After a weak start to the week, the major stock market indexes have rallied over the past two days, with investors looking past the Evergrande debt crisis in China. The market also sloughed off the Federal Reserve’s announcement on September 22 that it will likely reduce its monthly bond purchases as soon as November.
However, according to The Conference Board, the consumer confidence index came in at 113.8 in August, its lowest level since February. COVID-19 cases are on the rise too. So, many still expect the stock market to decline significantly in the near term. Therefore, we think it could be wise to invest now in high-yield quality dividend stocks to secure a steady income stream. British global asset management group Janus Henderson upgraded its global 2021 dividend forecast to $1.39 trillion from $1.36 trillion, just 3% below the pre-pandemic peak.
The high dividend yields and strong fundamentals of PJSC LUKOIL (LUKOY), Dow Inc. (DOW), Coca-Cola FEMSA, S.A.B. de C.V. (KOF), and Vector Group Ltd. (VGR) make them solid picks now. These companies have paid dividends consistently and have an overall A (Strong Buy) rating in our POWR Ratings system.
PJSC LUKOIL (LUKOY)
Headquartered in Moscow, Russia, LUKOY is an oil and gas exploration, production, refining, marketing, and distribution company. Its segments include Exploration and Production; Refining, Marketing, and Distribution, and Corporate and others. In addition, it has a retail network of 5,005 filling stations across 19 countries.
On September 22, LUKOY launched its largest digital model of an oil field in Russia. Azat Shamsuarov, the company’s first Vice President, said, “The Intelligent Field project is a unique digital complex that encompasses all LUKOIL’s main production centres. It enables extraction of additional resources and more efficient production management.”
LUKOY has been consistently increasing the dividends per share for more than 20 years. Over the last five years, LUKOY’s dividend payout has grown at an 8% CAGR. While the four-year average dividend yield for LUKOY is 6.40%, its current dividend translates to a 3.72% yield. Also, on June 24, its shareholders approved a dividend distribution of RUB 213 per ordinary share.
LUKOY’s revenue increased 17.3% sequentially to RUB2201.90 billion ($30.25 billion) in the second quarter, ended June 30, 2021. Its profit increased 20.6% sequentially to RUB189.80 billion ($2.61 billion). Its capital expenditures came in at RUB104.2 billion ($1.43 billion), compared to RUB107.2 billion ($1.47 billion) in the first quarter. Also, its EBITDA was RUB339.8 billion ($4.67 billion), up 8.1 % sequentially.
Analysts expect LUKOY’s revenue to increase 48.7% year-over-year to $113.36 billion in its fiscal year 2021. Over the past nine months, the stock has gained 59.6% in price to close yesterday’s trading session at $93.15.
LUKOY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which indicates a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
LUKOY has an A grade for Sentiment, and a B for Growth, Quality, Momentum, and Value. In addition, within the Foreign Oil & Gas industry, it is ranked #1 of 50 stocks. Click here to see the additional POWR Ratings for Stability for LUKOY.
Dow Inc. (DOW)
DOW in Midland, Mich., offers various materials science solutions for consumer care, infrastructure, and packaging markets globally. The company’s segments include Packaging & Specialty Plastics, Industrial Intermediates & Infrastructure, and Performance Materials and Coatings.
Capital Power Corporation announced a 15-year renewable power purchase agreement with DOW’s subsidiary Dow Chemical Canada ULC on September 16, for 25 megawatts (MW) of capacity and the associated environmental attributes from its Whitla Wind 2 project, which is currently under construction in Southeastern Alberta. The agreement is expected to help increase the company’s revenue.
DOW paid a $0.70 dividend per share on September 10. This represents the 440th consecutive dividend paid by the company or its affiliates since 1912. Its $2.80 annual dividend translates to a 4.88% yield. Also, its four-year average dividend yield is 4.52%.
For its fiscal second quarter, ended June 30, 2021, DOW’s net revenue increased 66.2% year-over-year to $13.88 billion. In addition, the company’s total operating EBITDA increased 372.0% from the same period last year to $3.57 billion. Its net income came in at $1.90 billion, versus a $225 million loss in the year-ago period. Also, its EPS was t $2.51 compared to a $0.31 loss per share in the prior year’s quarter.
