Dealmaker’s Diary: Get Ready for Rate Cuts With a 15% Yielder

Alpesh Patel|August 29, 2024

Rate cuts are coming… which means investors will be on high alert for high-dividend-paying stocks.

So let me cut to the chase…

I’ve found a 15% yielder with solid growth ahead. The stock has low volatility… and strong momentum.

Plus… it’s priced to move at less than $20 per share.

It’s all about the dividend and momentum with this one. So get all the details on the company – including its ticker – in my latest video.

Click on the thumbnail below to watch.

TRANSCRIPT

Dealmaker’s Diary here, friends, and Stock of the Week time. And the grand reveal – going for real estate, very much in the news with impending interest rate drops.

We want to make sure we’re getting value in growth companies, of course, as we always do. So let’s look at NexPoint Real Estate Finance (NREF).

It’s a REIT. You might think, what the heck, Alpesh? We want the technology, the AI stocks, and the like. What are you giving us?

Well, it’s ticking some of the boxes, and it’s a good way of educating you on the kinds of things that I do look for.

First of all, it pays a high dividend, and in an interest rate cutting environment, that might be attractive to a lot more people.

There’s some been some very good and strong financials around the company. So let’s dive a bit deeper into those.

Firstly, on my proprietary algorithm, which scores revenue, growth, valuation, dividend yields, cash flow, etc… this is a 9 out of 10. Remember, anything which is a 7, 8, 9, or 10 meets my minimum requirements… as this one indeed does.

You’re paying 13.1 dollars for every expected or forecasted dollar in profits. Now that’s certainly not cheap, but it’s not overly expensive.

We’ll come back to valuations in a second.

Now, sometimes with companies, particularly those which are REITs, you don’t necessarily get a cash return on capital invested number.

It’s not something I’m too worried about. This is really a play for dividends and the lower volatility.

You’ve got a volatility of 14.5%. That’s very low volatility for a stock. Consider that 20% is typical for an S&P 500 company, you know, some of the bigger companies.

So you’ve got that at play.

What caught my eye for this one was really the momentum.

We’ve had this downward trend that has been going for a while. The stock appears to have broken out from that. Now moving in this direction is the expectation, and the stock should follow through with it.

Now, there is a risk. There is a significant risk that this may drop off, and this goes back down. So do be aware of that.

It is pretty much a penny stock as well. So I have to highlight those factors.

It is very much more in the high-risk category. And one other reason for that is if you looked at discount cash flow, which is not necessarily always a good measure, certainly for REITs, then it looks ridiculously overvalued.

But as I said, discount cash flows are not always the best way to measure a company’s valuation. But it’s interesting to note and important to note. We don’t ever want to turn a blind eye to any information that we could lay our hands on.

Thank you very much. I hope you enjoyed that. I hope that was informative and different as well and gave you a broader perspective of some of the things going on in the market as a whole.

Thank you very much.