Investor sentiment remained upbeat for most of the year, driving market indexes to new highs. However, as summer came to a close, the stock market experienced a slowdown. The fall season brought about a market pullback, leaving year-to-date gains lower than the peak witnessed in July. At present, the S&P 500 has a year-to-date gain of 9%, while the NASDAQ boasts a 22% increase.
The current market environment can be described as volatile and uncertain. Both bullish and bearish arguments find support from various data and historical patterns. The result is investor confusion, with uncertainty about the best course of action.
Billionaire investor Leon Cooperman, founder of Omega Advisors and former Goldman Sachs executive, offers a moderate viewpoint. He advises caution to investors, suggesting that the S&P 500 is currently overvalued and could face a potential downturn in the near future. According to Cooperman, we are not in a bubble but rather in a “rolling correction,” and it may take a considerable amount of time to resolve the underlying issues. The S&P 500 reached its previous peak near 4,800 in January last year, and Cooperman believes that returning to that level will be a gradual process.
In such an uncertain climate, investors often seek stability, which leads to a focus on dividend stocks. These stocks provide a reliable income stream, insulating portfolios from the daily market fluctuations and volatility.
Taking inspiration from Leon Cooperman, let’s explore two high-yield dividend stocks that have gained his trust.
- Energy Transfer (ET)Energy Transfer is a significant player in the North American midstream sector. Midstream companies are pivotal in the energy industry, connecting producers of oil and natural gas with end customers through pipelines, storage facilities, and transport assets. Energy Transfer operates in 41 states, with international offices in Panama City, Panama, and Beijing, China.The company’s core activities involve the transportation, storage, and terminal services for crude oil, natural gas, natural gas liquids, and refined hydrocarbon products. Energy Transfer’s primary regions of operation are Texas, Oklahoma, Louisiana, the Great Lakes, and the Mid-Atlantic areas.With a market capitalization of $43 billion, Energy Transfer recently expanded its market share by acquiring Crestwood for nearly $7.1 billion in stock. The transaction enhances the company’s position in the market.While Q2 financial results showed a year-over-year revenue decrease of 29%, Energy Transfer announced a dividend increase in October, raising the annualized yield to 9%. Leon Cooperman holds approximately 11,912,500 shares in Energy Transfer.Analyst Selman Akyol of Stifel predicts a positive outlook for Energy Transfer due to favorable commodity market conditions and a focus on debt reduction. Akyol assigns a Buy rating to ET stock with a price target suggesting a 30% gain.As per the consensus rating, ET holds a Strong Buy status based on nine recent reviews, including eight Buys and one Hold. With a current stock price of $13.69 and an average price target of $16.78, the potential upside is approximately 23%.
- Arbor Realty (ABR)Arbor Realty specializes in commercial real estate investment trusts (REITs) and focuses on funding multifamily residential projects. The company provides commercial mortgages for apartment complex development and works with government-backed entities such as Fannie Mae and Freddie Mac.As of June 30, 2023, Arbor’s fee-based loan servicing portfolio stood at $29.45 billion, with a significant portion serviced through Fannie Mae. The company reported strong Q2 results, with a 15% year-over-year increase in net interest income. Arbor pays a generous dividend, with a forward yield of 12.5%.Leon Cooperman has invested in Arbor Realty, holding around 3,454,694 shares in the company. Analyst Stephen Laws of Raymond James supports Arbor Realty for its dividend yield and ability to cover the dividend.Laws rates ABR stock as Outperform (Buy) with a price target that suggests a 31% increase in the coming year. When combined with the dividend yield, the potential return could reach 43%.However, the broader Street opinion is less optimistic, resulting in a Hold consensus rating for Arbor Realty. Based on one Buy, one Hold, and two Sells, the stock has an average target price of $15.75, indicating a potential upside of around 21% in the next 12 months.
