For investors who seek regular cash flows, blue-chip dividends stocks are excellent options for a portfolio. The combination of a low-beta, regular dividend growth, and the possibility of capital gains makes these stocks attractive. Further, in an uncertain macroeconomic environment, it’s important to hold these stocks.
Generally, most high-yield dividend stocks fall among the blue-chip categories investors often focus on. However, my focus in this column is on high-yield dividend stocks from relatively small companies. I am typically looking at undervalued stocks with dividends yielding more than 10%.
Of course, these stocks have higher betas, and I would limit my exposure. However, given their respective yields and valuations, total returns can be robust from these stocks over the next 24 months. I also believe that the balance sheets of these companies are decent, and credit metrics indicate that high dividends can be sustained over the medium-term.
Let’s discuss three high-yield dividend stocks to buy for robust total returns.
|NAT||Nordic American Tankers||$3.66|
|EGLE||Eagle Bulk Shipping||$43.01|
|BGFV||Big 5 Sporting Goods||$8.32|
Nordic American Tankers (NAT)
Nordic American Tankers (NYSE:NAT) is a penny stock that has surged by 84% over the last 12 months. However, the stock remains massively undervalued at a forward price-earnings ratio of 5.7-times. Additionally, the stock offers a robust dividend yield of 16.1%. It’s therefore the top pick on this list of high-yield dividend stocks to buy.
As an overview, Nordic American is an oil tanker company with a fleet of 19 Suezmax tankers. These tankers have a cargo lifting capacity of 1 million barrels of oil each. Tanker rates have been on an uptrend, and that explains the stock’s upside and generous dividend.
For Q1 2023, the company’s time charter equivalent rate was $51,902 per ship per day. For the same period, the operating cost was $8,000 per vessel per day. Therefore, the company’s EBITDA margin has been robust, and even if there is some correction in TCE rates, the company’s dividend is likely to be sustainable for some time.
Eagle Bulk Shipping (EGLE)
Eagle Bulk Shipping (NYSE:EGLE) stock is another interesting pick that looks undervalued at a forward price-earnings ratio of 8.2-times. Currently, EGLE stock offers an attractive dividend yield of 10.9%.
As an overview, Eagle Bulk is engaged in the transportation of dry bulk commodities. Currently, Eagle Bulk has a fleet of 52 owned vessels, with a focus on the mid-size segment. For Q1 2023, the company reported revenue of $105.2 million and an adjusted EBITDA of $18.7 million.
From a dividend and growth perspective, there are two points to note. First, Eagle Bulk reported a total liquidity buffer of $255 million as of Q1 2023. Further, the company’s loan-to-value ratio is low, at 15.4%. This provides ample headroom for additional leverage to drive growth, which will support cash flow upside.
I am also bullish on time charter rates trending higher. With recession fears, fiscal stimulus in various parts of the world can boost dry bulk shipping activity.
Big 5 Sporting Goods (BGFV)
Big 5 Sporting Goods (NASDAQ:BGFV) stock is another high-yield dividend stock to consider. The company’s current dividend yield of 12.1% is attractive and I believe that its dividends are sustainable.
Big 5 is a sports good retailer in Western United States. As of April, the company reported 430 stores in 11 states. For Q1 2023, Big 5 reported sales of $224.9 million. Unfortunately, inflationary pressures impacted the company’s EBITDA margin.
However, the company’s balance sheet and fundamentals are decent, exemplified by the fact the company managed to report positive operating cash flows. It’s worth noting that merchandise inventory increased on a year-on-year basis due to supply-chain disruptions. Once the working capital cycle normalizes, cash flows are likely to swell.
It’s also important to note that BGGV stock has declined 30% over the last 12 months. However, the stock has witnessed a rally of 12.5% in the last month. In all probability, the negatives in terms of sluggish sales have been discounted into this stock. Thus, it’s one of the high-yield stocks on my buy list now.
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On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.