Dividend Excellence: What Makes These High Yielders So Great?

The Federal Reserve—the nation’s central bank in charge of monetary policies—began raising the federal funds rate (to combat inflation) from 0.75% to 1% in May 2022, which was already a concern… 

That same rate is now up to 5.15% as of June 15th, 2023. 

The era of low interest rates is coming to an end. Inflation is surging. Investors are seeking higher returns from the stocks in their portfolios. The smart move is to turn to reliable income stocks, and it’s important to hold positions in dividend stocks that compete well with the rest of the marketplace. 

Why? Capital gains and price appreciation. And these are among the very best…

OneMain Holdings Inc (OMF) 

Right off the bat, an unconventional opportunity among the bunch is OneMain Holdings (OMF). As a mid-cap financial firm valued at over $5 billion, OMF offers a unique proposition. Specializing in personal loans and insurance, particularly auto loans, credit cards, and life insurance, OMF benefits from the upward trend in interest rates. This favorable market condition allows OMF to enjoy increased profit margins. Notably, OMF is attractively priced, and investors are rewarded with a very nice dividend. 

OMF has been doing well, currently up by 28.82%, with a positive SMA (simple moving average) and a solid ROE (return on equity) of 24.41%. OMF has a TTM revenue of $2.65 billion at $6.19 per share, and it profited $754 million via its 29.45% net margin in the same period. With a PEG (price/earnings/growth) ratio of 0.27x and a forward P/E (price to earnings) ratio of 6.3x, OMF is forecasted to report $1 billion in sales at $1.31 per share for the current fiscal quarter. OMF has an annual dividend yield of 9.32%, a quarterly payout of $1.00 ($4.00/year) per share, and a 60.91% payout ratio. As assigned by analysts, OMF has a median price target of $50, with a high of $62 and a low of $41, representing the potential for a 44.5% price jump from where it currently sits. OMF has 11 buy ratings and 3 hold ratings

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Ambev SA (ABEV) 

Regarding high dividends, the reliability and stability of the underlying business are crucial. ABEV acts as an excellent example in this case. Shareholders of ABEV can find reassurance in the enduring demand for alcohol, making it an attractive investment option. A subsidiary of Anheuser-Busch, ABEV boasts a remarkable portfolio of renowned brands, including Budweiser, Stella Artois, and Corona. Analysts anticipate 12.5% earnings growth for ABEV in 2023

ABEV is currently up year-to-date by 16.91% and has a beta score of 0.65, deeming it safe from market volatility. ABEV has a TTM revenue of $81.8 billion at $0.20 per share and has made a profit of $14.75 billion through its 18.02% net margin. With a 0.99x PEG ratio, ABEV most recently beat analysts’ EPS and revenue forecasts by 20.57% and 2.07%, respectively, also showing year-over-year growth in revenue (+11.35%), net income (+8.40%), and EPS (+4.55%). ABEV has an annual dividend yield of 3.83%, a quarterly payout of 12 cents ($0.48/year) per share, and a 67.21% payout ratio. With a 10-day average volume of 15.39 million shares, ABEV has an average price target of $3.50, with a high of $5 and a low of $2.70; this represents the potential for a more than 57% price jump. ABEV has 11 buy ratings and 5 hold ratings.

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Chevron Corp (CVX) 

Amidst the cyclical nature of the energy industry, Chevron (CVX) shines as a dependable dividend stock. While the industry experiences fluctuations, CVX‘s production of oil and natural gas remains in consistent demand, even amidst the rise of renewable power. Notably, CVX boasts an exceptionally strong balance sheet, and during periods of market weakness, it strategically takes on debt to sustain its operations and dividend payments. CVX‘s ability to navigate this intricate market landscape while consistently rewarding investors with a strong dividend payment is a testament to its proficiency. 

CVX is in a great “buy the dip” position, as it’s currently down year-to-date by 14.47%. With TTM revenue of $234 billion at $18.53 per share, CVX’s same-period profit has been $35.78 billion on the back of its 15.28% net margin. CVX has a 13.42% ROE, a PEG ratio of 1.8x, and a remarkably low 4.46% D/E (debt to equity) measure. Reporting $3.55 per share vs. $3.39 as expected by analysts, CVX beat them out by 4.71% and also beat revenue projections by a 2.64% margin. CVX has a 3.87% annual dividend yield, with a quarterly payout of $1.51 ($6.04/year) per share. With a 10-day average volume of roughly 10 million shares, CVX has a median price target of $188, with a high of $212 and a low of $167, suggesting the potential for a price upside of more than 35%. CVX has 14 buy ratings and 12 hold ratings

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