According to analysts, the year 2022 has arrived, and we’re in for a bumpy ride, at least at first. 70% of top experts polled believe an S&P 500 correction is in the cards sometime within the next six months, with a 10%+ drop expected.
The drop will bring the bull market’s nearly uninterrupted run since the pandemic-driven March 2020 lows to an end. On the other hand, the good news is that all participants agreed that the S&P would be back in the black by the end of 2022. Nonetheless, this type of near-term warning indicates that it is time for some defensive plays. It will naturally lead to dividend stocks. These stocks will provide a consistent income regardless of the day-to-day market swings and protect the portfolio from any incoming volatility.
Ready Capital Corporation
The first is Ready Capital, a real estate investment trust (REIT). REITs exist to acquire, own, lease and manage a wide range of real estate assets, including residential, commercial, and industrial properties. The companies derive their income from leasing and sales activity. Tax regulations require them to directly return a specific, high percentage of profits to investors. Dividends are a standard method of achieving compliance.
Ready Capital is a commercial real estate lender that focuses on commercial real estate loans rather than physical properties. Ready will not only acquire such loans, but it will also originate, finance, and service small- to medium-balance commercial real estate loans. Most of Ready’s business is devoted to financing such loans for small businesses and multi-family residences. Throughout 2021, the company’s top and bottom lines increased steadily. In the most recent quarterly report, the company reported revenue of $187 million for the third quarter, the highest print in the last two years. EPS was 64 cents, the highest since 2Q20 and a 15% increase over Q2.
The EPS figure is important for dividend investors because it was more than enough to cover the 42 cents common stock dividend. After experiencing volatility during the pandemic crisis, the compensation has remained at this level for the past three quarters. The dividend yields an impressive 10.7 percent with an annualized payment of $1.66.
Kimbell Royalty Partners
Kimbell Royalty, the second stock, has a presence in both the real estate and energy sectors. Moreover, Kimbell acquires and owns mineral extraction rights on lands in high-production hydrocarbon regions throughout the United States. It also collects royalties on the oil and gas products extracted from those lands. The company owns more than 13 million acres in 28 states, including significant areas such as Texas’ Permian Basin, Montana’s Bakken fields, and Pennsylvania’s Appalachian gas regions.
Kimbell’s land holdings are home to over 121,000 active wells in terms of specifics. More than 46,000 of those are in Texan Permian formations. Oil and gas drilling has slowed during the Biden Administration. However, higher prices are compensating to some extent, and Kimbell has shown rising revenues this year. The top line totaled $49.3 million in the third quarter, including record revenue from oil and gas production. It was a 23 percent increase over the previous quarter. Net income reached $7.5 million, representing a 101 percent increase from earlier.