Mohamed El-Erian says the US economy is in trouble, and a soft landing seems less likely; Here are two “strong buy” stocks to protect your portfolio

Mohamed El-Erian says the US economy is in trouble, and a soft landing seems less likely;  Here are two “strong buy” stocks to protect your portfolio

Markets are buffeted by conflicting trends, and it is difficult to see a clear path ahead for investors. Low annual inflation and continued job market resilience point to continued economic strength – but interest rates are high, oil prices are rising, and the dollar is strong, all of which point to economic trouble.

Until recently, conventional wisdom favored a “soft landing,” where higher interest rates mandated by the Fed lower inflation and allow economic conditions to normalize without undue ripple effects. But recently, feelings have changed. Renowned economist Mohamed El-Erian explains the reasons that led him to adopt a more pessimistic view, and predicts turbulent economic times ahead.

“For more than a year now, I have been arguing that the United States is capable of avoiding the 2023 recession that many have repeatedly described. I am now less confident about what 2024 holds… An intense period of rising interest rates, higher oil prices, and a stronger dollar is driving… The financial market consensus on US economic growth is far from the comfortable idea of ​​a soft landing… these are developments that the economy and markets are not enjoying. “They dampen growth and increase the risk of stagflation,” El-Erian said.

If El-Erian is right, and the US economy is heading toward trouble, investors should start playing defensively and shift resources toward dividend stocks, the classic defensive play. These stocks guarantee a return through passive income, no matter how the markets turn — and when they get a “Strong Buy” rating from Street analysts, it’s a clear sign that investors should pay attention.

We used TipRanks to take a look at the details of two of these stocks, with dividend yields above 7% and Strong Buy ratings.

Enterprise Product Partners (EPD)

The first “strong buy” dividend stock on our list is Enterprise Products Partners, a mid-cap company in the North American energy sector. Enterprise, with a market capitalization of $58 billion, is one of the continent’s largest brokerages and one of the largest public partnerships in Wall Street’s trading markets.

The transportation and transformation sector is a vital component of the production and distribution of hydrocarbons; Medium carriers move product from wellheads and production areas to storage facilities, refineries, and distribution nodes. Enterprise operates a continent-spanning network of oil and gas transportation assets, including 50,000 miles of pipelines, 25 fractionation facilities, 20 deepwater berths, and storage assets capable of holding more than 260 million barrels of liquids. This network is centered in the coastal Texas-Louisiana region and branches into the Southeast, Appalachia, the Mississippi Valley, and the northwestern Rocky Mountains.

These operations are profitable, and Enterprise generated $10.65 billion in top income in the most recently reported quarter, 2Q23. However, this result was down more than 33% year over year, beating expectations by $1.67 billion. . On the bottom line, Enterprise had quarterly earnings per share of 57 cents, a penny below estimates. The company’s distributable cash flow also decreased year over year from $2.02 billion to $1.74 billion.

Despite these year-over-year declines, Enterprise maintained strong earnings. The company made its most recent earnings announcement on October 5, for a payment of 50 cents per common share. These annual dividends amount to $2, and at this rate they produce 7.5%. Enterprise has a 24-year history of maintaining regular dividend payments and making regular increases to those payments – strong attributes for a defensive portfolio addition.

When covering this stock for Truist, 5-star analyst Neil Dingman raved about the company’s ambitious expansion plans and the resulting potential to maintain profits.

“The organization is in an enviable position with $4.1 billion worth of growth projects under construction, including $1.1 billion expected to come into service this year. We expect the growth projects combined with expected strong organic growth coupled with minimal capital expenditure “We expect EPD to continue to deliver significant growth in future earnings/discounted cash flows. Long-term projects of material scale position the company to weather periods of commodity price pressures while also being able to capitalize as activity/volumes grow.” Adding flexible capacity where/when appropriate such as the Beaumont Export Terminal to continue to drive future upside,” commented Dingman.

Dingmann continues to give EPD stock a Buy rating — along with a $33 price target that suggests the stock will gain 22.5% in the next 12 months. Add to that the dividend yield, and the stock’s total return over the one-year time frame rises to 30%. (To view Dingman’s track record, click here)

Overall, the 11 recent analyst reviews on EPD include 9 Buys and 2 Holds, supporting a Strong Buy consensus rating. Shares are priced at $26.90, and the average price target of $31.82 implies a one-year gain of 18%. (be seen EPD stock forecast)

Capital of the blue owl (OBDC)

Next up is the business development firm, Blue Owl Capital. This company was created through a SPAC deal during 1H21 when Owl Rock and Dyal Capital merged together with Altimar Acquisition. The combined entity has since transitioned its assets, operations and brand to the Blue Owl name, and now operates under the larger umbrella of asset management firm Blue Owl Capital.

Blue Owl Capital invests in debt and equity of small and medium-sized companies. These investments make capital and financial services available to entrepreneurial companies that would not necessarily qualify for such services from the traditional commercial banking system. Blue Owl’s business development portfolio contains investments in 187 companies and has a fair value of $12.9 billion. Of the total investments, 98% are variable rate, and 83% of the total are first or second lien secured instruments.

We’ll see Blue Owl’s third-quarter results on November 8, 2023, but for now, we can take a look at the company’s Q2 2023 results to see where it stands. On a macro level, Blue Owl brought in $394.2 million in net investment income, a result that was up more than 44% year over year and exceeded expectations by more than $10.4 million. On the bottom line, the company generated net income of 48 cents per share, 2 cents per share better than expected.

These results were supported by Blue Owl’s latest dividend announcement of 33 cents per share on October 13, 2023. The regular dividend is supplemented by a special dividend payment sent out last month, at 7 cents per share, which is the fourth consecutive quarterly supplemental payment that the company has sent out. The regular annual dividend is $1.32 per common share and yields 10%; With the additional payment included in the calculation, the forward yield rises to an impressive 12%, more than enough to provide a significant level of portfolio protection.

This stock — especially its high yield generation — caught the attention of 5-star Compass Point analyst Casey Alexander, who wrote about it, “The consistency of OBDC’s yield generation should generate more enthusiasm from investors. Over the past four quarters, net Asset value of $0.78 per share, and – including dividends – OBDC generated a strong double-digit return on NAV. OBDC still has levers it can pull to generate additional return, such as increased portfolio change which increases fee income, and additional dividends from Off-Balance Sheet Equity Instruments Core earnings strength is expressed in core earnings and a further increase in special distribution.As such, we believe the upside and total return potential of OBDC is compelling, and urge investors to take advantage of the current unjustified discount to NAV.

Looking ahead, Alexander gives OBDC shares a Buy rating with a $16.50 price target, implying approximately 24% one-year upside potential. (To view Alexander’s track record, click here)

Overall, the Strong Buy rating on ObC stock is based on 8 recent analyst reviews, which break down into 7 Buys and 1 Sell. The stock has an average price target of $15.59, suggesting it will rise approximately 17% from its current trading price of $13.33. (be seen obdc stock forecast)

To find good stock trading ideas at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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