J.P. Morgan analysts highlighted five income names for the coming year.
All the stocks have an Overweight rating.
Apollo Commercial Real Estate Finance (ARI), price target $11
ARI “has made progress resolving troubled loans” well positioned to redeploy capital into interest earning assets. Higher NII and greater earnings potential are possible as its portfolio returns to growth mode.
Exxon Mobil (XOM), $124
XOM recently raised its medium-term targets for earnings and cash flow, highlighting its “ability to deliver consistent growth from its advantaged upstream portfolio, particularly in the Permian, while expanding its Product Solutions and Low Carbon Solutions businesses.” Its 3.6% dividend yield and $20B fixed buyback program are “sustainable even under low oil prices.”
Starwood Property Trust (STWD), $21
STWD’s diversified business “yields a high ROE, and its steady dividend creates a relatively compelling profile in the context of a challenging sector that deserves to trade at a premium multiple.” The company “potentially retains untapped distributable earnings from embedded gains in its property portfolio.”
TPG RE Finance Trust (TRTX), $10.50
TRTX has “significantly de-risked its portfolio by addressing risk-rated 5 loans and resolving REOs, achieving a 100% performing portfolio” and risk/reward is skewed to the upside.
Waste Management (WM), $265
J.P. Morgan’s top defensive-growth idea, with shares expected to re-rate up “on robust EBITDA accretion from renewable natural gas projects, a reduction in leverage to 2.5-3x, a resumption of buybacks (management expects ~$3.8B FCF in 2026 after ~$2.9B expected in 2025).”