When the curtain closes on 2021 in a little over a week, Wall Street is liable to uncork the champagne. Despite recent volatility, it’s been another fantastic year for the broad market indexes. In particular, the benchmark S&P 500 has…
rallied 23% year to date through this past weekend.
But for certain stocks, there’s still plenty of perceived upside to come, at least according to select Wall Street analysts and investment banks.
A trio of ultra-high-yield income stocks have Wall Street’s attention
Although growth stocks have been the apple of investors’ eye for more than a decade, dividend stocks are really coming into focus. Not only are dividend-paying companies often profitable and time-tested, but their track record clearly demonstrates they outperform.
Back in 2013, J.P. Morgan Asset Management, a division of banking giant JPMorgan Chase, released a report that compared the performance of stocks that initiated and grew their dividend to stocks that didn’t offer a payout over four decades (1972-2012). The result? The dividend-paying stocks ran circles around the non-dividend payers on an annualized basis over 40 years (9.5% return vs. 1.6% return).
The only real issue income investors typically run into is netting the highest payout possible with the least amount of risk. That’s because risk and yield tend to be correlated once you hit high-yield territory (4% and up). Since yield is a function of payout relative to the price, a company with a failing business model and falling share price can offer the impression of a juicy yield. This is called a yield trap.
But according to a handful of analysts and investment banks, there exists a trio of ultra-high-yield dividend stocks (a figure I’m arbitrarily defining as a yield of 8% or higher) that offers upside ranging from 51% to 56% in 2022.
Enterprise Products Partners: 8.6% yield with 52% implied upside in 2022
The first ultra-high-yield stock offering a drool-worthy payout and significant upside potential is oil and gas company Enterprise Products Partners (NYSE:EPD). Analyst T.J. Schultz at RBC Capital recently set a $32 price target on the company, which, based on its closing price last Friday, implies an up to 52% increase over the coming 12 months.
Some folks might be a bit leery about putting their money to work in oil stocks, especially after what happened with crude prices last year. The coronavirus pandemic led to a historic drawdown in crude oil demand that ultimately tanked prices for a period of time. However, Enterprise Products Partners didn’t deal with these issues, thanks to it being a midstream company.
Midstream companies operate transmission pipelines, storage tanks, and sometimes processing/refining facilities for the oil and natural gas industry. Whereas drillers are directly affected by…
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