You don’t get to head one of the world’s largest banks if you don’t know a few things about economics – and so when J.P. Morgan’s CEO Jamie Dimon speaks, investors listen. And lately, what Dimon has to say isn’t nice to hear.
“We’re just getting closer to what you and I might consider bad events,” was the warning Dimon issued on J.P. Morgan’s earnings call last week.
So, what are these bad events, then? The CEO thinks another 20% decline for the S&P 500 is not out of the question, a drop which will be a “lot more painful than the first” while Dimon is also seeing “early signs of distress,” noting that in many markets there is a “lack of liquidity.” Tech valuations are down already, you say? True, but they could “come down” more.
“This is serious stuff,” Dimon added. “Inflation, rates going up more than people expected and probably a little bit more from here, quantitative tightening which we’ve never had before, and the war. These are very, very serious things which are likely to push the US into some kind of recession, six, nine months from now.”
So, what is an investor to do with all this doom and gloom talk? Well, it should prompt a natural turn toward defensive stocks, and especially to the reliable dividend payers. We’ve opened up the TipRanks database to pull the details on two such equities that offer a combination of Strong Buy consensus ratings, decent upside potential, and dividend yields high enough to provide to protection against rising inflation. Let’s dive in.
Enterprise Products Partners (EPD)
We’ll start with Enterprise Products Partners, an energy industry midstream company with a reputation for reliable, high-yielding dividend payments. Enterprise, as a midstream firm, makes its business moving hydrocarbon products from well-heads through transport networks to the tank farms, storage facilities, terminal points, and refineries that store and use the product. Enterprise’s network moves crude oil, natural gas, and natural gas liquids; the scale of business is clear from the company’s $55 billion market cap.
Enterprise is set to release its Q3 financial results early next month, but we can look back at the Q2 results, and the current dividend declaration, to get a solid feel for this stock and its attraction for investors. In the Q2 release, EPD showed a top line of $16 billion, up an impressive 68% year-over-year. Net income was reported at a record $1.44 billion, up 26% y/y, and gave an EPS of 64 cents. The EPS was up 28% from the year-ago quarter.
These sound results came along with a 30% y/y increase in distributable cash flow, which reached a company-record of $2 billion in 2Q22. The high distributable cash flow supported a 5.6% bump in the quarterly dividend, to 47.5 cents per common share. That dividend was reiterated in the Q3 declaration, made on this past October 4, and is scheduled for payment on November 14. At its current rate, the dividend annualizes to $1.90 per common share and gives a yield of 7.5%. This yield is almost 4x higher than the market average – and high enough to provide some protection from inflation. Of note for dividend investors, Enterprise has raised its dividend every year for the past 24 consecutive years.
Covering EPD for RBC Capital, 5-star analyst TJ Schultz notes that the solid financial performance was ahead of expectations and goes on to say, “EPD is well on its way to hit $9B of EBITDA this year, with record DCF allowing balance sheet improvements, increased distributions, unit buybacks, and growth investments (three new Permian projects announced). We think EPD can comfortably grow with a less burdensome capital structure and maintain its commitment of distributions to investors.”
To this end, Schultz rates EPD an Outperform (i.e. Buy), and his price target of $34 indicates his belief in a 34% one-year upside for the stock. (To watch Schultz’s track record, click here)
Overall, with 8 positive analyst reviews on file against 1 lone fencesitter, Enterprise gets a Strong Buy consensus rating from Wall Street. The stock is selling for $25.50 and its average price target of $32.25 suggests a potential gain of 26% on the one-year horizon. (See EPD stock forecast on TipRanks)
Iron Mountain, Inc. (IRM)
For the second stock, we’ll switch our focus to the information sector, where Iron Mountain is a leader in the data management industry. The company boasts an enterprise customer base exceeding 225,000 – and including some 95% of the Fortune 1000 firms. Iron Mountain claims a 98% customer retention rate, annual revenues over $4.2 billion, and a market cap of $13 billion.
The company has reached this scale through offering a wide range of information and data management services to its customers, including data backup and recovery, information destruction, and records management. These are essential services, even if they’re easily overlooked, and Iron Mountain has leveraged them for steady ongoing sequential revenue gains.
In the company’s last reported quarter, 2Q22, the top line came in at $1.29 billion, for a year-over-year gain of 15%. Net income came in at $202 million, down 27% from the year-ago quarter, although adjusted EPS, at 46 cents per share was up 21% from the 38-cent EPS reported in 2Q21.
For dividend investors, however, the key metric may be the adjusted funds from operations, or AFFO, which supports the regular quarterly dividend payments. This grew 10% y/y to reach $271 million, or 93 cents per share. The dividend backed up by this AFFO was last declared on August 4 for 61.85 cents per common share, and was paid out on October 4. The dividend has been held at its current level since October of 2019. The annualized dividend rate, at $2.474, gives a yield of 5.3%.
Analyst Steve Sakwa covers this stock for Evercore ISI, and likes what he sees in the company’s path forward.
