Last week, the Fed’s open market commission raised its key interest rate by 0.75%, the largest such increase in nearly 30 years. The move marks a shift to an aggressive stance against inflation and an attempt by the Fed to prevent a possible recession.
In fact, preliminary data leaked by the Atlanta Fed earlier in the week showed that the US is in a technical recession. Although the official figures will not be released until after the end of the second quarter, the first figures show that the second quarter of 22 will end with a 0.0% GDP increase. After shrinking 1.5% in the first quarter, this is two quarters in a row of negative or zero growth – the definition of recession.
From an investor’s point of view, such an environment means it is time to support portfolio defenses. Defensive stock games will get a lot more attention in the future – as Deutsche Bank notes in a recent report on current conditions.
Against this backstop, the analysts of the investment bank have chosen possible winners among the dividend shares, the classic defensive games for falls of all kinds. We looked up the details of two of these options using the TipRanks database. Now let’s dive in and look at DB’s numbers and comment together.
Digital Realty Trust (DLR)
First, the Digital Realty Trust belongs to this category of long-term champions in the dividend sector, real estate investment trust (REIT). These companies are required to return a high percentage of profits directly to shareholders and often use dividends as a vehicle. As a result, REITs can usually be relied upon for reliable, high-yield dividends.
Some REITs are general, investing in any type of property, while others have a narrower focus. Digital Realty is one of the latest and its focus is on data centers. The company owns data center properties and provides solutions for co-location and interconnection between its properties and the businesses of its tenants. With a market capitalization of $ 36.2 billion and a corporate value of $ 56 billion, the company is the 7th largest REIT traded on Wall Street.
Some recent announcements from the company will help to demonstrate the size of its activities. Last month, DLR announced it had contracted 158 megawatts of new solar power plants for operations in California and Georgia. And this month, the company announced the expansion of its international footprint with a commitment to open a new data center project in Israel. The move will boost DLR’s activities in the Eastern Mediterranean region.
In financial terms, Digital Realty reported revenue of $ 1.1 billion in the first quarter of the 22nd year, up from the previous quarter and up 3% from the previous quarter. That revenue backed a net income of $ 76.9 million, which led to an EPS for common stock of 22 cents per share. That number fell sharply from the $ 1.32 lower EPS reported in the first quarter of the 21st. That said, FFOs per share, a key measure in the industry, rose from $ 1.50 in the first quarter to $ 1.60 in the recent report, a gain of 6.7%.
The FFO backed the common stock dividend of $ 1.22. This payment amounts to $ 4.88 for each common share on an annual basis. At this rate, it returns 3.8%, almost double the average dividend found in the wider markets. Even better for investors, the dividend has tripled in the last three years and the company has a history of 17 years keeping the payment reliable with gradual increases.
In his review of Digital Realty for Deutsche Bank, analyst Matthew Niknam sees this company as a solid foundation for overcoming financial difficulties. He writes, “Customer demand has been strong for both high-level clients and corporate clients, leading to increased leasing volumes in recent times. Although we do not believe that record volumes can be expanded in the future (especially as macroeconomic conditions deteriorate), we do believe that recent strength and a very healthy outstanding balance (~ $ 400 million +) are helping to alleviate the risk of growth prospects for in 2023 “.
Niknam does not stop there. It also raises its stance on Hold (Neutral) stocks to Buy, and sets a price target of $ 144, indicating a one-year uptrend for the 13% stock. (To view Niknam’s history, Click here)
Overall, the stock market analysts’ consensus rating for this stock is based on 10 recent reviews, including 7 for Buy vs. 3 for Holding. Shares are currently trading at $ 127.13 and have an average price target of $ 159.80, giving ~ 26% average uptrend for next year. (See DLR stock forecast at TipRanks)
The next dividend we will look at is NetApp, a San Jose-based company that works in data services and cloud-based data management. NetApp works with key corporate clients – including names like AstraZeneca, DreamWorks, and even Dow Jones – on a range of data applications, all with the goal of getting the right data to the right place at the right time, where the customer can get the most out of it. and its profitable use.
The data has become big business, and even after seeing stock losses in recent months (NTAP stock has fallen 31% year-on-year, yielding the S&P 500), the company is still proud of a market capitalization of over 14.5 billions of dollars.
The financial results for the most recent quarter, the fourth quarter of the financial year 2022, appeared strong. NetApp had net income of $ 1.68 billion, up from $ 1.56 billion in the fourth quarter of the 21st year. The company’s Hybrid Cloud Segment led the way, with $ 1.56 billion in total revenue. NetApp ended the quarter with $ 4.13 billion in cash and other liquid assets.
This strong cash is sent back to the company shareholders. NetApp has an active stock repurchase and dividend payment program totaling $ 361 million in the fourth quarter of the 22nd year and $ 1.05 billion for the full financial year. The common stock dividend is set at 50 cents per share or $ 2 per year and returns 3%.
All of this makes Deutsche Bank’s 5-star analyst Sidney Ho willing to upgrade these shares from Hold (ie, Neutral) to Buy. Explaining his stance, Ho writes: “We believe that the underperformance of NTAP’s share from year to year with a fall of -30% (versus -18% for IT peers) creates a market opportunity επίσης It also encourages us that the company will change cash usage in the short term from mergers and acquisitions to share acquisitions, which should be positive for the development of EPS “.
Believing that the risk reward is “imperative”, along with the upgrade and the optimistic outlook, Ho’s $ 84 price target indicates a one-year upside of 32%. (To view Ho’s history, Click here)
Overall, the NTAP analysts’ consensus rating is a mediocre market, based on 13 reviews. These include 6 purchases for 7 bookings. The stock is currently trading at $ 63.73 and the average price target of $ 88.38 indicates an upward trend of ~ 39% next year. (See NTAP stock forecast at TipRanks)
For good ideas on trading dividend shares at attractive prices, visit TipRanks’ Best Stocks to Buy, a recently released tool that brings together all of TipRanks stock information.
Disclaimer: The views expressed in this article are solely those of the selected analysts. The content is intended for informational purposes only. It is very important to do your own analysis before making any investment.