Saying “insider trading” conjures up images of smoky backrooms and shady deals, but that’s just for the movies. In real life, insiders refer to corporate officers, such as CEOs, CFOs, COOs, and directors, who are responsible for running their businesses profitably. They don’t take trading their own company’s stock lightly. While they may sell for a variety of reasons, they only buy when they expect an increase in the share price.
That makes insider trading moves one of the surest signals investors can look for to predict a stock’s short- to medium-term movements. The insiders, based on their positions, have advance information about the factors that will affect the stock, and regulators level the playing field by requiring insiders to publish their trades. Investors can keep an eye on these publications, and stocks with strong insider buying are always worth checking out.
You can boost the positive insider signals by combining them with other factors closely related to strong returns, such as high dividend yields. Passive income is always a boon for investors, and when that passive income yields 8% or more and the insiders buy a lot, that’s a combination that needs attention.
So let’s give these double barrel stocks some of the attention they deserve. Using the Insiders Hot Stocks tool on TipRanks, we found two stocks that showed strong insider buying over the past few days, along with dividend yields that start at 8% and then rise. If that’s not enough, both stocks have also received support from Wall Street analysts. Let’s take a closer look at that.
Owl Rock Capital (ORCC)
We start in the world of Business Development Companies or BDCs. These financial firms provide their clients with access to credit and capital. Their customer base consists of small and medium-sized enterprises that have long been the drivers of the US economy. These companies don’t always have access to major banks, but Owl Rock and his colleagues provide the capital, credit and loan facilities these companies need for growth, acquisitions and market or product expansions.
There are 187 of these mid-sized companies in Owl Rock Capital’s investment portfolio, with an aggregate fair market value of more than $13 billion. Of Owl Rock’s investments in these companies, 98% are floating rate and 85% are senior secured investments.
It’s a quality portfolio that has contributed to ORCC’s rising revenues over the past year. In fact, the company’s last quarter, 1Q23, showed strong earnings that far exceeded the Street’s forecasts. ORCC’s total investment income reached $377.6 million, an increase of 42% compared to the same quarter last year. In fact, total investment income was $12 million more than expected.
In the end, net investment income (NII) came in at $177.8 million, or 45 cents per share. This was 14 cents per share higher than the 1Q22 figure — and it was 2 cents more than analysts had predicted.
Strong investment returns supported a generous dividend. For the second quarter, the company has announced a regular dividend of 33 cents per common share, scheduled to be paid July 14. This regular dividend, on an annualized basis, is $1.32 and yields an impressive 9.8%.
In terms of insider trading, we see that the company’s president and CEO, Craig Packer, bought 75,600 shares of the company in May and paid about $1 million.
The company’s top executive isn’t the only bull here; RBC Capital’s 5-star analyst Kenneth Lee writes of this stock: “ORCC could be on track to achieve 12%+ ROE this year. The performance of the loan portfolio in the portfolio remains solid in our view. We expect to gain more insight into ORCC’s investment approach and potential return profile through cycles during the upcoming investor day. We continue to favor ORCC as one of the few BDCs at scale, with an attractive valuation (0.85x NAV) and dividend yield (~10%).”
According to Lee, this equates to an Outperform (ie Buy) rating, and he sets a $15 price target to imply ~12% upside potential over a year. Based on the current dividend yield and expected price appreciation, the stock has a potential total return of 22%. (Click here to view Lee’s track record)
As for Wall Street in general, ORCC gets an average buy consensus rating, based on 5 recent reviews, including 4 buy and 1 sell. (To see ORCC inventory forecast)
Boston Properties (BXP)
Moving up a gear from BDCs, we look at a company from a different industry known for high dividends, a real estate investment trust. The REIT at hand is Boston Properties, a major player in the US workplace real estate segment. Boston Properties is the largest publicly traded developer, owner and manager of such properties in the US.
A look at some numbers will give the scale. Boston Properties has 177 office properties in its portfolio, totaling 50 million square feet of rentable space. These properties are located in six metropolitan regions, known as some of the most desirable real estate in the US. BXP has interests in the namesake city of Boston, along with New York City, Washington DC, Seattle, San Francisco and Los Angeles. The company’s largest presence, with 49 locations and 15.9 million square feet, is in Boston; Washington and New York are next, with 42 properties and 22.6 million square feet between them.
Commercial real estate, especially in urban areas, is under pressure post-COVID. With many employees still commuting remotely, companies are trying to downsize their office spaces. But even in that difficult environment, BXP has maintained its sales and profits. The company’s revenue in its most recent quarter, 1Q23, was $803.2 million, capping nearly two years of consistent quarter-over-quarter revenue growth. The first quarter total was also up 6.5% year over year, beating expectations at $24.4 million.
In the end, there are several statistics to consider. BXP’s GAAP earnings of 50 cents were 4 cents lower than forecast and 45% lower than earnings per share of 91 cents from the same quarter last year. Of more interest to dividend investors, however, BXP reported 1Q23 earnings from operations (FFO) of $1.73 per share, derived from a total of $272 million. While lower than last quarter’s earnings ($1.82 per share for a total of $286.1 million), the current FFO was more than enough to fully fund the company’s dividend.
The dividend was paid at the end of April at 98 cents per common share. BXP has kept the dividend at this level since the end of 2019; the annualized rate of $3.92 per
common share gives a strong return of 8%.
Taking a closer look at this company’s insider trading, we discover that Carol Einiger, a member of the board of directors, recently bought 10,000 shares and paid $474,100.
Also bullish on the stock is Evercore ISI analyst Steve Sakwa, who focuses on the company’s ability to generate funds.
“After a few tweaks to our model, our ’23 FFO estimate rises from $7.15 to $7.18 due to slightly higher base rent and lower operating expenses, compared to our new FY24 estimate of $7.58, which reflects slightly more conservative operating costs… We maintain our Outperform rating given the company’s quality portfolio, healthy balance sheet and robust development pipeline to generate long-term value in an otherwise challenging office sector,” said Sakwa.
That Outperform rating (i.e. Buy) comes with a $67 price target implying ~38% growth for the year ahead. (Click here to view Sakwa’s track record.)
Overall, of the 12 most recent analyst reviews recorded here, 5 are Buy and 7 are Hold, giving the stock a Moderate Buy consensus rating. (To see BXP stock forecast)
To find great ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that brings together all of TipRanks’ stock insights.
disclaimer: The opinions expressed in this article are solely those of the named analysts. The content is for informational purposes only. It is very important to do your own analysis before making an investment.