The U.S. stock market fell again on Tuesday as Fed Chairman Jerome Powell’s remarks about inflation spooked investors and pushed bond rates higher. The 10-year Treasury yield rose to as high as 1.56% on Tuesday. The S&P 500 suffered its worst session since May, while the Nasdaq Composite had its worst day since March, as the tech sector struggled to retain investors’ attention due to their susceptibility to increased interest rates.
Because the stock market is expected to remain highly volatile, dividend-paying stocks should outperform due to being higher-quality businesses and providing a guaranteed income.
So, it could be wise to bet on lesser-known, high-dividend-yielding stocks like Ternium S.A (TX), OneMain Holdings Inc. (OMF), Westlake Chemical Partners LP (WLKP), and Ennis Inc. (EBF) that possess fundamental strength.
Ternium S.A (TX)
TX, through its subsidiaries, manufactures and processes a range of steel products across various regions. Steel and mining are the two operational segments of the company. In addition, the company offers medical and social, financial, scrap, engineering, and other services.
Last month, TX and Vale S.A. signed a memorandum of understanding in which the two companies committed to seeking opportunities to create steelmaking solutions that reduce CO2 emissions.
TX’s revenue increased 124.5% year-over-year to $3.92 million for the second quarter ended June 30, 2021. Its operating income grew significantly from the year-ago value to $1.27 billion. The company’s net income surged substantially from the prior year’s quarter to $1.02 billion. Moreover, its cash and cash equivalents increased 42.9% year-over-year to $768.7 billion for the six months ended June 30, 2021.
The company’s EPS is expected to grow 475.8% year-over-year to $17.39 in the current year. Analysts expect TX’s revenue to increase 78.9% year-over-year to $15.63 billion in fiscal 2022. TX’s stock has gained 136.6% over the past year and 46.9% over the past nine months.
TX’s annual dividend of $2.1 yields 4.7% on its current stock price. On April 14, the company approved a $2.10 quarterly dividend, payable on May 14. It has a four-year average dividend yield of 3.6%.
TX’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its weighting.
TX has also rated an A grade for Momentum and Quality, and a B for Value and Sentiment. Within the A-rated Steel industry, it is ranked #2 of 33 stocks. Click here to see additional POWR Ratings for Growth and Stability for TX.
OneMain Holdings Inc. (OMF)
OMF is a financial service holding company that specializes in consumer lending and insurance. Personal loans secured by vehicles, other titled collateral, or that are unsecured are originated, underwritten, and serviced by the company. It operates through 1,500 branch offices throughout 44 states in the United States and a website onemainfinancial.com.
Last month, OMF announced the start of Money LaunchPad, a new personal financial education program that teaches fundamental financial capability skills to kids in grades 9 to 12. Through this, the company aims to strengthen and promote financial wellness for people of all ages.
During the second quarter ended June 30, 2021, OMF’s revenue increased 1.4% year-over-year to $150 million. The company’s net income surged 293.3% from the year-ago value to $350 million, while its EPS grew 293.9% from the prior-year quarter to $2.6.
Analysts expect OMF’s EPS to increase 75.8% year-over-year to $10.67 in fiscal 2021. In addition, the company’s revenue is expected to increase 5.6% in the current year. Also, the stock has surged 96.9% over the past year and 20.9% year-to-date.
OMF paid a quarterly dividend of $0.7 on August 13. While the four-year average dividend yield for OMF is 8.1%, the current dividend translates to a 4.8% yield.
OMF’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to Strong Buy in our proprietary rating system. The stock is also rated a B grade for Momentum, Value, and Quality.
Westlake Chemical Partners LP (WLKP)
WLKP acquires, develops, and manages ethylene manufacturing plants and related assets in the United States. The company’s ethylene production facilities primarily convert ethane into ethylene. In addition, it sells ethylene co-products directly to other parties on a spot or contract basis, including propylene, crude butadiene, pyrolysis gasoline, and hydrogen.
WLKP’s revenue increased 35.1% year-over-year to $322.23 million in the second quarter ended June 31, 2021. Its operating profit grew 46.3% from the year-ago value to $122.76 million. The company’s net income surged 68.9% from the prior year quarter to $25.10 million, while its EPS increased 65.1% year-over-year to $0.71 over this period.
The company’s EPS is expected to grow 9.6% year-over-year to $2.06 in fiscal 2021. In addition, its revenue is expected to increase by 16.6% in the current year. The stock has gained 25.4% over the past year and 10.9% over the past nine months.
WLKP’s annual dividend of $1.89 yields 7.7% on its current stock price. On August 12, the company approved a $0.47 quarterly dividend, payable on August 26. It has a four-year average dividend yield of 7.9%.
WLKP’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. WLKP also has an A grade for Quality, and a B for Value and Momentum. The stock is ranked #2 of 10 stocks in the A-rated MLPs – Other industry.
Beyond the POWR Ratings grades I have just highlighted, you can see the WLKP ratings for Stability, Growth, and Sentiment.
Ennis Inc. (EBF)
EBF is engaged in manufacturing and selling printed business goods, business forms, and other business supplies. Under the Ennis tag & label brand, the company sells custom printed, high-performance labels and stock tags.
In June, EBF announced acquiring the assets and business from AmeriPrint Corporation in Harvard, Illinois. Through this acquisition, the company aims to expand its operational capabilities and product portfolio.
EBF’s revenue increased 16% year-over-year to $100.45 million in the second quarter ended August 31, 2021. Its operating income grew 21.1% from the year-ago value to $10.81 million, while its net income surged 16.2% year-over-year to $7.46 million over this period. The company’s EPS increased 16% from the year-ago value to $0.29.
The company’s EPS is expected to grow 31.2% year-over-year to $1.22 in fiscal 2021. Analysts expect EBF’s revenue to increase 11.9% year-over-year to $400.48 million in the current year. The stock has gained 11.8% over the past year and 14% over the past nine months.
EBF declared a quarterly dividend of $0.25, payable on November 5. While the four-year average dividend yield for EBF is 4.7%, the current dividend translates to a 5.2% yield.
It is no surprise that EBF has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has an A grade for Quality, and a B for Stability and Value. In the Consumer Goods industry, it is ranked #3 of 71 stocks.
In addition to the POWR Ratings grades I have just highlighted, you can see the EBF ratings for Growth, Momentum, and Sentiment here.
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TX shares were trading at $42.80 per share on Wednesday afternoon, down $0.24 (-0.56%). Year-to-date, TX has gained 55.28%, versus a 17.89% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...
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