Kimbell Royalty Partners
This off-theadar energy play is a safe way to play the sector while getting huge dividends. Kimbell Royalty Partners L.P. (NYSE: KRP) acquires and owns mineral and royalty interests in oil and natural gas properties in the United States.
As of December 31, 2021, it owned mineral and royalty interests in approximately 11.4 million gross acres and overriding royalty interests in approximately 4.7 million gross acres. Its interests are located in 28 states and include ownership in approximately 122,000 gross wells, including approximately 46,000 wells in the Permian Basin.
The company reported record second-quarter revenue and operating results earlier this month. Every metric from runate daily production to revenue to cash available for distribution came in at record highs. In addition, the company announced a second-quarter 2022 cash distribution of $0.55 per common unit, an increase of 17% from the first and a new record, reflecting a payout ratio of 75% of cash available for distribution.
Investors receive a 12.42% distribution. Raymond James has a Strong Buy rating to go with its $25 target price. The consensus target is $23.67, and Friday’s close was at $17.72.
Redwood Trust
While operating in the mortgage business, this company is very diversified and looks like a solid play for the rest of 2022. Redwood Trust Inc. (NYSE: RWT) operates as a specialty finance company in the United States. The company operates through three segments.
The Residential Lending segment operates a mortgage loan conduit that acquires residential loans from third-party originators for subsequent sale, securitization or transfer to its investment portfolio. This segment also offers derivative financial instruments to manage risks associated with residential loans.
The Business Purpose Lending segment operates a platform that originates and acquires business purpose loans, such as single-family rental and bridge loans for subsequent securitization or transfer into its investment portfolio.
The Third-Party Investments segment invests in residential mortgage-backed securities issued by third parties, as well as in K-Series multifamily loan securitizations and SLST reperforming loan securitizations. This segment also offers servicer advance and other residential and multifamily credit investments.
The dividend yield is 11.19%. Piper Sandler’s $11 target price is in line with the $11.06 consensus figure. On Friday, Redwood Trust stock closed at $8.22.
These more aggressive investments likely are not suitable for conservative investors with preservation of capital as the number one objective. But all have been hammered this year, and most are offering the best entry points since last year.
With second-quarter earnings reporting all but over, and most of these top companies performing well, now may be a great time to pick up some shares. However, investors may want to buy partial positions to see if the selling from Friday continues for the rest of August and into September.
Originally posted at 24/7 Wall St.
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