- These mid-cap stocks to buy now offer very high dividend yields and a price forecast with plenty of upside potential.
- ZIM Integrated Shipping Services (ZIM): A global container liner shipping company with a dividend yield of nearly 30%.
- Braskem (BAK): This chemicals company in Brazil has reported very large revenue and net income growth in 2021.
- FS KKR Capital (FSK): A financial services firm with a history of strong profitability at a very attractive valuation.
Mid-cap stocks have slightly outperformed the broader U.S. stock market as measured by the S&P 500 in 2022. In a year with elevated volatility and major risks ahead, this outperformance signals that investment opportunities exist everywhere, but stock picking is tough. The S&P MidCap 400 measures “the performance of 400 mid-sized companies, reflecting the distinctive risk and return characteristics of this market segment.”
At the close of the U.S. stock market on May 20, the S&P MidCap 400 had losses of 16.1% compared to a loss of 18.1% for the S&P 500. It is not a huge difference, but it shows mid-cap stocks offer returns that can be better than the overall index.
These three mid-cap stocks to buy have very high dividend yields. They’re enough to add significant passive recurring income with very good risk/return characteristics, growth and relative stability.
| ZIM | ZIM Integrated Shipping Services | $70.07 |
| BAK | Braskem | $17.73 |
| FSK | FS KKR Capital | $20.92 |
ZIM Integrated Shipping Services (ZIM)
ZIM Integrated Shipping Services (NASDAQ:ZIM) is a global container liner shipping company founded in 1945 and headquartered in Haifa, Israel. Shares of ZIM stock are very interesting now for several reasons.
First, the company decided to offer shares to the public for $15 each back in January 2021. As of May 20, the closing price was $64.70, indicating a successful initial public offering (IPO) in terms of its financial return almost 1.5 years later.
The second reason ZIM stock is interesting is its very high forward dividend and yield of $19.50 and 30.1%, respectively. Finally, the one-year price target is $87, providing an upside potential of nearly 24%.
ZIM reported record results in both full-year 2021 and the first quarter of 2022. Net income for the first quarter was $1.7 billion, a year-over-year (YOY) increase of 190%, and revenue was $3.7 billion, a YOY increase of 113%.
Need another reason to be bullish for ZIM stock? It trades at a price-to-earnings (P/E) ratio of 1.7x.
Braskem (BAK)
Braskem (NYSE:BAK) produces and sells thermoplastic resins, operating through three segments across Brazil, the United States, Mexico and Europe. Shares of Braskem are cheap, trading at a P/E ratio of 2.5x and offering a high forward dividend yield of 14.4%.
Its dividend yield history is not stable. However, this is not a bad thing as long as the fundamentals are strong and the valuation is compelling. The price-to-sales (P/S) ratio of 0.3x makes the stock very cheap.
Braskem’s sales growth seems to have had momentum over the past two years. It rose from a rate of 11.9% in 2020 to 80.4% in 2021.
The net income growth in 2021 was stellar at 309%, making a big turnaround after two consecutive years of net losses. The company also generates high, but volatile free cash flows, which also have picked up tons of momentum in the last two years. BAK stock has a one-year target of $24 for a potential upside of approximately 35%.
FS KKR Capital (FSK)
FS KKR Capital (NYSE:FSK) is a financial services firm specializing in investments in debt securities. The forward dividend and yield are $2.72 and 13.2%, respectively. FSK stock is trading now at a P/E ratio of 3.4x.
Back in 2018 through 2020, the quarterly cash dividend was 19 cents. In June 2020, it was raised to 60 cents and then 65 cents in September 2021. It dipped to 62 cents in December 2021, but it was raised to 68 cents to be paid in June 2022.
Its sales growth is volatile, but its profitability is strong. In the past five years, the company was unprofitable only in 2020. In 2021, it reported net income growth of 474.1% to $1.5 billion.
For the first quarter of 2022, FS KKR Capital reported a net investment income of 77 cents per share. That was a quarterly increase of nearly 17% compared to 66 cents per share for the quarter ended Dec. 31, 2021.
Analysts are bullish, as the one-year target of $23.06 offers upside potential of 11%.
On the date of publication, Stavros Georgiadis, CFA did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.