In his Dividend Detective newsletter, Harry Domash looks far and wide to find income opportunities; here, he looks at four diverse ideas — a U.S. fast food operator, a Canadian auto parts firm, a preferred issue and a closed-end fund that buys convertible shares.
We’re recommending McDonald’s (MCD), the world’s largest fast food restaurant company. Analysts expect 2020 revenues to drop around 10% vs. year-ago to $19.0 billion.
In 2022, probably the first full year that won’t be impacted by COVID-19, analysts are forecasting sales at $22.5 billion, driving EPS up to $9.09, 16% above 2019. McDonald’s is paying a 2.3% dividend yield and we’re forecasting around 10% annual dividend growth.
We’re adding a new pick to our Preferred Stocks portfolio issued by a techie healthcare player that’s paying a 9.4% dividend yield. With that sort of payout, you’d expect high risk, but that’s not the case here.
Ontrak (OTRK) is an artificial intelligence powered, virtualized outpatient healthcare treatment company that provides in-person or telehealth intervention services to health plans.
Our portfolio recommendation is the Ontrak 9.50% Series A (OTRKP). Although not credit rated, these shares are cumulative meaning that Ontrak remains on the hook for any missed dividends. Recently trading at $25.10 per share, the market yield is 9.5% and the yield to its 8/25/25 call date is 9.4%.
In our Canada Stocks portfolio, we are buying Magna International (MGA). The firm designs, develops, and manufactures automotive systems, assemblies, modules, and components in North America, Europe, and Asia. It’s biggest customers are General Motors, BMW, Ford, and Fiat Chrysler.
Besides for making automotive components, its Magna Steyr unit in Graz, Austria designs, develops and assembles complete vehicles for auto companies not set up to do the manufacturing themselves. This capability is expected to appeal particularly to electric vehicle startups.
Analysts expect Magna to report EPS around $5.52 next year and then grow that number by 30% to $7.33 per share in 2022. Magna is paying a 3.3% dividend yield and we expect around 10% annual dividend growth.
We’re also adding a new position in our Closed-End Fund Monthly Income portfolio. Calamos Convertible Securities & Income (CHI) holds convertible stocks and below investment-grade corporate bonds. It overweights tech, healthcare and consumer discretionary in both categories.
Calamos pays an 8.1% dividend yield. It has returned 23% over the past 12-months, and averaged 10% annually over three-years.