After analyzing the April jobs report, some strategists are expressing concerns about the mid-term outlook for the economy. The report revealed that 175,000 new jobs were added, the lowest in the past six months, and was accompanied by a slight increase in unemployment from 3.8% to 3.9%. Additionally, there were declines in job openings and hires.
Roukaya Ibrahim from BCA believes that this job report could signal a shift towards a recession by the end of this year or early 2025. She anticipates that as the unemployment rate continues to rise, concerns about a recession will mount.
In the event of a recession, Ibrahim predicts that the S&P 500 could drop to 3,600, which is a 31% decline from current levels. This gloomy outlook suggests a defensive stance for investors, leading to a focus on dividend stocks. These stocks are known for providing protection to investment portfolios during downturns through reliable income streams from dividend payments.
Two dividend stocks yielding more than 12% have caught the attention of some Wall Street analysts. The first stock is Kimbell Royalty Partners (KRP), based in Fort Worth, Texas. The company operates in the mineral rights business, acquiring land titles and associated mineral rights in various hydrocarbon basins across the US. Kimbell earns royalties on oil and gas production from its holdings, which include approximately 17 million gross acres in 28 states.
Kimbell’s revenue is driven by royalties on oil, natural gas, and natural gas liquid production. The company reported a top-line revenue of $82.2 million in the first quarter of 2024, up 22% year-over-year. Kimbell finished the quarter with $48.9 million in cash available for distribution, a 59% increase from the previous year. The company declared a dividend of 49 cents per common share for Q1, representing a payout of 75% of the cash available for distribution.
Analyst Neal Dingmann from Truist sees potential in Kimbell, forecasting production and free cash flow growth. He believes that the company’s strong production profile and strategic assets will drive upside. Dingmann has a Buy rating on the stock with a price target of $21, implying a 31% upside potential.
Overall, Kimbell Royalty Partners has a Strong Buy consensus rating based on 5 positive analyst reviews. The stock is currently trading at $16.01, with an average price target of $20.75, suggesting a 29.5% upside over the next year.