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Today we are highlighting our first “Pick of the Year” for 2022. Last year, when Seeking Alpha asked us to choose just a single pick, we chose IRM. In our consideration for “Pick of the Year”, we consider a combination of dividend yield, dividend safety, price upside, and safety. We want a pick that we have a very high level of confidence will outperform over the next year. In the case of IRM, many of the improvements that drove 2021 performance were already made by Q3 2020 earnings. We didn’t have to speculate on whether they would improve, we saw in the numbers that they already had improved. Success from last year’s Pick of the Year: IRM
For 2021, our Pick of the Year was Iron Mountain ( IRM ). We are very pleased that IRM returned over 77% year-to-date ! This is almost triple the performance of the S&P 500! Even with IRM’s share price near all-time highs, it is still paying a 5% yield. Our investment thesis for IRM was based on the strength of its core business, the potential in their digital expansion, and the improved efficiency at the corporate level from “Project Summit”. We wrote: All three of IRM’s segments are positioned to outperform their 2020 results, plus IRM will be realizing significant savings at the corporate level. The outlook for IRM’s 2021 could not be brighter. You can invest today and lock in an 8.8% yield before the market realizes how much cash flow will be improving in 2021. This is why IRM is one of our high-dividend opportunity picks of the year! Hopefully, you followed us on that opportunity. Many dismissed IRM as a boring old paper company. We recognized that IRM had used COVID as an opportunity to improve the daily operations of their business dramatically. Post-COVID, IRM is a more efficient, more profitable, and faster-growing company.
Using our Income Method, my team of experts and I were able to sift through the noise and look at the fundamentals of a company in the midst of a transformation. This is a key skill to develop as a value investor, the ability to see past perceived risk, something that having a team of experts and a massive community of like-minded investors can make easier. Regardless, you can and should be actively developing such a skill for yourself!
If you missed that opportunity, don’t despair! We have another one for you today!
We have identified 3 top picks for the year 2022, and we are pleased to share the first one with our readers and followers. The other two are being released to members of our investment community this weekend. Like with IRM, we are looking at picks with a high yield today, a core business that is improving, and a significant upward price potential that is likely to be realized within the next year. OXLC: Introducing Our First 2022 Pick of the Year!
We are pleased to announce the first Pick of the Year is Oxford Lane Capital Corp. ( OXLC ), with a yield of 12% (based on a recent 11% increase effective in January).
OXLC is a CEF that invests in Collateralized Loan Obligations (or CLOs). These are collections of senior secured loans to corporations with B/B+ credit ratings. CLOs are one of the hottest sectors today and a sector that is seeing a tremendous amount of cash inflows by institutional investors.
Let’s take a look at what makes OXLC special! High Dividend & Huge Dividend Coverage
One of the first things we want from our Pick of the Year is a covered high dividend. At Q2 2022 earnings, OXLC reported Core Net Investment Income of $0.36/share, covering its dividend by 177%. Over the past year, OXLC has covered its dividend by 200%! Due to its high dividend coverage, OXLC raised its dividend by 11% to $0.075/month, starting in January. The dividend is well-covered, and it is growing!
The best part is that OXLC is positioned to see cash flow grow. Through 2021, OXLC has been reinvesting in CLO “equity” positions. OXLC acquired $450 million in CLO equity over the past four quarters.
New positions do not immediately produce cash flow. The first distribution typically takes 6-9 months. Currently, OXLC holds $314.5 million invested in positions that have not yet made their first distribution. OXLC is easily covering its dividend, even though 27% of its investments are not yet paying!
Here is a look at when these positions are scheduled to […]
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