its operations.
2023 wasn’t kind to Civitas, as net income fell from $1.248 billion in 2022 to $784.2 million. As a result, diluted EPS fell to $9.02 from $14.58 last year. CEO Chris Doyle, however, expresses optimism for this year, stating, “Our focus in 2024 is clear: maximize free cash flow, return cash to owners, and maintain our strong balance sheet.”
Based on the latest quarterly payout, which amounted to $1.45 (50 cents regular and a 95 cents extra dividend), it is well on its way to keeping its promise to shareholders. Based on the last quarterly dividend, Civitas pays an annual dividend of $5.80, which reflects an 8.22% yield; you can call their “extra dividend” the icing on the cake.
CIVI stock also has a perfect 5 rating from 10 analysts, ranking it a strong buy. Last, it trades at a discount, with a ttm P/E of 8.33, well below the 12.15 industry average.
Blackstone Secured Lending (BXSL)
Blackstone Secured Lending is an investment company primarily investing in first-lien senior secured debt and unitranche loans. The company operates in many sectors, including software, aerospace and defense, air freight and logistics, commercial services and supplies, healthcare providers and services, and more.
94.75% of the company’s investments are in the United States, while the rest are in Canada and Europe. As of December 31, 2023, Blackstone Secured Lending has $9.9 billion in investments.
The company pays 77 cents per quarter, translating to a $3.08 forward annual rate or a 9.62% yield. In addition to that excellent yield, BXSL stock has an average rating of 4.50, ranking it as a strong buy based on ten analyst scores.
Compared to the S&P 500 Financial Sector’s 15.12, Blackstone’s 8.13 ttm P/E makes it quite cheap.
Meanwhile, Blackstone Secure Lending's Q4’23 financials resulted in improving metrics. Net investment income was 7% higher than the same period last year, while net income grew 16%. The company also has $1.8 billion in cash and undrawn debt, ready to be mobilized for business growth.
Trinity Capital (TRIN)
Trinity Capital is an investment company specializing in venture debt and equipment financing for companies like Impossible Foods, Super73, and Axiom Space, among its other 330 growing investments.
TRIN stock appears pretty cheap, with a 6.93 ttm P/E compared to the industry average of 15.12. Eight analysts rate the company a strong buy, with a 4.5 average.
As for dividends, Trinity Capital tops our list with a $2.04 forward annual rate, translating to a strong 14.08% yield.
This yield excludes special dividend payments, which the company has paid out on five occasions in the last two years.
Meanwhile, Trinity’s Q1’24 report—hot off the press as of May 1, 2024—reported excellent results. Total investment income reached a record of $50.5 million, increasing by 21.5% year over year. Net investment income also reached new heights at $25.2 million, representing a 30.1% increase.
Q1 also marks the company’s 13th consecutive increase in regular quarterly dividends. With such great performance and a top-tier dividend yield, Trinity is in an excellent financial position to continue increasing its payouts and give investors a good reason to be excited about its future.
Should You Buy A High-Yielding Stock?
High-yielding stocks can be great choices. Highly rated stocks are also excellent.
Yet, as I’ve written multiple times before, it’s one of the best lessons I’ve learned in the last 25 years of trading: never base your stock picks on a single metric. It doesn’t matter if it’s yield, analyst rating, P/E ratio, or plain vanilla hype. Smart money combines multiple metrics, and a little intuition to make a final choice..
On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
