Buy These Smart 7-9% Yields Before The Market Wakes Up To Income

seekingalpha06-09

Sixth Street Specialty Lending offers a solid 8.7% yield and has consistently outperformed its peers through strategic first lien loans and robust portfolio management.Imperial Brands has undergone ...

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This brings me to the following 2 picks which currently throw off yields ranging from 7 to 9%. Both have demonstrated strong operating performance despite not being the most popular stocks in their respective sectors. Let's explore what makes each of them appealing 'buys' at present!","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{".SPX":"S&P 500 Index","LU0417517546.SGD":"Allianz US Equity Cl AT Acc SGD","GME":"游戏驿站","SPXU":"三倍做空标普500ETF","LU2360032135.SGD":"ALLSPRING GLOBAL EQUITY ENHANCED INCOME \"A\" (SGDHDG) INC","BK4543":"AI","IVV":"标普500指数ETF","LU0080751232.USD":"富达环球多元动力基金A","IE00BMPRXR70.SGD":"Neuberger Berman 5G Connectivity A Acc SGD-H","SPY":"标普500ETF","MO":"奥驰亚","NVDA":"英伟达","LU0234572021.USD":"高盛美国核心股票组合Acc","LU2125154935.USD":"ALLSPRING (LUX) WF GLOBAL EQUITY ENHANCED INCOME \"I\" (USD) INC","BK4547":"WSB热门概念","ARCC":"阿瑞斯","BIZD":"VanECk BDC Income ETF","BK4581":"高盛持仓","UPRO":"三倍做多标普500ETF","LU0061474705.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN \"AU\" (USD) ACC","BTI":"英美烟草","IMBBY":"帝国烟草","OBDC":"Blue Owl Capital Corporation","LU0289960550.SGD":"AB FCP I - GLOBAL EQUITY BLEND PORTFOLIO 'A' (SGD) ACC","LU0276348264.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN\"AUP\" (USD) INC","SDS":"两倍做空标普500ETF","OEF":"标普100指数ETF-iShares","IE00BFSS8Q28.SGD":"Janus Henderson Balanced A Inc SGD-H","SH":"标普500反向ETF","SG9999001440.SGD":"United Global Dividend Equity Fund A SGD Dist","SSO":"两倍做多标普500ETF","TSLX":"TPG Specialty Lending Inc","IE00BFSS7M15.SGD":"Janus Henderson Balanced A Acc SGD-H","OEX":"标普100","PM":"菲利普莫里斯"},"translate_title":"在市场意识到收入之前购买这些明智的7-9%收益率","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"ARCC":1,"BIZD":1,"PM":1,"SPY":1,"OBDC":1,"BTI":1,"NVDA":1,"GME":1,"MO":1,"TSLX":1,"IMBBY":1,"US3Y.BOND":0.62,"US10Y.BOND":0.62,"US12M.BOND":0.62,"US2Y.BOND":0.62,"US30Y.BOND":0.62,"US5Y.BOND":0.62,"US6M.BOND":0.62,"US7Y.BOND":0.62,"US912797HE00.BOND":0.6,"UPRO":0.6,"US912797FS14.BOND":0.6,"US912797GB79.BOND":0.6,"US912797GK78.BOND":0.6,"US912797GL51.BOND":0.6,"SSO":0.6,"US912797GW17.BOND":0.6,".SPX":0.6,"SPXU":0.6,"SH":0.6,"ESmain":0.6,"IVV":0.6,"OEF":0.6,"OEX":0.6,"SDS":0.6},"content_text":"Sixth Street Specialty Lending offers a solid 8.7% yield and has consistently outperformed its peers through strategic first lien loans and robust portfolio management.Imperial Brands has undergone significant transformation and achieved solid progress in next-generation products, offering an appealing dividend yield of 7.3%.Both TSLX and IMBBY provide investors with reliable cash flow and potential for long-term value creation, making them appealing additions to a dividend-focused portfolio.gawrav Buying stocks doesn't have to be a popularity contest. While not participating in the latest hot trends like NVIDIA (NVDA) or highly speculative GameStop (GME) won't make you the center of a party conversation, it's important to keep in mind that the turtle is the one that ends up winning the race over the hare. That's why I remain humble picking up undervalued names that don't necessarily scream as being 'hot stocks' of the moment. In the words of Jerry Rice: \"Today I will do what others won't, so tomorrow I will do what others can't!\". This brings me to the following 2 picks which currently throw off yields ranging from 7 to 9%. Both have demonstrated strong operating performance despite not being the most popular stocks in their respective sectors. Let's explore what makes each of them appealing 'buys' at present! #1: Sixth Street Specialty Lending - 8.7% Yield Sixth Street Specialty Lending (TSLX) is an externally-managed BDC with a solid track record of value creation for its shareholders. This is reflected by TSLX's leading net investment income return on equity compared to both the BDC average and BDC top quartile both over the trailing 12 reported months (Q1'23 to Q1'24) and since inception, as shown below. Investor Presentation This has resulted in respectable total returns. TSLX has produced an 181% total return over the past 10 years, driven in large part by high returns on equity, which translated to dividends. While TSLX has underperformed the tech-heavy but low-yielding S&P 500 (SPY), it's significantly outperformed the VanEck BDC Income ETF's (BIZD) 126% total return over the same timeframe, as shown below. TSLX Total Return (Seeking Alpha) TSLX's portfolio is comprised primarily of first lien loans, which represent 92% of the portfolio total, with second lien/subordinated debt comprising 3% and equity being the remaining 5%. The portfolio is also in good shape with 96% of it being rated either 1 or 2, representing the two lowest risk tiers, and only 2 investments are on non-accrual, representing just 1.1% of portfolio fair value. As shown below, no single investment represents more than 2.6% of the portfolio total, and the largest segments are defensive in nature, including Business Services, E-Commerce, HR Services, Financial Services, and Healthcare. Investor Presentation Importantly, TSLX's NAV per share has grown by 