2 “Strong Buy” stocks with a dividend yield of at least 10%.

Markets started September with a resumption of the swoon we saw in early August, making it clear that investors are not quite as bullish as politicians would like in this election year.

The bad news in the jobs report is fueling fears that a recession could be on the way; July’s figures included a downward revision of more than 800,000 to last year, and August’s figures missed expectations, coming in barely at maintenance.

Commodity markets have also fallen in recent weeks, with oil losing all of its early-year gains. Falling oil prices could signal potential economic trouble ahead as they reflect weakened global demand and an industrial slowdown — key indicators that a recession is looming.

Tracking the situation at JPMorgan Asset Management, portfolio manager Priya Misra says, “I don’t think any market is really pricing in a reasonable chance of a recession, but the totality of the data suggests that recession risks are rising. While there is so much turmoil about a 25 or 50 basis point cut from the Fed in September, all markets will move if a recession is upon us. It will take some time for the rate cuts to seep into the economy.”

A smart investor will always have a worst-case plan – and that scenario will naturally draw attention to dividend stocks. These stocks generate a stream of income regardless of how the market rises or falls.

With that in mind, we opened the TipRanks database and found div stocks with “Strong Buy” ratings from analysts that produce at least 10%, a solid return at all times. Here are the details on two of them.

Financial MFA (MFA)

The first stock we’ll look at is MFA Financial, a specialty finance company that acts as a real estate investment trust (REIT). These companies operate in the world of real estate and mortgage finance, investing directly in property purchases or financing real estate loans. MFA Financial invests primarily in residential real estate assets, primarily residential mortgage loans and residential mortgage-backed securities. The company is internally managed and publicly traded.

At the end of this year’s second quarter, June 30, the company had a total residential loan balance of $9.2 billion and a total portfolio of securities worth $863.3 million. During the second quarter, the company made $688.2 million in loan purchases and added $175.5 million in agency-backed securities to its holdings.

During the same period, MFA generated net interest income of $53.49 million, a figure that was up 20% year over year and beat the forecast by $330,000. The company’s non-GAAP earnings per share, at 44 cents, rose 10% from the prior quarter and were 6 cents per share better than expected.

The story continues

For dividend investors, the key point here is that MFA’s earnings fully covered the 35-cent common stock dividend. Dividends were declared on June 11 and paid on July 31; at the current rate, the payout annualizes to $1.40 per common share and provides a forward yield of 11.4%. It should be noted that MAE has paid out $4.7 billion in cumulative dividends since going public in 1998.

For Wedbush 5-star analyst Jay McCanless, this stock is emerging from a transformational period and is poised for near-term gains. The analyst, who is rated in the top 1% of his peers by TipRanks, is particularly impressed with the dividend here and writes of the stock: “MFA performed near the middle of the pack in our mREIT screen, as the company was not immune. from the pressures that have affected the whole group in recent years. However, we believe that MFA has since been able to successfully rebuild on multiple fronts and believe that this positive transformation is seen in more recent financial results as the company has covered its dividend on an EAD basis for the last two. years and through 2024. We also view MFA’s current valuation as relatively attractive given its dividend yield of ~11.5% on what we believe to be a fairly stable ongoing dividend.”

Overall, McCanless rates the stock as Outperform (Buy) with a $14 price target suggesting 14% more growth next year. With the dividend, that adds up to a total potential return of over 25%. (To track McCanless’ track record, click here)

While there are only 4 recent analyst reviews of this stock on file, they include 3 Buys to just 1 Hold, for a Strong Buy consensus rating. The stock has a trading price of $12.26 and an average price target of $13.13, implying a one-year upside of 7%. (See MFA stock forecast)

Golub Capital BDC (GBDC)

Next on our list is a business development corporation, or BDC. Golub Capital provides the necessary combinations of capital, credit and financial services that keep the small and medium-sized business sector – the traditional engine of the American economy – afloat. These companies that make up Golub’s potential customer base aren’t always able to access financial services through major banks, and firms like Golub are picking up the slack.

That’s not to say Golub is operating on a small scale. Earlier this year, the company completed an approved merger with a sister firm, GBDC 3, in which the two companies combined their business and portfolio activities under the name and stock symbol Golub Capital. The merger was completed in June of this year, and the combined entity has total assets of approximately $8.8 billion at fair value and investments in 367 portfolio companies.

The Golub portfolio is heavily focused on senior loans. 86% of the firm’s investments are in traditional first lien senior loans and 7% are in single first lien instruments. The remaining 7% of the portfolio is in equity investments. Of Golub’s loan portfolio, 99% is in variable rate loans.

The most important aspect of Golub’s business is generating total returns for its investors. The company builds the foundation for this by cultivating a portfolio of high-quality customers with repeat business. Golub is an experienced credit asset manager and understands the importance of not only building a portfolio at scale, but also maintaining investment quality.

In the second quarter of this year, the quarter in which Golub completed its acquisition of GBDC 3, the company reported total investment income of $171.27 million, while adj. investment income per share was 48 cents.

The company’s earnings more than covered the regular dividend payment, which was declared on August 5 for payment on September 27. The dividend, at 39 cents per common share, annualizes to $1.56 and yields ~10.6% going forward.

This stock caught the attention of KBW’s Paul Johnson, who is impressed by the company’s overall quality. He writes of Golub: “We believe Golub Capital is one of the highest quality BDCs in the sector and the management team has deep middle market experience. We expect GBDC’s portfolio to be of higher quality than many BDC peers due to their focus on more senior debt assets. GBDC’s cost structure is one of the best in the industry, with low fees, lower operating expenses and significant shareholder protections.”

Quantifying his position, Johnson sets an Outperform (Buy) rating on GBDC, with a $16.50 price target implying a 12% upside over the next 12 months. Adding the forward dividend yield, the yield could be more than 22.5%. (To track Johnson’s track record, click here)

This is another stock with 4 recent analyst reviews and a 3-to-1 split favoring Buy over Hold for a Strong Buy consensus rating. The stock price is $14.76 and the average target price of $16.50 matches KBW’s view. (See GBDC stock forecast)

To find good ideas for trading stocks at attractive valuations, visit TipRanks’s Best Stocks to Buy, a tool that aggregates all of TipRanks stock information.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.