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2 High-Yield Dividend Stocks to Buy for Value and Upside

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The U.S. Federal Reserve remains on the warpath against inflation, with Wall Street currently betting on a third-consecutive 75-basis point rate hike at its next policy meeting on September 20-21.

Jay Powell and the Fed view tackling 40-year inflation as their top priority and are willing to cause pain when it comes to jobs and economic growth, if that’s what it takes to bring prices down. The Fed’s task is far from easy since an array of factors are fueling higher costs across nearly every aspect of the economy, many of which are out of its control.

All of this is leading some Fed officials to call for the fed-funds rate to be lifted to roughly 4% by the end of 2022. This would require another roughly 1.5% hike from the current levels.

Specific targets and deadlines aside, Wall Street is reversing its peak inflation bet that helped the market climb off its mid-June lows. And rightfully so since the U.S. labor market remains strong and employers are still struggling to hire enough workers, driving up wages and inflation.

The Fed’s hawkish stance on rates and a flight to safety amid global economic slowdown worries is pushing 10-year U.S. Treasury yields back up to around 3.3%—yields hit fresh decade-long highs of around 3.5% in mid-June.

Despite the broader stock market decline so far this year and economic worries, investors are still pouring money into U.S. equities because the economy is comparatively strong, and staying in cash comes with an 8% charge at present.

With this in mind, let’s dive into a few dividend-paying stocks that investors might consider buying in September and beyond that also offer solid growth upside and value.

Global Ship Lease, Inc. (GSL - Free Report)

Global Ship Lease, as its name might suggest, owns a diversified fleet of mid-sized and smaller containerships. Global Ship Lease began operations in 2007, with a focus on owning and chartering out containerships under fixed-rate charters to top-tier container liner companies. Today, it is one of the leading independent containership owners, catering to a key aspect of the industry.

Global Ship Lease’s revenue growth started to take off a few years back, having posted 66% sales expansion in FY19, 8% in FY20, and 58% last year. The company topped our Q2 EPS and revenue estimates in early August and lifted its guidance as it benefits from rising prices and supply chain bottlenecks. GSL’s FY22 EPS has popped and its FY23 consensus is 11% higher since its release, helping it land a Zacks Rank #2 (Buy) right now.

Zacks Investment Research
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Global Ship Lease’s revenue is projected to climb another 34% in 2022 and 4% higher next year, based on current Zacks estimates. Meanwhile, its revenue is set to surge by 51% and 17%, respectively. And its Transportation – Shipping space is in the top 23% of over 250 Zacks industries, highlighting its strength. GSL stock has soared over 250% in the past two years, though is down around 17% in 2022.

Yet at roughly $18 per share, Global Ship Lease’s average Zacks price target of $31.50 offers over 70% upside. And GSL trades at 2.2X forward 12-month earnings. This marks a discount 75% discount to its own three-year highs, 40% vs. its median, and 45% against its highly-ranked industry.

On top of all of that, Global Ship Lease’s dividend yields 8.3% at the moment to crush its industry’s 1.6% average, with a very sustainable 20% payout ratio.

Enterprise Products Partners L.P. (EPD - Free Report)

Enterprise Products Partners is focused on the transportation and storage side of the oil and gas industry. It is one of the largest publicly traded master limited partnerships and boasts a storage capacity of around 260 million barrels for NGLs, crude oil, petrochemicals, and refined products, with 14 billion cubic feet of natural gas capacity. EPD’s portfolio also includes 24 natural gas processing facilities, 25 NGL and propylene fractionators, and more.

Natural gas currently accounts for about 40% of U.S. electricity generation, which is by far the largest, ahead of nuclear, coal, and renewables all of which hover around 20%. Despite the rise of Tesla and the push from other major automakers, EVs account for under 5% of the U.S. market. All of this means EPD and other oil and gas companies can play a role within a diversified portfolio now and in the future.

Enterprise Products Partners’ revenue soared 50% last year to post its largest total sales since 2014. EPD topped our Q2 estimates in early August and upped its guidance once again even as prices remain well off their highs.

EPD’s positive bottom-line revisions help it land Zacks Rank #2 (Buy) and Zacks estimates call for its sales to climb another 36% in 2022 and 5% in FY23 to hit nearly $60 billion. Its adjusted earnings are set to climb 20% this year and 4% next year.


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Image Source: Zacks Investment Research

Nine of the 11 brokerage recommendations Zacks has are “Strong Buys,” alongside two “Holds.” And Enterprise Products Partners trades 19% below its average Zacks price target of $31.25 a share. The upside is there even though EPD stock has climbed 80% in the past 10 years to top its industry’s 50% climb and 80% in the last 24 months, including a nearly 30% jump in 2022.

Enterprise Products Partners raised its dividend in July and it yields 7.3% to match its industry and crush oil and gas titans like Exxon. EPD currently trades at 10.2X forward 12-month earnings, marking a slight discount to its industry and 20% value compared to the larger Zacks Oi l& Gas Production Pipeline market. Better still, EPD’s forward P/E offers 50% value vs. its own 20-year median and 60% against its highs.

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