Billionaire Howard Marks Is Holding These 2 Dividend Stocks for Income Growth — Including One With 11% Yield

The Federal Reserve has increased short-term fed fund rates 11 times in the past 18 months, resulting in a range of 5.25% to 5.5%, which is the highest it's been in 22 years. These actions have produced noticeable outcomes, as inflation has remained relatively calm throughout this year. In fact, the consumer price index's annual growth rate dropped to 3% in June, its lowest point since March 2021.

Despite the good results, Howard Marks, a billionaire investor, is warning US businesses. In a recent interview with Bloomberg, the co-founder of Oaktree Capital Management, which has $179 billion in assets, advised that interest rate increases, which have been on the rise, are going to have a serious impact on businesses. As borrowing money has become considerably more expensive, he predicts that more companies will struggle to repay their debts and could possibly default.

Marks suggested that during a time when raising funds is incredibly effortless for any reason or even no reason at all, and subsequently transitions into a period where obtaining capital is challenging, numerous companies will inevitably struggle.

Marks feels concerned about how high-interest rates might affect the economy but his investment portfolio shows that he has the ability to handle any upcoming economic difficulties. He has invested heavily in two stocks that generate high dividends and, in particular, one of these stocks provides a very impressive dividend yield of 11%.

Indeed, Marks isn't the only one who prefers these particular names. According to information stored in the TipRanks database, analysts also rate them highly as 'Strong Buys.' It's worth examining them in more detail.

is a company that specializes in mineral exploration and development. They focus on acquiring and developing mineral properties that have the potential for high mineral yields. Their team of experts has extensive experience in the mining industry and is dedicated to maximizing the value of each property they acquire. STR is committed to using environmentally responsible mining practices. They work closely with local communities to ensure their mining operations have the least impact possible on the environment and people's lives. Among their goals is to create lasting economic benefits for the communities they operate in. STR has strong financial backing and is well positioned to take advantage of promising opportunities in the mining sector. They are actively seeking new properties with high potential for mineral yields and plan to continue expanding their portfolio in the coming years. Overall, Sitio Royalties Corp. is a reliable and innovative company that operates with integrity and a commitment to sustainable mining practices. Their dedication to investing in promising mineral properties and working in partnership with local communities is commendable and sets them apart from many other mining companies.

In this blog post, we will introduce you to Sitio Royalties, a company endorsed by Marks. They specialize in managing and making money from mineral and royalty interests in the energy industry.

The main way Sitio does business is by getting and keeping ownership of oil, natural gas, and mineral rights. This lets them get money from energy companies that do exploration and production. Sitio carefully picks which properties to invest in, using their deep knowledge of the energy industry to find ones that have good potential for resources. This gives them a reliable income from royalty payments.

The company has been concentrating on getting hold of top-notch oil and gas reserves in America, and has managed to bag over 190 purchases until now. This year has also been full of busy dealings. During their Q2 earnings call, the company informed that they had wrapped up a number of lucrative buys in the Permian Basin, worth a grand total of $247.9 million, since the close of Q1. Sitio leveraged 27% equity and 73% cash for these deals.

The most recent report had some negative points. Although the company's revenue went up by 50.2% compared to the previous year, only reaching $136.46 million, it didn't meet the expected amount by $8.84 million. Furthermore, the company had a net loss of $3.0 million during the quarter due to a non-cash impairment charge, which is a significant decline from the first quarter's $50.7 million. Lastly, the company reduced its dividend payout from $0.50 per share to $0.40, but it still has a decent yield of 6.07%.

At the present moment, Marks still has a significant financial stake in this company. He possesses a total of 12,935,120 STR shares, which currently hold a market worth of approximately $341 million.

Derrick Whitfield, an analyst from Stifel, expresses positive opinions about Sitio. He believes that investing in Sitio offers the opportunity for exposure to the best geological formations in the Lower 48. He also notes the company's diversification in both location and operation. Whitfield thinks that Sitio provides investors with considerable scale and an alternative approach to buying minerals in the heart of significant oil basins. Sitio acquires these minerals at a lower cost of supply through quality operators. He further thinks that Sitio's selective acquisition approach gives the company a strategic edge in foreseeing development in the short and medium term, regardless of external factors like political instability and market fluctuations.