DOW’s revenue is expected to be $52.87 billion in fiscal 2021, representing a 37.2% year-over-year rise. The company’s EPS is expected to increase 413.3% year-over-year to $8.52 in the current year. In addition, it surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 22.9% to close yesterday’s trading session at $57.43.
It’s no surprise that DOW has an overall A rating, which equates to a Strong Buy in our proprietary rating system. In addition, it has an A grade for Value, and a B grade for Growth.
Coca-Cola FEMSA, S.A.B. de C.V. (KOF)
Franchise bottler of Coca-Cola trademark beverages KOF, in Mexico City, and its subsidiaries produce, distribute, and market certain Coca-Cola beverages. It offers sparkling beverages, waters, and still beverages. In addition, it distributes and sells Heineken beer products in its Brazilian territories.
John Santa Maria, KOF’s CEO, said in July 2021, “As we enter the second half of the year, we are confident that we are taking the right strategic actions to continue building an unparalleled commercial beverage platform that is digitally integrated in order to carry on capturing opportunities to grow profitability.”
KOF has been paying dividends consistently for the past 17 years. The stock’s dividend payout has grown at an 11.42% CAGR over the last three years and at a 5.23% CAGR over the past five years. While KOF’s four-year average dividend yield is 3.54%, its current dividend translates to a 2.16% yield. Also, it paid the first installment of its Ps.0.63 per share 2020 dividend on May 4, 2021.
KOF’s total revenue increased 10.9% year-over-year to Ps. 47,786 million ($2.38 billion) for its fiscal second quarter, ended June 30, 2021. The company’s gross profit came in at Ps.22,560 million ($1.12 billion), up 18.3% year-over-year. Its operating income wasPs.7,248 million ($361.05 million), up 41.3% year-over-year. Also, its net income came in at Ps. 3,316 million ($165.18 million), representing a 56.8% year-over-year rise.
For its fiscal year 2021, analysts expect KOF’s revenue to be $9.58 billion, representing a 12% year-over-year rise. In addition, the company’s EPS is expected to increase 38.9% year-over-year to $3.18 this year. It surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 41.5% to close yesterday’s trading session at $57.58.
KOF’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to a Strong Buy in our POWR Ratings system. Also, the stock has an A grade for Growth, and a B grade for Value, Quality, Stability, and Sentiment.
Vector Group Ltd. (VGR)
VGR manufactures and sells cigarettes in the United States through its brands, which include EAGLE 20’s, Pyramid, Montego, and Grand Prix. The Miami, Fla.-based company also provides residential real estate brokerage, relocation, real estate sales, and marketing services.
Howard Lorber, VGR’s President and CEO, said on August 4, “We are excited by the continued strong performance of our tobacco business, which validates our market strategy and reflects the competitive advantages we have in the deep discount segment, as demonstrated by increased adjusted EBITDA during the quarter.”
VGR has been paying dividends consistently for the past 21 years. While the four-year average dividend yield for VGR is 10.97%, its current dividend translates to a 6.39% yield. Also, on August 23, VGR declared a $0.20 quarterly dividend per share payable on September 29.
VGR’s total revenues increased 63.7% year-over-year to $729.53 million in the second quarter, ended June 30, 2021. Its operating income increased 105.2% year-over-year to $137.08 million, while its net income increased 262% to $93.31 million. Also, its EPS came in at $0.61, representing a 281.3% year-over-year rise.
For its fiscal year 2021, VGR’s revenue and EPS are expected to grow 26.6% and 92.3%, respectively, year-over-year to $2.53 billion and $1.75. In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 36.7% in price to close yesterday’s trading session at $12.52.
VGR’s strong fundamentals are reflected in its POWR ratings. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system.
In addition, it has a B grade for Growth, Value, Momentum, and Quality. VGR is ranked #1 of 11 stocks in the A-rated Tobacco industry. Click here to see the additional POWR Ratings for VGR (Stability and Sentiment).
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LUKOY shares were trading at $93.68 per share on Friday afternoon, up $0.52 (+0.56%). Year-to-date, LUKOY has gained 40.71%, versus a 19.77% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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