In the current financial landscape, Wall Street analysts exhibit overwhelmingly positive sentiments, with over 75% of S&P 500 stocks rated as “Buy.” This sharp contrast highlights an intriguing opportunity for contrarian investors to explore underappreciated assets with high dividend yields. Amidst a sea of favorable ratings, the search for “Sells” unveils a striking assortment of investment options that feature yields ranging from 6.1% to 11.8%. While conventional wisdom encourages cautious approaches, these undervalued stocks present unique potential for those willing to embrace contrarian perspectives. The inverse relationship of analysts’ expectations means that ratings and stocks trending towards the negative might become appealing, offering a strategic position for subsequent upgrades.
Cheniere Energy Partners LP (CQP), with a 6.1% yield, leads the list due to its ownership of the Sabine Pass LNG terminal in Louisiana and significant pipeline assets. The company has faced challenges over the past year, primarily stemming from stagnation at its terminal and a need for a costly expansion that requires approvals until at least 2025. Despite these setbacks, the current environment surrounding rising liquefied natural gas (LNG) prices and favorable governmental sentiments toward energy may rejuvenate the valuation of CQP. Wall Street shows reluctance, with the majority leaning toward “Hold” or “Sell” ratings, yet any upgrading movement would benefit from the anticipated bounce as the company’s outlook processed through ongoing market dynamics.
On the list of unloved stocks is Kohl’s (KSS), boasting a staggering 11.7% yield, but burdened by declining sales and a challenging retail environment. The company witnessed significant drops in comparable-store sales and net sales year-over-year, forecasting continued losses ahead. The fundamental flaws behind its high yield hinge on unsustainable practices as Kohl’s allocates 80% of its profits to dividends—an untenable position in a bearish market. Given the company’s substantial loss in share value over recent years and an increasingly bleak financial trajectory, analysts’ disinterest in Kohl’s outlook appears reasonable. Investors here may find themselves grappling with dividends that cannot be maintained amid worsening business fundamentals and shifting consumer behaviors.
Another stock facing significant analyst skepticism is Western Union (WU), yielding 8.7%. The company, historically a giant in money transfer services, has struggled to keep pace with newer technological rivals like PayPal and Venmo. Despite the initiation of “Evolve 2025,” a strategic overhaul, growth remains elusive, hindering WU’s ability to rebound from declining user engagement. Analysts on Wall Street demonstrate cautiousness with merely two “Buy” ratings against multiple “Holds” and “Sells”—indicative of the company’s ongoing struggles. However, WU’s sustainable payout ratio at 50% and attractive price relative to projected earnings suggest potential for value investors willing to risk financial exposure in a stagnant sector.
Apollo Commercial Real Estate Finance (ARI) presents a high yield of 10.9%, representing a mortgage real estate investment trust engaged in originating senior mortgages. Despite holding a diversified $7.8 billion debt portfolio, the company has faced turbulence marked by troubled assets, leading to a substantial decline in share value this year. Wall Street’s bearish outlook has resulted in a cascade of “Hold” ratings and at least one “Sell.” Most concerning for income-driven investors is Apollo’s recent dividend cut, aimed at stabilizing its financial footing. The cautious approach by analysts reflects deeper market concerns regarding ARI’s pivotal asset management and overall profitability in light of declining interest rates—further entrenching the perception of the stock as one fraught with risk.
SLR Investment (SLRC), yielding 10.0%, is another business development company that invests in senior secured loans. Despite a diversified portfolio across multiple sectors, the stock shows a divided analyst opinion, with more “Holds” and “Sells” than “Buys.” The prevailing criticism stems from market uncertainties around SLRC’s strategic acquisitions and traditional lending models amid a declining interest rate environment. However, there’s room for optimism as the company recently reported better-than-anticipated quarterly results, indicating potential signs of improvement. The juxtaposition of high yields and strong portfolio diversification paints SLRC as an intriguing option for contrarian investors willing to speculate on market rebounds catalyzed by responsible asset management.
Finally, Walgreens Boots Alliance (WBA) finds itself marked by a staggering 11.8% yield yet tainted by operational challenges and a dramatic fall in share prices. Over the past year, Walgreens has slashed its dividend in a bid to regain financial footing after yielding trading values indicative of a company’s dire situation, including the recent closure of numerous store locations. Analysts have expressed considerable doubt regarding Walgreens’ recovery potential, reflected in a predominance of “Holds” and “Sells.” Nevertheless, the firm’s attempts to stabilize its dividend amid a ratio decline, albeit resulting from previous reductions, might suggest a cautious path forward for income investors watching this storied name redefine its operational blueprint. Overall, these stocks function as both cautionary tales and desirable income opportunities for discerning investors with a contrarian approach amidst a landscape dominated by bullish trends.