In simpler terms, Whitfield stated that Sitio has the potential to make a lot of money in the years to come. By 2030, they could make back all of their worth and could have even more potential to grow. This makes Sitio a unique opportunity for investors because of their expertise and ability to make smart deals.

Whitfield sees the shares as a good investment and recommends buying them. He believes the stock has the potential to increase by 25% within the next year and has set a target price of $33. Due to the current rate of dividend payments and predicted price gains, the company has the ability to provide a total return of approximately 31%. To see Whitfield's past performance, click on the link provided.

In general, two additional experts have offered their opinions on STR and they both agree that it's a good investment, leading to a widespread belief that it's worth purchasing. The average target of $32 isn't a significant decrease from Whitfield's goal and indicates that there is potential for a 21% increase in value from where it currently stands. (To learn more about what experts predict for STR's future, check out the STR stock forecast.)

was able to report a successful fiscal year 2019. The firm's earnings for the year were $0.73 per share, beating estimates by $0.07. In addition, OCSL also reported $125.7 million in net investment income, and achieved a total return of 13.5% for the year. The company's success can be attributed to its diversified portfolio, which includes investments in a range of industries. Additionally, OCSL's disciplined underwriting process and expertise in credit analysis have also contributed to its strong performance. Looking forward, Oaktree Specialty Lending is focused on continuing to deliver strong results for investors. The company will continue to seek out and invest in high-quality companies with strong cash flows and growth potential. With a solid track record and strong fundamentals, OCSL is poised for continued success in 2020 and beyond.

Moving on to the next item on our Marks-supported roster is Oaktree Specialty Lending. This BDC specializes in the realm of specialty finance and lending. Its main focus is to furnish tailored funding options to middle-market enterprises across a wide range of sectors.

This section talks about a BDC (Business Development Company) that is run by Oaktree Capital Management. The founder, Howard Marks, took charge of the BDC in October 2017. Marks owns 1,852,456 shares in the company, which equals more than $37.4 million based on the current share price.

The investment collection of the corporation has a huge variety of debtary tools, such as senior secured loans, subordinated debt, and joint investments in equity. This allows the company to provide customized financial services to satisfy the exact necessities of their customers. OCSL acquires a broad variety of enterprises in its collection, where software constitutes the main portion with 18%, followed by specialty retail with 5.2%, and property management with 4.4%.

In terms of finance, the company experienced a decline in its credit metrics during the last reported fiscal quarter (June quarter) due to a rise in investments that did not accrue interest. Even though the overall income from investments increased by 61.5% compared to the previous year, reaching $101.9 million, it fell slightly short of the forecast made by financial analysts, missing it by $0.73 million. Also, the adjusted earnings per share of $0.62 slightly missed the expected earnings by $0.01.

However, the primary attraction remains intact, which is a highly profitable dividend. At present, the dividend paid every three months is $0.55, giving a return of approximately 11%.

Although there were some problems that affected the Q2 performance, KBW analyst Ryan Lynch believes that this stock is worth examining more closely.

Lynch stated that OCSL achieved a robust operating ROE of 12.6% and a sound net income ROE of 9.7%, despite a slight increase in non-accruals. Although OCSL experienced a few non-accruals in the past six months, we trust in the potency of their foundation and previous lending practices. Oaktree has an impressive and prosperous history of managing and investing during difficult times, which suggests that they will proficiently steer through this uncertain climate.

The statements provided support for Lynch's recommendation to Outperform (also known as Buy) OCSL, which is supported with a target price of $22. This number implies that the stocks will increase by approximately 9% in the upcoming months. (To view Lynch's previous success, click here.)

In general, there is a strong recommendation to purchase shares of OCSL, as based on the consensus rating which is derived from 3 recommendations to buy and only 1 suggestion to hold. Although the average target of $21.38 indicates relatively small gains of 6% in the upcoming year, when the yield percentage of roughly 11% is factored in, the expected increase becomes more significant at 17%. (Refer to the OCSL stock forecast for more information.)

To discover promising dividend stocks that are reasonably valued, check out TipRanks' Best Stocks to Buy. This innovative tool brings together all of TipRanks' market analysis to offer valuable investment advice.

Note: The views shared in this piece are those of the highlighted experts alone. The information included is meant to enlighten and not to be taken as a direct recommendation. It's crucial to conduct personal research before making any investment decision.