The Best Mid-Cap Dividend Stocks for 2022
Mid-cap dividend stocks are the best deal on the board right now. I like them because lame income investors don’t consider them. They attach to:
- Large Cap Stocks: For the dividend security.
- Small cap stocks: For the dividend growth.
Meanwhile, many under-the-radar mid-cap stocks are between $2 billion and $10 billion in market capitalization. They sit in a “sweet spot” that allows dividend security and growth.
This is why they generate big returns.
Touchstone Investments reports that when looking at 20-year trailing returns, mid-caps have experienced “generally higher absolute returns over the past 42 years”:
It’s easy to overlook these names – the media doesn’t talk about them as much and they tend to get a lot less analyst coverage than the Apples (AAPL) and Microsoft
Let’s talk about five mid cap stocks that are trading at low prices. I’m talking single-digit price-to-earnings (P/E) ratios with generous returns between 7.2% and 15.3% as I write (and no, that’s not a typo).
New York Community Bank
Dividend yield: 7.2%
Forward P/E: 6.7
New York Community Bancorp (NYCB) is the holding company of New York Community Bank, a savings bank with 237 branches serving five states – and rather than being regionally locked, it serves the Northeast (NY/New Jersey), Midwest ( Ohio), the southeast (Florida) and the southwest (Arizona).
Unlike many financial stocks with outsized returns, NYCB is just a regular, ordinary bank. It has nearly $60 billion in assets across a wide range of traditional offerings, such as checking and savings accounts, mortgages, business accounts, commercial loans, and more.
However, NYCB is trading at a low price – and offering an even bigger return than normal – due to a decline of around 30% from its 2022 highs, much worse than its contemporaries.
Part of that is just the fact that NYCB is dragged down for the financial sector downside. Part of that was recently released quarterly results that were just in line with estimates. But the extension of a merger with the Michigan headquarters is also weighing on stocks. Flagstar Bancorp (FBC), which would likely see the deal close in the second half of 2022, and the announcement that the new combined company would need the blessing of the Fed and the Office of the Comptroller of the Currency – and the latter is no slam- to soak. And even if it does, Flagstar, which relies heavily on its mortgage business, has its own struggles, as evidenced by a broad quarterly miss.
The sweet dividend looks safe, M&A or not. But whether NYCB can actually turn its value into an added advantage is somewhat of a gamble that hinges on both the successful merger with Flagstar and Flagstar carrying its weight.
Former International Republic
Dividend yield: 4.1%/10.7%
Forward P/E: 8.9
Another high-yield financier worth checking out is Former International Republic (ORI)– a provider of general and title insurance whose decent overall performance belies a much larger share of change being thrown at investors.
Old Republic is part of an elite group of stocks that most investors tend to overlook: the Dividend Aristocrats. “But wait,” you say, “I heard about it.” Yes, you’ve heard of the S&P 500 Dividend Aristocrats, the club where the likes of Coca Cola
ORI is a particularly notable mid-cap aristocrat, after four decades of uninterrupted payout increases.
But what really makes Old Republic International is that it continues to reliably grow its payout and has a pretty good consistent return while overseeing one of the most responsible dividend programs you’ll find – a program who, when times are good, can move that payment. at top speed. ORI has a two-part dividend system in which it pays regular quarterly dividends, but also special annual payments based on its earnings for the year. For example, a special dividend of $1.50 per share paid last fall pushes ORI’s yield into double digits. (Remember: these special dividends may vary from year to year.)
Crestwood Equity Partners LP (CEQP)
Dividend yield: 8.6%
Forward P/E: 12.4
Crestwood Equity Partners LP (CEQP) is an Intermediate Master Limited Partnership (MLP) that owns a number of assets involved in the gathering, processing, processing, compression and/or storage of natural gas, natural gas liquids, crude oil and even produced water. Its assets are primarily located in the Williston, Delaware and Powder River basins, as well as the Marcellus and Barnett shales.
Most investors would be happy with an overall return like CEQP’s, which is up 8% in a bear market. Opposite side? This is a far cry from other MLPs and the energy industry as a whole.
Maintaining CEQP was a generally lousy first quarter in which EBITDA (earnings before interest, tax, depreciation and amortization) and DCF (distributable cash flow, from which MLP distributions are paid) were both lower to Wall Street expectations.
That said, the company reaffirmed its full-year guidance and expects Williston, Powder River and Delaware to become more productive later in 2022. The company is also returning to distribution growth, which means that this big yield, if bought now, will become even bigger. based on your costs.
Dividend yield: 9.4%
Forward P/E: 4.5
Brazilian steelmaker based in São Paulo Gerdau (GGB) has factories in its home country, as well as in Argentina, Canada, Mexico and a few other Latin American countries. It is also the largest long steel producer in the United States. (Long steel covers a number of products, such as rods, rails and cables, as well as structural beams and sections.)
Gerdau is like most material stocks in that they play in an extremely cyclical realm. Although its top and bottom lines have been going in the right direction for some time, you won’t get the same linear operational performance you expect from, say, a company selling soap. Revenues in 2018, for example, were 46.2 billion Brazilian reals, fell to 39.6 billion in 2019, rebounded to 43.8 billion in 2020 and climbed to 78.3 billion in 2021.
Fortunately, this is not an anomaly – sales are expected to remain at varying levels above 70 billion reals over the next two years. Really, Gerdau is just hanging around.
GGB is similar to the likes of General Motors
It should be noted, however, that Gerdau is a “young man’s dividend action”. In other words, it can produce a lot of income, but it does not do so consistently. Gerdau will pay out at least 30% of the year’s adjusted net income as dividends, but payouts are ubiquitous. Its last four dividends were 3.95 cents, 29 cents, 7 cents and 10.5 cents. Planning for your retirement is difficult, but easier to manage if you allow funding to do its job over a few decades or so.
OneMain Financial (OMF)
Dividend yield: 7.7%/12.2%
Forward P/E: 5.3
OneMain Financial (OMF) provides personal installment loans to millions of Americans, many of whom have non-prime credit ratings.
It may be a turbulent business, but it’s sprouted like a weed during COVID. And while it’s cooling, it hasn’t cooled. Delinquencies, for example, have been up in recent months, but that’s mostly seasonal — they’re actually slightly lower year over year. The OMF share thus behaves admirably compared to the sector.
It is a robust company, which expects to be profitable even if the United States slips into recession. Meanwhile, it improves shareholder rewards in not one but two ways:
- Higher redemptions: At the end of 2021, the company increased its repurchase authorization from $200 million to $300 million.
- Larger dividends: In February 2022, the company announced a huge 35% increase in its quarterly payout, to 95 cents per share. It was 25 cents just three years ago.
Now, based on that quarterly dividend, OMF is yielding around 7.7%. But OneMain is another routine special dividend payer, and that the sum also improved for years. Once you factor in a special payout of $3.50 per share from August 2021, OMF’s actual return is actually over 12%.
Brett Owens is Chief Investment Strategist for Opposite perspectives. For more income ideas, get your free copy of his latest special report: Your early retirement portfolio: huge dividends, every month, forever.