The Federal Reserve has been holding benchmark interest rates near zero since the onset of the COVID-19 pandemic to help the U.S. economy recover. Though the economy has experienced a significant recovery so far this year, economists expect the Fed’s easy monetary policy to continue in the near term, with the first rate hike projected to occur in 2023.
Given the low interest rate environment, fixed-income investors are looking to bet on stocks that have steady dividend paying histories and offer attractive yields. This trend is likely to continue because the Fed’s dovish stance is not expected to change anytime soon. While the rise in Treasury yields caused some investors to shift to government-backed securities earlier this year, the recent boom in equity markets has caused Treasury yields to decline lately, making dividend stocks the best alternative for those investors. Also, given rising inflation, investors are rapidly shifting toward high-yield dividend stocks to hedge against rising price levels.
With increasing investor focus on dividend stocks, analysts expect the share prices of China Life Insurance Company Limited (LFC), Triton International Limited (TRTN), and DRDGOLD Limited (DRD), which offer high dividend yields, to advance in the near term.
China Life Insurance Company Limited (LFC)
Based in China, LFC is a life insurance company that provides individual and group life policies, annuity products, accident, and health insurance products. It is also involved in the third-party asset management business. The company operates in four segments: its life insurance business, health insurance business, accident insurance business, and other businesses.
LFC’s $0.52 annual dividend yields 5.08% on its current stock price. The company’s dividend payouts have increased at a 43.6% CAGR over the past three years.
LFC’s operating income for the fiscal first quarter, ending March 31, stood at RMB 372.26 billion ($58.12 billion), up 10.5% from the same period last year. Its net profit grew 65.4% from its year-ago value to RMB 28.96 billion ($4.52 billion). And its EPS increased 68.3% year-over-year to RMB1.01.
Analyst expects LFC’s revenues to rise 47% year-over-year to $103.08 billion in the fiscal period ending December 2021. A $1.49 consensus EPS estimate for the same period indicates a 10.1% improvement year-over-year.
Owing to the current market volatility and delicate international relations with China, LFC has declined 8.2% year-to-date.
All three Wall Street analysts that rated LFC have rated it Buy. $13.00 median price target indicates a potential 28.1% upside from its last closing price of $10.15.
It is no surprise that LFC has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
The stock also has an A grade for Sentiment, and a B grade for Value. Among the 31 stocks in the Insurance – Life industry, LFC is ranked #1.
To see additional LFC Ratings for Growth, Quality, Stability and Momentum, click here.
Triton International Limited (TRTN)
Based in Bermuda, TRTN is the world’s largest lessor and supplier of intermodal containers. It operates in 16 countries. The company engages in the acquisition, leasing, re-leasing and ultimate sale of multiple types of intermodal transportation equipment. It operates in two segments–equipment leasing and equipment trading. It provides its customers access to its containers through container depot facilities across 46 countries.
On June 2, TRTN’s wholly owned subsidiary TCIL announced the redemption of approximately $821 million worth of senior secured notes. The redemption is part of the company’s strategy to limit its debt obligations to unsecured investment grade bonds.
In May, TRTN’s subsidiary priced a senior note offering to raise $1.10 billion in two tranches. The company plans to use the proceeds from this offering to repay outstanding debt and expand TCIL’s container fleet.
TRTN’s $2.28 annual dividend yields 4.44% at the stock current price. On June 10, the company approved a $0.57 quarterly dividend, payable on June 24. TRTN’s dividend payouts have increased at a 6% CAGR over the past three years.
TRTN’s total leasing revenues increased 7.9% year-over-year to $ 346.74 million in its fiscal first quarter, ended March 31. Its operating income grew 39% from its year-ago value to $205.72 million, while its net income improved 81.5% year-over-year to $ 139.84 million. The company’s EPS increased 104.3% year-over-year to $ 1.92.
A $373.51 million consensus revenue estimate for the current quarter, ending June 2021, indicates a 16.2% improvement from the same period last year. Analysts expect the company’s EPS to come in at $ 1.96 in the current quarter, indicating a 127.9% rise year-over-year. Also, TRTN surpassed the Street’s EPS estimates in each of the trailing four quarters.
Shares of TRTN have gained 70.9% over the past year, and 5.8% year-to-date. TRTN’s $70.00 median price target indicates a potential 36.4% upside from its last closing price of $51.32.
TRTN has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. TRTN has a B grade for Quality and Momentum. It is ranked #4 of 49 stocks in the Shipping industry.
Click here to view additional TRTN Ratings for Growth, Value, Sentiment and Stability
DRDGOLD Limited (DRD)
DRD is a gold mining company that explores for, extracts, processes, and smelts gold. Headquartered in Johannesburg, South Africa, DRD is a world leader in the recovery of gold from the retreatment of surface tailings.
The six-month period ending 31 December 2020 was extremely profitable for the company, owing to higher gold prices in the second half and high sales volume. As a result, DRD paid an interim dividend of R40 cents ($0.029). DRD’s $0.46 annual dividend yields 3.68% at the current share price.
DRD’s revenue increased 41% year-over-year to R2.98 billion ($220 million) in the six months ended December 31. Its operating profit stood at R1.44 billion ($100 million), up 100.4% from the same period last year. Its profit for the period grew 185.2% from the year-ago value to R949.4 million ($68.88 million). And its cash and cash equivalents balance rose 299.2% from the prior year quarter to R2.17 billion ($160 million) over this period.
A $386.84 million consensus revenue estimate for the fiscal period ending June 2021 indicates a 56.9% improvement from its year-ago value. Analysts expect the company’s EPS to come in at $1.01 in the same period, indicating a 108.9% rise year-over-year.
DRD has gained 20.8% over the past year and 4.1% year-to-date. Its $ 19.30 median price target indicates a potential 58.1% upside from its last closing price of $12.21.
DRD has an overall B rating, which equates to Buy in our proprietary rating system. DRD also has a B grade for Momentum and Sentiment. It is ranked #7 of 43 stocks in the Miners-Gold industry.
Beyond what we’ve stated above, we have also rated DRD for Value, Growth, Quality and Stability. Click here to view all DRD Ratings.
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LFC shares were trading at $10.04 per share on Tuesday afternoon, down $0.11 (-1.08%). Year-to-date, LFC has declined -9.22%, versus a 13.83% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More...
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