3 Bargains Yielding 7% Or More
In the face of rising inflationary pressures, aggressive interest rate hikes, and increasing recession fears, the major stock market indices have witnessed major sell-offs over the past couple of months....
In the face of rising inflationary pressures, aggressive interest rate hikes, and increasing recession fears, the major stock market indices have witnessed major sell-offs over the past couple of months. Given the current market volatility, we think fundamentally sound dividend stocks ARC Document Solutions (ARC), Nippon Steel (NPSCY), and A.P. Møller - Mærsk (AMKBY), which yield more than 7%, could be ideal investments to ensure a steady income stream. These stocks are also trading at significant discounts to their peers. Read on to learn more.
The multi-decade high inflation and the Fed’s constant efforts to fight it by raising the interest rates have led to massive sell-offs on Wall Street over the past couple of months. The S&P 500 is still down more than 18% year-to-date. Earlier this month, the Fed raised interest rates by 75 basis points, the largest increase in nearly three decades, and also hinted at more aggressive tightening ahead.
Many analysts expect the Fed’s hawkish moves could eventually tip the U.S. economy into a recession. However, Jack Ablin, chief investment officer at Cresset Capital, said, “We’re calling for a small ‘r’ recession. It means it’s not going to be protracted, and things aren’t going to fall apart.”
Given the market fluctuations, we think fundamentally sound dividend stocks ARC Document Solutions, Inc. (ARC), Nippon Steel Corporation (NPSCY), and A.P. Møller - Mærsk A/S (AMKBY), which are yielding more than 7%, could be safe additions to one’s portfolio. These stocks are currently trading at significant discounts to their peers.
ARC Document Solutions, Inc. (ARC)
ARC is a digital printing company that provides digital printing and document-related services in the United States. It provides managed print services that place, manage, and optimize print and imaging equipment in customers' offices, job sites, and other facilities; and cloud-based document management software and other digital hosting services.
ARC declared a quarterly dividend of $0.05 on April 29, 2021, payable on August 31, 2022. Its $0.20 annual dividend yields 7.49% on the current share price.
During the first quarter ending March 31, 2022, ARC’s net sales increased 12.6% year-over-year to $69.50 million. Its income from operations grew 78.2% from its year-ago value to $3.06 million, while its adjusted net income improved 150% from its prior-year quarter to $2.00 million. The company’s adjusted EPS rose 150% year-over-year to $0.05.
ARC’s 14.83x trailing-12-months non-GAAP P/E is 5.7% lower than the 15.72x industry average. Its 0.64x trailing-12-months EV/Sales is also 62.3% lower than the 1.70x industry average.
It has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in all of the trailing four quarters.
ARC'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 own weighting.
The stock also has an A grade for Quality and Value and a B for Sentiment. Within the B-rated Outsourcing - Business Services industry, it is ranked #2 of 44 stocks.
To see additional POWR Ratings for Growth, Stability, and Momentum for ARC, click here.
Nippon Steel Corporation (NPSCY)
Headquartered in Tokyo, Japan, NPSCY is engaged in steelmaking and steel fabrication, engineering and construction, chemicals and materials, and system solutions businesses in Japan and internationally. The company's steelmaking and steel fabrication business provides steel plates, sheets, and slags; bar and rod materials; structural steel; pipes and tubes, and other related products.
NPSCY paid a semiannual dividend of $0.62 on December 8, 2021. Its $1.31 annual dividend yields 9.7% on the current share price. It has a four-year average dividend yield of 2.84%. In addition, the company's dividend payouts have increased at a 26.7% CAGR over the past five years.
For the fiscal year ending March 31, 2022, NPSCY's net sales increased 41% year-over-year to ¥6808.89 billion ($5.04 billion). Its operating profit grew significantly from its year-ago value to ¥840.90 billion ($6.22 billion), while its profit for the year amounted to ¥637.32 billion ($4.72 billion) compared to a loss of ¥32.43 billion ($142.99 million). The company's EPS came in at ¥657.48 compared to a loss per share of ¥35.22 in the prior-year period.
NPSCY's 0.87x forward EV/Sales is 37.1% lower than the 1.38x industry average. Its 5.00x forward EV/EBITDA is also 19.9% lower than the 6.24x industry average.
Analysts expect NPSCY's revenue to increase 5% year-over-year to $14.47 billion for the first quarter ending June 2022.
NPSCY's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has an A grade for Value and a B for Stability. Within the A-rated Steel industry, it is ranked #10 of 32 stocks.
In total, we rate NPSC in eight different levels. Beyond what we've stated above, we have also given NPSCY grades for Growth, Sentiment, Momentum, and Quality. Get all the NPSCY ratings here.
A.P. Møller - Mærsk A/S (AMKBY)
Headquartered in Copenhagen, Denmark, AMKBY functions as an integrated transport and logistics company worldwide. The company's Ocean segment engages in container shipping activities, including demurrage and detention, terminal handling, documentation and container services, and container storage, as well as transshipment services under Maersk Line, Safmarine, Sealand – A Maersk Company, Hamburg Süd, and APM Terminal brands; and sale of bunker oil.
Recently, AMKBY announced a share buy-back program of up to DKK 32 billion (around $5 billion) to be executed over a period of two years. As announced on 4 May 2022, during the second phase of the program running from 5 May 2022 to 1 November 2022, the company will buy back A and B shares for an amount of up to DKK 8bn.
AMKBY’s annual dividend of $1.85 yields 15.27% on the current share price. It has a four-year average dividend yield of 6.11%. In addition, the company's dividend payouts have increased at a 76.6% CAGR over the past five years.
In the first quarter of fiscal 2022, ending March 31, 2022, AMKBY's total revenue increased 55.1% year-over-year to $19.29 billion. Its profit for the period grew 150.1% from its year-ago value to $6.81 billion. The company's cash and bank balances increased 88.6% from its prior-year quarter to $12.11 billion for the 12 months ending March 31, 2022.
AMKBY's 2.02x forward Non-GAAP P/E is 86.7% lower than the 15.19x industry average. Its 0.63x forward EV/Sales is also 84.9% lower than the 11.79x industry average.
Analysts expect AMKBY's revenue to increase 38.4% year-over-year to $19.69 billion for the second quarter ending June 2022.
It is no surprise that AMKBY has an overall A rating, which equates to Strong Buy in our POWR Ratings system. AMKBY has an A grade for Value and a B grade for Momentum and Quality. Among the 44 stocks in the A-rated Shipping industry, it is ranked #1.
Click here to see the additional POWR Ratings for AMKBY (Growth, Sentiment, and Stability).
ARC shares were unchanged in premarket trading Tuesday. Year-to-date, ARC has declined -20.60%, versus a -17.30% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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