5.6% over the past 2 years to $17.17 as of Q1 2024, sitting just a penny below its historical high of $17.18, and above the pre-rate hike level of $16.88 in Q1 of 2022. It also generated NII per share of $0.58, which more than covered the $0.46 regular dividend rate at an NII-to-Dividend coverage ratio of 1.26, enabling it to declare a $0.06 special dividend post-Q1. Management sees opportunities in the direct lending market with companies with durable business models looking to restructure their balance sheets. This taps into TSLX's ability to structure and underwrite creative financing solutions. This is also supported by TSLX's strong balance sheet with a BBB credit rating from Fitch and debt-to-equity ratio of 1.25x, sitting well under the 2.0x BDC statutory limit. Admittedly, TSLX isn't cheap at the current price of $21.88 with a Price-to-Book value of 1.27x, which puts it on the high end of externally managed BDC valuations. As shown below, TSLX is noticeably more expensive than the P/Book values of Ares Capital (ARCC) and Blue Owl Capital Corp. (OBDC). Despite its premium, TSLX still yields 8.7% on a TTM basis (including special dividends) due to above average returns on equity. TSLX vs. Peers P/Book (Seeking Alpha) Considering TSLX's strong track record of shareholder returns, safe leverage profile, and solid portfolio fundamentals, I view TSLX as being an attractive high-yielding stock for its robust cash flow generation potential. #2: Imperial Brands - 7.3% Yield Imperial Brands (OTCQX:IMBBY) doesn't often get mentioned in the same breath as industry giants Altria (MO), British American Tobacco (BTI) and Philip Morris International (PM), given its much smaller size. IMBBY has made some key transformations since its current CEO, Stefan Bomhard, stepped into the role in 2020. This includes re-focusing on key markets as well as NGP (next-generation products) for a tobacco industry that's currently in transition. IMBBY's solid performance is demonstrated by Tobacco & NGP revenue growing by 2.8% YoY, operating profit growth of 2.8% YoY, and adjusted EPS growth of 7.7% YoY for the six months ended March 31, 2024. This was driven by strong tobacco pricing of 8.6%, which more than offset volume declines, as well as NGP revenue growth of 17% over the prior year period. IMBBY is seeing market share growth in three of its top 5 markets, including the U.S., Spain, and Australia, offsetting declines in Germany and the UK. IMBBY has also been building out its NGP platform, as it now represents 7% of total tobacco and NGB revenue in Europe. This included expanded capacity with the blue vape bar with 1,000 puff capacity as well as its heated tobacco offering, Pulze 2.0, with flavored herbal sticks in Europe. Management is guiding for low single-digit constant currency tobacco and NGP revenue growth for the full fiscal year, with the expectation of strong tobacco pricing that's already taken hold in the first half of the fiscal year and strong adoption of NGP products. Also encouraging, management expects to reach a net debt to EBITDA ratio of 2.0x by the end of the year and raise its interim dividend by 4% to 44.90 pence (paid at 22.45 pence in two installments). The combined interim dividends were well-covered by a 37% payout ratio, based on adjusted EPS of 120.2 pence earned over the same period, and I would expect for the two remaining higher dividends this year to be covered as well. It's also worth noting that IMBBY is returning capital to shareholders through share buybacks, repurchasing 9% of outstanding shares since October 2022. Turning to valuation, IMBBY appears to be attractive at the current price of $25.35 with a forward PE of just 7.4, sitting well under its historical PE of 11.8, as shown below. IMBBY is slightly more expensive than the 6.6x PE of British American Tobacco, while being cheaper than the 9.2x PE of Altria and 16.4x PE of Philip Morris International. FAST Graphs While I like all the aforementioned tobacco names, I believe IMBBY is well deserving of a spot in a dividend-focused portfolio for the aforementioned reasons. Plus, at the current valuation, IMBBY is priced for a no growth future, whereas the analyst consensus is for 8-13% annual EPS growth between now and 2026, as shown in the graph above. With an appealing 7.3% dividend yield and potential for at least mid-single digit EPS growth in the near term, IMBBY could deliver market-beating returns even without a return to its mean valuation. Investor Takeaway Sixth Street Specialty Lending and Imperial Brands are undervalued investment opportunities that prioritize stability and high yields over market popularity. TSLX has consistently outperformed its peers through strategic first lien loans and a robust portfolio management, offering a solid 8.7% yield. Imperial Brands, although less prominent in the tobacco industry, has undergone significant transformation under new leadership, achieving solid progress in NGPs and offers a healthy dividend yield of 7.3%. Both companies, through their strategic and financially sound operations, provide investors with reliable cash flow and potential for long-term value creation, making them appealing additions to a dividend-focused portfolio.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.24.2","shortVersion":"4.24.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2442854409"}