Are markets down, or up? Stocks went into a true bear market earlier this year, but the last few weeks have seen a strong rally. The S&P 500 has gained 13% from its mid-June trough, and the NASDAQ is up 19%. Put shortly, the last few weeks have been good for investors.
This doesn’t mean, however, that we’re out of the woods. There are plenty of roadblocks still ahead to trip up an unwary investors, and Chief Investment Officer Larry Adam, from Raymond James, doesn’t hesitate to lay them out.
“Investors should expect some challenging months ahead as we navigate uncertainty around global inflationary pressures coming from the continuing pandemic; Chinese lockdowns, which could constrain supply chains further; the Russia-Ukraine war and its implications on energy; as well as ‘noisy’ data,” Adam said.
Given that situation, investors would do well to make defensive plays, and Raymond James 5-star analysts are pointing out some big dividend stocks for just that. These are div players offering yields of 8% or better, and according to the analysts, they also offer double-digit upside potential. We’ve ran them both through TipRanks database to see what other Wall Street’s analysts have to say about them. Let’s take a closer look.
Camping World Holdings (CWH)
We’ll start with Camping World Holdings, a leader in the recreational vehicle (RV) niche. The company offers a full range of RVs, accessories, supporting gear, and related products, such as boating and water sports vessels and gear.
This company’s sales and revenues recovered quickly from the pandemic crisis of 2020, and showed a strong rebound in 2021. Performance in 2022 is down slightly from those rebound levels, but remains elevated compared to pre-pandemic numbers. A look at the most recent quarterly release, from 2Q22, will tell the tale.
At the headline, Camping World reported its Q2 top line as the ‘second strongest second quarter earnings since inception.’ The current revenue came in at just under $2.2 billion, up $106.8 million, or some 5%, year-over-year. On earnings, the company saw a drop from the year-ago quarter. Adjusted diluted EPS was reported at $2.16, down from $2.51 one year ago – a drop of 14%. Over the past six months, the company has spent down its cash holdings, reducing liquid assets from $267.3 million as of December 31 to $133.9 million as of June 30. Total assets, however, rose from $4.3 million to $4.6 million over that same period.
In a key metric, Camping World Holdings reported the sale of 39,000 RVs during Q2. This number includes both new and used vehicles, and is only 3.8% below the year-ago total. The current sales number includes a 10.6% y/y drop in new vehicle sales, partially offset by an 8.6% y/y increase in used vehicles.
All in all, management felt confident to pay out their Q2 dividend at 62.5 cents per common share, or $2.50 annualized. The dividend has been 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’ 5-star analyst Joseph Altobello believes that investors have already taken the measure of this company’s headwinds – and he remains sanguine on it.
“The stock is already pricing in a fairly sharp demand slowdown and steep margin decline through 2023. Further, we continue to believe that by leveraging its scale and extensive customer database, along with an increasingly diversified (and less cyclical) revenue base, CWH remains uniquely positioned to continue to deliver healthy organic growth long-term, augmented by fairly aggressive footprint expansion,” Altobello opined.
English translates his upbeat view of CWH’s forward prospects into numbers with a $36 price target – which implies an upside of ~24%. It’s not surprising, then, why he rates the stock an Outperform (i.e. Buy) (To watch Altobello’s track record, click here)
So, that’s Raymond James’s view, let’s turn our attention now to rest of the Street: CWH’s 3 Buys and 2 Holds coalesce into a Moderate Buy rating. Should the $34.40 average price target be met, about 18% upside could be in store. (See CWH stock forecast on TipRanks)
MPLX LP (MPLX)
Now we’ll turn to the energy industry, an essential place in the world economy. MPLX is a midstream company, spun off of Marathon Petroleum some 10 years ago, and its assets include a wide-ranging network of pipelines, river shipping, terminals and refineries, and tank farms – all the infrastructure necessary for the efficient collection, movement, and storage of crude oil and natural gas products. MPLX operates in, on, and near the Gulf Coast, as well as the Great Lakes region, the Rockies, and in Washington State.
Shares in MPLX have been volatile this year, especially in the last three months. Even taking the volatility into account, however, the stock has outperformed the markets. Where all three of the major indexes remain at double-digit losses for the year so far, MPLX has managed to post a ytd gain of ~9%.
That outperformance comes on the heels of steady growth in revenues and income. The 2Q22 numbers were released earlier this month, and showed $2.94 billion at the top line, a gain of 23% year-over-year. On earnings, the company reported 83 cents per share in net income, for an increase of 25% from the year-ago quarter. And finally, the company’s cash assets on hand expanded dramatically in 1H22, from a mere $13 million as of December 31 to $298 million as of this past June 30.
This performance has left management with the confidence to implement a strong capital return program, including both share buybacks and dividend payments. Capital return, through both modes, reached $750 million during Q2, and the company still has $1 billion remaining in its authorized share repurchases. The dividend was declared on July 26 for an August 12 payout, at 70.5 cents per common share. This gives an annualized payment of $2.82 and a high yield of 9.3%.
Justin Jenkins, another of Raymond James’ 5-star analysts and an energy sector expert, takes an upbeat view of MPLX, writing: “MPLX earnings consistency through the commodity market volatility of 2020-22 has been commendable, leaving little question around current earnings power or the go-forward 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 on MPLX’s unique diversification, and argue this is not fully reflected in the stock…”
In line with his bullish comments, Jenkins rates MPLX shares an Outperform (i.e. Buy) and sets a $39 price target to imply a 12-month gain of 27%. (To watch Jenkins’ track record, click here)
All in all, there are six recent analyst reviews on record for this hydrocarbon midstream company and they break down 4 to 2 in favor of Buy over Hold, for a Moderate Buy consensus view. The shares are trading for $30.52 and have an average target of $37.50, suggestive of ~24% one-year upside. (See MPLX stock forecast on TipRanks)
To find good ideas for dividend stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
