U.S. futures slipped in the pre-market trading session today due to disappointing jobs data and declining Treasury yields. CNBC’s Jim Cramer said, “The charts, as interpreted by the legendary Tom DeMark, suggest that the market’s getting close to a top, especially the S&P 500 and the Nasdaq 100. He’s not too keen on the Dow Jones Industrial Average, either.”
Because most of the industry leaders have announced their most recent quarterly earnings results, the stock markets are expected to witness a sharp correction soon. Technical analysis and charts indicate that the S&P 500 will likely experience a “tough month.”
With the Fed’s reiterated dovish monetary policy stance for the near term, and with declining bond yields, investing in fundamentally sound companies with high dividend yields could be a wise move now. Industry leaders Vale S.A. (VALE), Dow Inc. (DOW), and OneMain Holdings, Inc. (OMF) pay dividends that yield more than 3%. Given these companies’ strong fundamentals we believe they are worth considering for one’s portfolio now.
Vale S.A. (VALE)
VALE is Brazilian iron ore and iron ore pellets manufacturing company that operates in three segments: Ferrous Metals; Base Metals; and Coal. The company’s products are used as raw materials by steel producers internationally.
For the fiscal second quarter ended June 30, VALE’s net operating revenue increased 121.8% year-over-year to $16.68 billion. Its gross profit rose 228.8% from its year-ago value to $10.87 billion, while its operating income increased 366.1% from its prior-year quarter to $9.71 billion. Its net income stood at $7.54 billion, reflecting a 720.1% improvement from the same period last year. And its EPS increased 684.2% year-over-year to $1.49.
VALE’s 24.79% non-GAAP forward earnings yield is 287.8% higher than the 6.39% industry average. In addition, its forward operating earnings and free cash flow yields of 36.23% and 21.75%, respectively, compare well with the 10.61% and 6.16% industry averages. VALE pays $1.74 as dividends annually, yielding 8.02% on the current price.
On June 29, VALE invested CAD150 million ($119.59 million) in its mining activities in Thompson, Manitoba to increase the production levels by 30%. This marks the largest single investment made in this area and is expected to contribute to VALE’s sustainability goals in the future.
A $17.83 billion consensus revenue estimate for its fiscal third quarter (ending September 2021) indicates a 64.6% rise year-over-over. Analysts expect VALE’s EPS to rise 152.5% from the same period last year to $1.49 in the current quarter. Shares of VALE have gained 90.4% over the past year and 29.7% year-to-date.
VALE has a B grade for Sentiment in our proprietary POWR Ratings system. Of the 39 stocks in the Industrial – Metals group, it is ranked #13.
To view additional VALE ratings for Growth, Momentum, Value, Stability, and Quality, click here.
Note that VALE is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Growth portfolio. Learn more here.
Dow Inc. (DOW)
DOW in Midland, Mich., offers materials science solutions services to industrial and commercial customers worldwide. The company operates six global units in three segments: Packaging & Specialty Plastics; Industrial Intermediates & Infrastructure; and Performance Materials and Coatings.
DOW’s net sales came in at $13.90 billion in its fiscal second quarter, ended June 30, 2021, up 66% year-over-year. This can be attributed to a 9% rise in volumes and a 53% rise in local prices. Its operating EBIT increased 4861.4% from the same period last year to $2.83 billion. Its net income and operating EPS stood at $1.93 billion and $2.72, respectively, reflecting a substantial improvement from their negative year-ago values.
The company pays $2.80 as dividends annually, yielding 4.5% at its current share price. Its non-GAAP forward earnings and forward free cash flow yields of 12.84% and 11.24%, respectively, are significantly higher than the 6.39% and 6.16% industry averages, respectively. Also, the company’s 11.85% forward operating earnings yield is 34.7% higher than the 8.79% industry averages.
The Street expects DOW’s revenue and EPS to rise 31.9% and 288%, respectively, year-over-year to $12.55 billion and $1.94 in the current quarter (ending September 2021). Also, DOW has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in each of the trailing four quarters.
DOW has gained 55.2% over the past year to close yesterday’s trading session at $62.23. Also, it has returned 12.1% year-to-date.
DOW has an overall A rating, which equates to Strong Buy in our POWR Ratings system. In addition, it has an A grade for Value, and B for Growth. DOW is ranked #9 of 99 stocks in the A-rated Chemicals industry.
Beyond what we’ve stated above, we have rated DOW for Momentum, Quality, Sentiment, and Stability. Get all DOW ratings here.
OneMain Holdings, Inc. (OMF)
OMF is a financial services holding company that operates in four segments: Consumer and Insurance; Acquisitions and Servicing; Real Estate; and Other. The Evansville, Ind.-based company provides secured and unsecured services and personal loans through two divisions--branch operations and centralized operations, as well as strategic acquisitions, and asset management.
OMF’s net interest income increased 84.9% year-over-year to $708 million in its fiscal second quarter, ended June 30, 2021. Its EBT came in at $463 million, up 292.4% from its year-ago value. Its net income and EPS rose 293.3% and 293.9%, respectively, from the prior-year quarter to $350 million and $2.60.
OMF’s $2.80 annual dividend payout yields 4.6% at the prevailing share price. Its 16.6% non-GAAP forward earnings yield is 80.5% higher than the 9.2% industry average. Also, OMF’s 31.38% forward operating earnings yield is 152.6% higher than the 12.42% industry average.
OMF has announced its plan to raise $500 million through a senior notes offering issued by its wholly owned subsidiary OneMain Finance Corporation. The proceeds are expected to fund general corporate expenses and debt repayments and repurchases by the subsidiary.
Analysts expect OMF’s revenues to rise marginally year-over-year to $3.37 billion in its fiscal year 2021. The company’s EPS is expected to come in at $9.53, indicating a 57% improvement from the same period last year. Also, OMW beat the Street’s EPS estimates in each of the trailing four quarters.
OMF has gained 110.6% over the past year and 26.4% year-to-date.
OMF has an overall A rating, which translates to a Strong Buy in our proprietary rating system. In addition, the stock has a B grade for Momentum, Sentiment, and Quality. Of the 51 stocks in the B-rated Consumer Financial Services industry, OMF is ranked #2.
In addition to the grades we’ve highlighted, view OMF ratings for Value, Stability, and Growth here.
VALE shares were trading at $21.73 per share on Wednesday afternoon, down $0.01 (-0.05%). Year-to-date, VALE has gained 38.00%, versus a 18.38% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.
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