Given world events, the stock market is likely to experience a bumpy ride over the next few weeks. So, what's an investor to do? asks Harry Domash, editor of Dividend Detective.
I'm going to describe three relatively high dividend paying (4%+ dividend yields) stocks that, despite a shaky stock market, are unlikely to face serious financial problems that would force them to cut their dividends.
Yes, their share prices will drop in market downturns, but if I'm right, they will eventually recover. In the meantime, we will be collecting substantial dividends.
I picked these because they are profitable companies with strong balance sheets, but stock analysts are not forecasting significant earnings or revenue growth for them this year. In other words, fundamentally strong stocks with low expectations. In my view, that's a recipe for positive surprises at report time. Sound crazy? We'll see.
The first two stocks in this review are "low expectation" ideas. HanesBrands (HBI) is a global producer of basic innerwear and activewear apparel. Brands include Hanes, Champion, Maidenform and Playtex.
Analysts are only looking for low single-digit revenue and earnings growth this year, so upside surprises are possible. Longer-term, analysts are looking for 14% annual EPS growth. Dividend yield is 4.0%.
OneMain Holdings (OMF) offers subprime auto and personal loans to individuals via a network of 1,600 branches. Once a fast earnings grower, growth has stalled and analysts are forecasting a 10% year-over-year EPS drop for 2022.
Once a prodigious special dividend payer, OneMain has stopped that practice, but on the other hand, recently raised its quarterly dividend by 35% to $0.95 per share, pushing its dividend yield up to 7.4%.
An exception to the low expectations of Hanesbrand and OneMain, analysts are forecasting 60% EPS growth for Devon Energy (DVN) — driven by 21% revenue growth. My guess is that Devon beats those numbers.
Devon is an oil and gas exploration and production company. Current world events are likely to drive crude oil and natural gas prices higher. Devon operates in most of the U.S. major oil and gas production areas such as the Permian Basin and Eagle Ford plays.
Devon has a unique dividend policy. It pays a fixed $0.16 per share quarterly dividend and then adds s variable amount reflecting 50% of each quarter's excess cash after paying capital expenses. Driven by the closing of a recent acquisition that significantly drove up Devon's cash flow, those excess cash numbers have increased substantially.
Here are the last four quarters' total payouts, starting with the recently declared December quarter: $1.00, $0.84, $0.49, and $0.34. In this case, the trend is really our friend. Devon's current dividend yield is 5.0%.