In response to the coronavirus pandemic, the Fed is maintaining a low-interest-rate environment and repurchasing treasury bills and mortgage-backed securities.
To support the economic recovery, the Fed announced its intentions to hold the interest rates near zero till 2022. With millions of people out of work and an increasing number of Americans feeling severely cash-strapped, dividend stocks can prove to be good bets as they can offer a steady stream of income.
Moreover, as the market volatility is expected to rise with the fear of the “Second Wave” of coronavirus, companies such as Quest Diagnostics, Inc. (DGX), Snap-on Incorporated (SNA), Penske Automotive Group, Inc. (PAG) and Evercore Inc. (EVR) that offer impressive dividend yield and have been able to sustain their dividend payments could be some of the safest investment bets in the upcoming months.
Quest Diagnostics, Inc. (DGX)
DGX is diagnostic testing, information, and service provider operating globally. The company has a strategic partnership with hc1, Clinical Genomics Pty Ltd, and Anthem, Inc.
DGX has recently partnered with Catapult Health to facilitate virtual clinical services to the employees of various organizations at lower costs. This should incentivize more companies to sign up with DGX to offer all-round healthcare benefits to its employees, thereby increasing its revenue.
On October 6th, DGX announced its collaboration with CLEAR to provide mobile identity verification technology with verified DGX COVID-19 test results. This partnership could put DGX at the forefront of pandemic response in the United States and also increase its MyQuest - patient portal, user base significantly.
DGX currently pays $2.24 as dividends annually, which yields 1.8% based on the current price. DGX’s revenue grew 42.5% year-over-year to $1.95 billion in the third quarter ended September 2020. Operating income increased 129.5% from the year-ago value to $718 million, while EPS rose 164.6% year-over-year to $4.14 over this period.
The consensus EPS estimate of $3.38 for the current quarter ending December 2020 indicates a 102.4% improvement year-over-year. Moreover, DGX beat the street EPS estimates in each of the trailing four quarters, which is impressive. The consensus revenue estimate of $2.63 billion for the current quarter indicates a 36.7% growth from the same period last year. The stock has gained 18.8% year-to-date.
How does DGX stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
A for Peer Grade
B for Industry Rank
A for Overall POWR Rating.
You can’t ask for better. The stock is also ranked #5 out of 58 stocks in the Medical – Diagnostics/Research industry.
Snap-on Incorporated (SNA)
SNA is a manufacturer and markets equipment, tools, diagnostic and repair information internationally. The company operates through 4 segments - Commercial & Industrial Group, Snap-on Tools Group, Repair Systems & Information Group, and Financial Services. It offers financing programs on its products and services.
On September 29th, SNA announced the acquisition of AutoCrib, Inc. for approximately $36 million. This step could further expand SNA’s tool control offering to customers in aerospace, automotive, military, natural resources, and other general industries.
SNA currently pays $4.92 as dividends annually, which yields 3% based on the current price. The company raised its dividends for 11 consecutive years.
SNA’s net sales increased 4.4% year-over-year to $941.60 million in the third quarter ended September 2020. Net earnings grew 9.2% from the year-ago value to $179.70 million, while EPS rose 10.7% year-over-year to $3.31. The company reported an operating margin before financial services of 19.7% for this period, up 110 basis points from the same period last year.
The consensus EPS estimate of $11.54 for the next year indicates a 7.4% improvement year-over-year. The consensus revenue estimate of $3.61 billion for the next year indicates 4.5% growth from the same period last year. The stock has gained 35.9% over the past six months.
SNA’s strong fundamentals are reflected in its POWR Ratings. It has a “Buy” rating with an “A” in Trade Grade and Peer Grade and a “B” in Buy & Hold Grade and Industry Rank. It is also ranked #12 out of 69 stocks in the Home Improvement & Goods industry.
Penske Automotive Group, Inc. (PAG)
PAG is a diversified transportation services company that operates through four segments - Retail Automotive, Retail Commercial Truck, Non-Automotive Investments, and Other. The company operates heavy and medium-duty trucks dealership, distributes diesel and gas engines, and power systems worldwide.
On October 2nd, PAG raised $550 million through senior notes offering. This will reduce the company's future interest expense by approximately $12.0 million annually.
PAG currently pays $1.25 as dividends annually, which yields 2.3% based on the current price. PAG’s third quarter ended September 2020 retail automotive revenue increased 2% year-over-year to $5.26 billion. Net income increased 112.2% from the prior-year quarter to $246.60 million. Gross profit rose 10% from the year-ago value to $956.50 million, while EPS rose 116.2% from the prior-year quarter to $3.07.
The consensus EPS estimate of $1.77 for the next quarter ending March 2021 indicates a 176.6% improvement year-over-year. Moreover, PAG beat the street EPS estimates in three out of the trailing four quarters, which is impressive. The consensus revenue estimate of $5.41 billion for the next quarter indicates an 8% growth from the same period last year. PAG has gained 9.7% year-to-date.
It’s no surprise that PAG is rated “Buy” in our POWR Ratings system. It has an “A” for Trade Grade, and a “B” for Buy & Hold Grade and Peer Grade. Among the 32 stocks in the Auto & Vehicle Manufacturers industry, it is ranked #9.
Evercore Inc. (EVR)
EVR is an independent investment banking advisory firm, engaging in advisory services related to capital markets, secondary wealth management. The company also raises funds for its financial sponsors.
On October 13th, EVR announced the formation of a strategic alliance with TACTIV to further enhance its global advisory platform. This partnership will diversify EVR’s global market operations.
EVR has recently announced that it has partnered with Seneca Evercore, an independent strategic advisory firm based in Brazil. This will lead to an expansion of EVR’s global network and client-base in the fast-growing Brazilian market.
EVR currently pays $2.44 as dividends annually, which yields 2.3% based on the current price. The company’s underwriting revenue increased 278% year-over-year to $66.50 million in the third quarter ended September 2020. Investment management segment operating income rose 135% from the year-ago value to $4.60 million.
The consensus EPS estimate of $1.57 for the next quarter ending March 2021 indicates a 29.8 % improvement year-over-year. EVR has an impressive earnings surprise history as well, as it beat the street EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $459.47 million for the next quarter indicates a 5.6% increase year-over-year. The stock has gained 9.4% year-to-date.
EVR’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of “Strong Buy” with an “A” in Trade Grade, Buy & Hold Grade, and Peer Grade. It is also ranked #2 out of 27 stocks in the Investment Brokerage industry.
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DGX shares were unchanged in after-hours trading Monday. Year-to-date, DGX has gained 15.21%, versus a 11.74% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.
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