On August 19, General Motors Company (GM) announced the recommencement of the return of excess capital to shareholders in the form of quarterly dividends after more than two years since it was stalled in April 2020. The company also expanded its budget for opportunistic share repurchases to $5 billion, up from the $3.3 billion remaining under the program.
However, at 9 cents a share, the quarterly cash dividend is 76% down from 38 cents a share last paid back in April 2020. The company had suspended the dividend payment to preserve cash during the pandemic. The company’s forward annual dividend of 36 cents translates to a mere 0.93% yield.
The automotive manufacturer’s EPS declined year-over-year in the second quarter of 2022. With the imperative to set aside capital to keep pace with its rivals in the electric vehicle and autonomous vehicle segment in a turbulent economic environment, it is not surprising that GM’s forward dividend payout ratio is marginal at 5.3% and probably far from certain.
Therefore, investors should opt for stable dividend-paying stocks for an assured income stream to tide over the uncertain market conditions. To that end, high-yield dividend stocks Honda Motor Co., Ltd. (HMC) and Alliance Resource Partners, L.P. (ARLP) could be better buys than GM.
Honda Motor Co., Ltd. (HMC)
Headquartered in Tokyo, Japan, HMC develops, manufactures, and distributes motorcycles, automobiles, power products, and others globally. It operates through four segments: Motorcycle Business; Automobile Business; Financial Services Business; and Life Creation and Other Businesses.
On August 10, HMC announced the acquisition of its shares worth a maximum amount of ¥100 billion ($728.57 million) to improve the efficiency of its capital structure. This promises to be a positive development for existing shareholders with the potential for an increase in EPS.
On July 16, HMC announced the signing of a Memorandum of Understanding with Sony Group Corporation (SONY) to establish a joint venture to develop, sell and commercialize high-value-added battery electric vehicles (EVs) and allied services.
On July 14, HMC announced a multi-year agreement with Kyndryl (KD), the world’s largest IT infrastructure service provider, to support its infrastructure transformation across U.S. manufacturing plants, research and development, captive finance, and sales operations. This collaboration is expected to help HMC harness data and bring more efficiency to its operations.
HMC’s sales revenue increased 6.9% from the prior-year quarter to ¥3.83 trillion ($27.90 billion) in the fiscal first quarter ended June 30, 2022. The company’s operating profit from Motorcycle Business came in at ¥97.80 billion ($712.54 million), up 21.2% year-over-year.
HMC pays ¥120 ($0.87) annual dividend per share. The stock’s dividend payout ratio is 14.7%, while its annual dividend yield is 5.17%. In addition, its five-year average dividend yield stands at 3.38%.
Analysts expect HMC’s revenue for the fiscal year 2023 (ending March 2023) to come in at $125.74 billion, indicating an increase of 370.8% year-over-year. The company’s EPS for the ongoing year is expected to grow 26.3% year-over-year to $3.46.
HMC’s stock has gained 4.9% over the past month to close the last trading session at $26.66.
HMC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
HMC also has an A grade in Value and a B in Quality and Stability. It is ranked #3 of 65 stocks in the Auto & Vehicle Manufacturers industry.
Beyond what is stated above, we’ve also rated HMC for Momentum, Sentiment, and Growth. Get all HMC’s ratings here.
Alliance Resource Partners, L.P. (ARLP)
ARLP is a diversified natural resources company that deals with producing and marketing coal for utilities and other industrial users in the U.S. The company operates through four segments: Illinois Basin Coal Operations; Appalachia Coal Operations; Oil & Gas Royalties; and Coal Royalties.
On July 26, ARLP announced an increment in cash distribution to the unitholders for the quarter ended June 30, 2022. The quarterly cash distribution of $0.40 per unit represents an increase of 300% year-over-year and 14.3% sequentially. Its dividend payout ratio is 51.06%, while its current dividend translates to a 6.31% yield annually. Also, the stock’s four-year average dividend yield is 14.09%.
In the second quarter ended June 30, 2022, ARLP’s revenues increased 70.1% year-over-year to $616.50 million. The company’s operating income grew 218.6% over the previous-year quarter to $175.27 million. Net income came in at $ 161.80 million, up 266.4% year-over-year, while earnings per limited partner unit increased 261.8% from the year-ago value to $1.23.
The consensus revenue estimate of $243 billion for fiscal 2022 represents a 54.7% increase from the previous year. The consensus EPS estimate of $4.76 for the current year represents a 250% improvement year-over-year.
ARLP has gained 98.5% over the last six months and 216.3% over the past year to close the previous trading session at $25.37.
It is no surprise that ARLP has an overall rating of A in our POWR Ratings system, which translates to a Strong Buy. ARLP has a grade of A for Sentiment and B for Growth, Momentum, and Quality. In the A-rated MLPs – Other industry, it is ranked #3 out of 10 stocks.
Click here to see additional POWR Ratings for Value and Stability for ARLP.
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GM shares were trading at $38.54 per share on Tuesday afternoon, down $0.01 (-0.03%). Year-to-date, GM has declined -34.27%, versus a -12.44% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More...
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