Billionaire Carl Icahn’s top stocks offer a whopping 22% dividend yield, which Wall Street expects to jump to 45% by 2024.

Carl Icahn is one of the world’s most famous activist investors and one of its most successful investors. His net worth currently totals nearly $5.8 billion.

Mr. Icahn has money in dozens of stocks, but by far his own stocks are at the top. Icahn Enterprises LP (IEP -0.06%). He owns nearly 86% of the holding company and generates nearly two-thirds of its revenue from investments and energy.

There are two things that stand out about Icahn Enterprises right now. First, it offers an impressive dividend yield of 22%. Second, Wall Street believes the stock will jump 45% over the next 12 months.

What’s behind Icahn Enterprises’ sky-high yield?

There are very few stocks with a dividend yield of 22%. What’s behind Icahn Enterprises’ sky-high yield?

This limited partnership consistently pays quarterly distributions of $1 per unit. These distributions are partially funded by dividends and distributions that Icahn Enterprises receives from its subsidiaries. CVR energy.

Although dividend payments have been stable, Icahn Enterprises’ stock price has not. The stock price has fallen more than 65% in the past 12 months. The company’s yield was already high before this selloff, but it rose even more as the stock price fell.

This dismal stock performance is largely due to IEP short selling. In a letter to investors in August 2023, Carl Icahn said that the company had “deviated from our activist approach over the past several years and engaged in unnecessarily short selling (hedging).” admitted. He added: “While we made gains on the long side through our activism efforts, our returns were overwhelmed by our overly bearish view of the market and associated excessive short (hedging) positions.” .

Short selling hurt the company in other ways as well. In May, Hindenberg Research released a report alleging that Icahn Enterprises’ net asset value was inflated and that the holding company was not generating enough cash flow to support distributions.

Unsurprisingly, Hindenberg Research also revealed that it had shorted the company’s stock. This report caused a significant drop following its release.

Why does Wall Street think stocks will skyrocket?

According to analysts, the average 12-month price target for the company is $26. LSEG. This is 45% above the current share price. Why does Wall Street think stocks will skyrocket?

First, it is important to note that the ‘average’ provided by LSEG only includes the estimates of one analyst. This lonely analyst jeffries. However, as far as I am aware, the last update from Jefferies was on August 7, 2023, when the investment firm maintained a buy rating with a price target of $27. This target reflects 53% upside potential based on the current stock price.

Jefferies analyst Daniel Fannon has been bullish on Icahn Enterprises for years. He likes that holding companies give individual investors a way to jump on the activist bandwagon.

But Hindenberg Research said Jefferies blindly assumed the company’s distribution would be sustainable forever, resulting in “one of the worst cases of sell-side research misconduct we have ever seen.” He accused it of being. The short seller also noted that Jefferies has carried all of Icahn Enterprises’ over-the-counter products since 2019.

But Jefferies may be heeding Carl Icahn’s promise to investors that the holding company will “stand firm on our policies and focus on activist strategies while maintaining appropriate hedges.” There is sex. This is a strategy that works well for IEPs over the long term.

Is Icahn Enterprises stock a buy?

I don’t have confidence in the “permanently bullish” recommendation for Icahn Enterprises. I would be surprised if the stock skyrockets more than 45% for him in 2024. We also don’t have a vague feeling that the company’s dividends will remain at current levels.

That said, if the company returns to its past activist strategies, its financial performance could improve over the next few years. Even with ration cuts underway, I suspect Icahn Enterprises’ yield is still very high.

But my biggest concern with Icahn Enterprises is that there are other stocks that offer more attractive risk-reward propositions. I think investors should look elsewhere.