The topsy-turvy, one of a kind 2020, taught investors the importance of diversifying and holding some stable income generating investments. With interest rates remaining near zero, in order to diversify their portfolio and survive the ongoing market volatility, investors should consider dividend paying stocks. It’s also important to enter stocks at reasonable prices to provide the potential for capital appreciation…
After the record-setting rally post mid-March, September witnessed tech-led market corrections with investors’ concerns over stalled fiscal stimulus talks, the upcoming election, and ever increasing coronavirus cases across the globe. With concerns over these issues still remaining intact, this roller coaster market ride is expected to continue at least for the remainder of this year.
Keeping this in mind, I have selected three financially sound dividend paying stocks that are currently trading at low valuations: Hanesbrands Inc. (HBI), Rent-a-Center, Inc. (RCII), and OneMain Holdings, Inc. (OMF).
Hanesbrands Inc. (HBI)
HBI is a manufacturer and marketer of leading everyday basic apparel under some of the world’s strongest apparel brands in the Americas, Europe and Asia, as well as in Australia and South Africa. The company’s iconic innerwear and activewear apparel brands found in the United States and elsewhere include Hanes, Champion, Playtex, Bali, Maidenform, JMS/Just My Size, Wonderbra and Gear for Sports. Outside the United States, HBI also has dominant national and regional brands, including DIM, Nur Die/Nur Der, Lovable, Abanderado, Shock Absorber, Zorba, Sol y Oro, Rinbros, Track N Field and Ritmo.
On October 8th, HBI announced new, wide-ranging 2030 global sustainability goals that include a commitment to setting science-based environmental targets, a goal of improving the lives of at least 10 million people, and addressing the use of plastics and sustainable raw materials in products and packaging.
For the quarter ending June 2020, HBI reported total revenue of $ 1.73 million, experiencing a marginal dip of 1.7% year-over year. EPS for the quarter came in at $0.60, exceeding the consensus estimate by 957.1%. The company’s second-quarter global online sales increased more than 70% and US Innerwear segment results benefited from better-than-expected apparel performance and significant sales of protective garments (cloth masks and medical gowns). This segment’s revenue increased by 61% and operating profit increased by 104%. Innerwear basics gained more than 300 basis points of market share in the quarter, and Innerwear intimate apparel point-of-sale trends returned to pre-COVID levels entering July.
As per the market consensus, the company’s revenue is expected to grow 4% next year. The company’s EPS is expected to grow 12.5% next year and at a rate of 2% per annum over the next 5 years.
HBI has been consistently paying quarterly dividends since 2013. On September 1, the company paid a dividend of $0.15, which cumulated to an annual dividend of $0.60 and yields 3.5%. The company’s 3-year and 5-year divided CAGRs stand at 10.9% and 14.9%, respectively.
HBI recorded free cash flow of $0.13 million in the second quarter, generated $65.4 million as cash flow from operations and returned $ 52.2 million to its shareholders in the form of dividends. In terms of the forward P/E ratio, HBI is currently trading almost at 12, 48.4% lower than the sector median. The stock has gained 132.9% since hitting its 52-weeks low in the first week of April.
How does HBI 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
The stock is also ranked #5 out of 65 stocks in the Fashion & Luxury industry.
Rent-a-Center, Inc. (RCII)
RCII is an industry leading omni-channel lease-to-own provider for the credit constrained customer. The company provides its customers an opportunity to obtain ownership of high-quality, durable products via small payments over time under a flexible lease-purchase agreement and a no long-term debt obligation. Preferred Lease provides virtual and staffed lease-to-own solutions to retail partners in stores and online enabling its partners to grow sales by expanding their customer base utilizing RCII’s differentiated offering.
For the second quarter ending June 2020, RCII reported consolidated revenue of…
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