“IRM continues to focus on new initiatives to drive value add services to its existing customer base. Its diversified business lines surrounding existing business relationships is a key strategy that differentiates IRM with other players and creates synergies. Going forward, the company will focus on providing integrated solutions to its customers to maximize value creation. The growth outlook through 2026 is favorable with global RIM business outlook remaining stable and data center and ALM business growing fast,” Sakwa opined.
These comments back up Sakwa’s Outperform (i.e. Buy) rating on IRM shares, and his $63 price target implies a potential gain of 35% in the next 12 months. (To watch Sakwa’s track record, click here)
All in all, Iron Mountain gets a Strong Buy consensus rating from the Wall Street analysts, based on 4 unanimously positive reviews. The shares have a trading price of $47.13, and their $60.50 average price target suggests a 30% one-year upside potential. (See IRM stock forecast on TipRanks)
To find good ideas for 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.
‘We Remain Bullish on Equities — Many Solid Companies Look Oversold’: Oppenheimer Suggests 2 Beaten-Down Stocks to Buy
The markets began the week with the best foot forward with all the major indexes charging ahead, but as evidence has shown throughout the year, that is no guarantee a sustained rally is in the cards. Most upticks have been followed by severe pullbacks, although investors will be hoping the latest surge has legs. Those looking for positive signs will be glad to hear Oppenheimer’s Chief Investment Strategist John Stoltzfus’ take on the matter. “Our view remains bullish on equities as the stocks of
After weeks of intense and relentless selling, have real estate investment trusts (REITs) finally bottomed? No one can say for sure, but REITs in general had a very good day Monday with some of the best up moves in awhile. The following five REITs easily outperformed the Standard & Poor’s 500 on Monday, and that benchmark index was up 2.65%. Host Hotels & Resorts Inc. (NASDAQ: HST) is based in Bethesda, Maryland, and operates 78 hotels in 20 U.S. markets. The 3.39% move up ran into sellers at th
Mawer Investment Management, an investment management firm, published its third-quarter 2022 investor letter – a copy of which can be downloaded here. In its third-quarter letter, the fund mentioned that the valuation correction experienced in 2022 has its benefits in that gravity is being restored to the system and that the probability of a global […]
As we get down toward the end of the year, hedge funds and large-scale individual investors have a habit of shedding their losing positions, swallowing the losses now to offset them against capital gains taxes on their profitable holdings. The trades are called tax-loss harvesting, and they open up an interesting opportunity for the daring retail investor. The opportunity comes due to a statistical quirk of trading history noted by Savita Subramanian, Bank of America’s head of US equity strategy
“Snap is the worst-performing stock in our coverage universe thus far in 2022,” Brian White of Monness Crespi Hardt said in a note Monday. “Moreover, we believe the darkest days of this economic downturn are ahead of us.”
As markets tumble, folks nearing retirement are scrambling to locate strategies that will help them protect their nest eggs and grow their wealth. But if you’re over 50 and currently in the workforce, you may specifically want to consider a … Continue reading → The post T. Rowe Price Says Workers Over 50 Should Do This in a Down Market appeared first on SmartAsset Blog.
The official definition of a bear market is a 20% or greater decline from an index’s previous high. Accordingly, the three major U.S. stock-market benchmarks — the Nasdaq (COMP) the S&P 500 (SPX) and the Dow Jones Industrial Average (DJIA) — are currently all in a bear market. Based on my work with stock market strategist Mark D. Cook, a typical bear market goes through nine stages.
The Wall Street Journal
The Swiss food company has succeeded in passing cost inflation on to consumers so far, but high energy bills are about to pinch shoppers in Europe.
IBM is set to provide investors with a fresh look at the state of enterprise technology spending when it reports third-quarter financial results late Wednesday. There is growing concern that tighter corporate IT spending will pressure results across the enterprise technology landscape. Corporate personal computer sales are slowing and there has been a flurry of cautious commentary from the software sector as some projects get pushed out and more deals draw closer scrutiny from boards and senior management.
(Reuters) -Baker Hughes Co on Wednesday posted an adjusted third-quarter profit that topped Wall Street estimates, sending shares higher but warned of more market volatility as demand softens under high inflation and rising interest rates. Baker is the first oilfield services firm to report quarterly results, and its beat bodes well for rivals Schlumberger and Halliburton, both of which report in coming days. It has cooled on concerns of a global recession and currently trades around $90.75 a barrel.
(Bloomberg) — Long maligned as the debt-addicted corporate raiders of Wall Street, private equity firms are resorting to an unusual maneuver to get deals done as borrowing costs spiral. They’re taking the leverage out of leveraged buyouts.Most Read from BloombergA Tense Pay Dispute Overshadows Nintendo’s Upcoming Bayonetta 3$200 Diesel Puts Biden in an Ugly CornerTrump Special Master Has ‘No Patience’ for Records SpatsBlinken Says China Wants to Seize Taiwan on ‘Much Faster Timeline’Chinese Eco