As we inch closer to the end of 2021, the indices have posted stellar gains despite rising inflation rates, supply chain disruptions, the possibility of higher interest rates and more recently the threat of the Omicron variant. The S&ampP 500 Index has gained close to 27% while the tech-heavy NASDAQ index is up 21% in 2021.

However, there are several stocks across sector that are trading at a massive discount compared to Wall Street estimates. A few of these stocks also offer investors a tasty dividend yield, allowing you to benefit from a steady stream of dividend income as well as capital gains.

Here, we look at three dividend stocks that have a high yield with significant upside potential looking at consensus price target estimates.

 

Enterprise Product Partners

The first stock on my list is Enterprise Product Partners (NYSE: EPD), a midstream company valued at a market cap of $46.5 billion and an enterprise value of $74 billion. According to RBC Capital analyst T.J. Schultz, EPD stock can touch $32 per share in the next year, implying a 50% increase from current prices.

The onset of the COVID-19 pandemic decimated oil stocks in early 2020 as economies were shut and borders were closed. The tepid demand all over the world resulted in record low prices of crude oil that impacted oil producers to a great extent.

However, midstream companies such as Enterprise Product Partners operate pipeline, refining facilities as well as storage tanks and do not produce oil. They operate on take-or-pay contracts and cash flows are backed by long-term commitments from upstream companies.

Enterprise Product Partners is an entity that is fundamentally sound and one that has survived multiple recessions. In fact, even amid the pandemic, its distribution coverage ratio did not fall below 1.6x. 

This ratio calculates the amount of distributable cash flow in relation to the cash available that can be distributed to investors. A ratio below 1x would mean the payout is unsustainable.

Enterprise Product Partners has increased its payouts for 23 consecutive years and is well poised to benefit from rising crude oil prices going forward.

 

AT&ampT

Shares of telecom giant AT&ampT (NYSE: T) are currently trading at $24.9 and the company pays investors annual dividends of $2.08 per share, indicating a yield of 8.4%. Earlier this year, Deutsche Bank (NYSE: DB) increased the price target of AT&ampT stock to $37, implying a 50% upside for investors.

A key catalyst for the company is the rollout of 5G infrastructure which should drive revenue higher in 2022 and beyond. Another positive development for AT&ampT is the plan to merge WarnerMedia with Discovery (NASDAQ: DISCA) thereby creating a media behemoth targeting sports-based and original programming. 

After the merger the combined entity will have over 85 million subscribers and is expected to derive $3 billion in cost synergies each year. The spin-off will also allow AT&ampT to lower debt and operational costs.

 

Mobile TeleSystems

Another high-yield stock that can generate significant returns in 2022 is Mobile TeleSystems (NYSE: MBT). A Russia-based telecom company MBT stock provides investors a tasty dividend yield of almost 13%. In the past 10 years, its payout has averaged around 9%.

Similar to AT&ampT, Mobile TeleSystems will also benefit from the transition towards 5G while its widening suite of services that now include banking, online streaming, and cloud.

However, the ancillary businesses account for a small portion of overall sales. Alternatively, its paid TV subscribers rose by 39% year over year in Q3 to 2.2 million while over-the-top subscribers doubled to 3.5 million. The gross loans in its banking division rose by 54.3% and operating income surged 50% year over year in Q3 of 2021.

Discovery (NASDAQ:DISCA)
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Discovery (NASDAQ:DISCA)
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