2 major dividend stocks that yield at least 8%; Raymond James says ‘buy’

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Are the markets down or up? Stocks went into a real bear market earlier this year, but the last few weeks have seen a strong rally. The S&P 500 is up 13% from its mid-June low and the NASDAQ is up 19%. In short, the past few weeks have been good for investors.

However, this does not mean that we are out of the woods. There are still plenty of obstacles to trip up unwary investors, and Chief Investment Officer Larry Adam, of Raymond James, doesn’t hesitate to explain them.

“Investors can expect some challenging months as we navigate uncertainty over global inflationary pressures from the ongoing pandemic; Chinese lockdowns, which could further restrict supply chains; the war between Russia and Ukraine and its impact on energy; as well as ‘noisy’ data,” Adam said.

Given that situation, investors would do well to take defensive actions, and Raymond James’ five-star analysts point to some major dividend stocks. These are div players that offer returns of 8% or better, and they also offer double-digit upside potential, according to the analysts. We ran them both through the TipRanks database to see what other Wall Street analysts have to say about them. Let’s take a closer look at that.

Camping World Holdings (CWH)

We start with Camping World Holdings, a leader in the recreational vehicle (RV) niche. The company offers a full range of RVs, accessories, support equipment and related products such as boats and water sports equipment.

This company’s sales and revenues recovered quickly from the 2020 pandemic crisis and showed a strong recovery in 2021. Its performance in 2022 is slightly below those rebound levels, but remains high compared to pre-pandemic numbers. A look at the most recent quarterly release, from 2Q22, will tell the story.

In the headline, Camping World reported its second-quarter revenue as the “second strongest second-quarter profit since inception.” Current sales came in at just under $2.2 billion, up $106.8 million, or about 5%, year over year. In terms of earnings, the company saw a decline from the year-ago quarter. Adjusted diluted earnings per share were reported at $2.16, down from $2.51 a year ago — down 14%. Over the past six months, the company has reduced its cash positions, reducing cash from $267.3 million as of December 31 to $133.9 million as of June 30. However, total assets increased from $4.3 million to $4.6 million over the same period.

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In a key statistic, Camping World Holdings reported sales of 39,000 RVs in the second quarter. This number includes both new and used vehicles and is just 3.8% below the year-ago total. Current sales include a 10.6% year-over-year decline in new vehicle sales, partially offset by an 8.6% year-over-year increase in used vehicles.

Overall, management was confident to pay their Q2 dividend at 62.5 cents per common share, or $2.50 year-on-year. The dividend has increased twice in the past six quarters and at the current rate offers a yield of 8.4%, more than 4x the average dividend found among S&P-listed companies.

Raymond James’ five-star analyst Joseph Altobello believes investors have already assessed the headwinds of this company — and he remains optimistic about it.

“The stock is already projecting a fairly sharp slowdown in demand and sharp margin decline through 2023. Furthermore, we continue to believe that by leveraging its scale and extensive customer base, along with an increasingly diversified (and less cyclical) revenue base, CWH remains unique positioned to continue to deliver healthy organic growth over the long term, complemented by quite aggressive footprint expansion,” said Altobello.

English translates his optimistic view of CWH’s future prospects into numbers with a price target of $36, representing a ~24% gain. It is therefore not surprising why he rates the stock an Outperform (ie buy) (to check Altobello’s track record, click here)

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So, that’s Raymond James’s opinion, let’s turn our attention to the rest of the street now: CWH’s 3 Buys and 2 Holds merge into a Moderate Buy rating. If the average price target of $34.40 is met, there would be about 18% upside potential. (See CWH stock forecast at TipRanks)

MPLX LP (MPLX)

Now we move on to the energy industry, a vital place in the global economy. MPLX is a midstream company, spun off from Marathon Petroleum some 10 years ago, and its assets include an extensive network of pipelines, river shipping, terminals and refineries, and tank farms – all the infrastructure needed to efficiently collect, move, and storage of crude oil and natural gas products. MPLX operates in, on and near the Gulf Coast, as well as the Great Lakes, Rockies and Washington State area.

Shares in MPLX have been volatile this year, especially in the last three months. However, even taking volatility into account, the stock outperformed the markets. While all three major indices have suffered double-digit losses so far, MPLX has managed to gain ~9%.

That outperformance follows steady revenue and earnings growth. The numbers for the second quarter of 22 were released earlier this month and showed $2.94 billion on the upside, a 23% year-over-year gain. On earnings, the company reported 83 cents a share in net income, up 25% from the same quarter a year ago. And finally, the company’s available cash grew dramatically in the first half of 22 years, from just $13 million on Dec. 31 to $298 million as of June 30 last year.

This performance has given management the confidence to implement a strong capital return program, including both share buybacks and dividend payments. Return on capital through both modes reached $750 million during the second quarter and the company still has $1 billion left from its authorized share repurchase. The dividend was declared on July 26 for an August 12 payout at 70.5 cents per common share. This gives an annual payment of $2.82 and a high return of 9.3%.

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Justin Jenkins, one of Raymond James’ five-star analysts and an expert in the energy sector, has an optimistic view of MPLX, writing: “The consistency of MPLX gains through the volatility of the 2020-22 commodities market was commendable, leaving little there are doubts about current revenue power or the forward-thinking financial model. As a result, further catalysts in 2022-23 via buybacks, distribution growth and modest organic growth are all reasonable assumptions. We remain positive about MPLX’s unique diversification and argue that this is not fully reflected in the shares…”

In line with his optimistic comments, Jenkins estimates that MPLX shares an outperform (ie buy) and sets a price target of $39, implying a 27% gain in 12 months. (To view Jenkins’ track record, click here)

All in all, six recent analyst reviews have been recorded for this hydrocarbon midstream company, and they split 4 to 2 in favor of Buy over Hold, for a moderate buying consensus. The stock is trading at $30.52 and has an average target of $37.50, indicating an increase of about 24% over a year. (See MPLX stock forecast at TipRanks)

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

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

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