‘Huge surge’ away from credit to debit cards as consumers keep spending

TipRanks

2 “Strong Buy” Dividend Stocks Yielding 7%

Investment firm Morgan Stanley had set a 3,900 year-end target for the S&P 500 – and it’s already obsolete. The index stands at 4,196, a 7.5% above Morgan Stanley’s target. Year-to-date, despite some volatile trading, the S&P is up nearly 12%. Mike Wilson, chief investment officer and US equity strategist for Morgan Stanley has taken a deep dive into the current state of the market, and believes that values have peaked – at least for now. “We continue to believe valuations are too high and will adjust materially lower over the next six months… We’ve left the early cycle part of this recovery… the reopening of the economy is likely to put upward pressure on costs and downward pressure on margins. This will come as a surprise to now lofty earnings estimates, in our view,” Wilson explained. The markets are getting no help from tax policy, either. Wilson notes that the Biden Administration is pushing to increase the corporate tax rate to 28%, and while it is likely to compromise at a slightly lower rate, Wilson sees increased corporate taxes as a headwind for the S&P. For retail investors, this environment points toward defensive stocks, to insulate the portfolio from share depreciation, and that will naturally bring up the subject of dividend stocks. The dividend payment provides a steady income stream, one that can compensate for lower share gains when markets hit a plateau. Bearing this in mind, we used the TipRanks’ database to zero-in on two stocks that are showing high dividend yields – on the order of 7%. Each stock also holds a Strong Buy consensus rating; let’s see what makes them so attractive to Wall Street’s analysts. Hercules Capital (HTGC) We’ll start with Hercules Capital, a business development company that puts a twist on its niche – it specializes in venture capital. Hercules provides funding and support for science-oriented, early-stage client companies. The company has $2.6 billion in assets under management, and in 18 years of business has committed $11.6 billion in funding to more than 530 clients. For the first quarter of this year, Hercules reported a record level of new debt and equity commitments, at $530.9 million. The company had $550 million in available liquidity at quarter’s end, and a net investment income of 30 cents per share, based on a total of $34.6 million. During the quarter, Hercules also declared its regular dividend, at 32 cents per common share. Afterward, the company added a supplemental dividend of 7 cents per share, making the to total payment 39 cents in the current quarter. That payment gives a yield of 7.5%. Covering the stock for RBC Capital, 5-star analyst Kenneth Lee writes: “HTGC’s first private credit fund could potentially expand opportunities down the line. Pipeline of potential investments looks robust. We continue to favor HTGC’s specialized niche of direct lending to growth-oriented, tech-related companies, well-supported dividends and above-peer avg ROE generation potential.” The analyst added, “We continue to believe HTGC’s common dividends are well-supported; our forecasted NII/sh for FY21/FY22 continue to be above the base dividend level. Further, the 94c/sh in spillover income provides additional support.” To this end, Lee rates HTGC an Outperform (i.e. Buy), and his $19 price target implies a one-year upside potential of ~14%. Based on the current dividend yield and the expected price appreciation, the stock has ~21% potential total return profile. (To watch Lee’s track record, click here) Wall Street’s analysts are in complete agreement here; all 10 of the recent reviews on HTGC shares are positive, making the Strong Buy consensus rating unanimous. The stock is selling for $17.03 and the $18.13 average price target suggests ~12% upside potential. (See HTGC stock analysis on TipRanks) Gladstone Commercial (GOOD) We’ll shift gears slightly – but stay in the…