Given rising concerns over inflation, the Federal Reserve is expected to increase interest rates sooner than expected. However, Fed Chair Jerome Powell recently reaffirmed that the central bank would not raise interest rates too quickly solely because of inflation worries. So, we think investors looking to hedge their portfolios against the risk of inflation and while generating higher steady returns than fixed-income securities are offering should bet on high dividend yielding stocks.
Ternium S.A. (TX) and Star Group L.P. (SGU) have impressive dividend payout histories, and their current dividends yield more than 5%. Furthermore, these stocks have the necessary fundamentals to continue moving higher. Both stocks have a ‘Strong Buy’ rating in our proprietary POWR Ratings system.
Ternium S.A. (TX)
Based in Luxembourg, TX produces iron ore and finished and semi-finished steel products, which are sold either directly to steel manufacturers, steel processors or end users primarily in America and Europe. The company offers its products to the construction, automotive, manufacturing, home appliances, packaging, energy, and transport industries.
TX pays a $2.10 annual dividend, which translates to a 6.18% dividend yield. The company’s four-year average dividend yield is 3.49%. TX’s dividend has increased at a 18.5% rate over the past five years.
TX’s net sales for its fiscal first quarter, ended March 31, 2021, came in at $3.25 billion, which represents a 43.1% year-over-year improvement. Its revenue from its steel segments increased 43.7% year-over-year to $3.24 billion. The company’s gross profit increased 216.3% year-over-year to $1.11 billion. Its operating income is reported at $905.80 million, up 567.5% from the prior year period. And TX’s net income came in at $706.70 million for the quarter, versus a $19.40 million net loss in the prior-year period. Its earnings per ADS were $3.07, compared to a $0.06 loss per ADS in the year-ago period.
Analysts expect TX’s EPS to improve 1509.1% year-over-year for the current quarter, ending June 30, 2021, to $3.54. The stock achieved the Street’s EPS estimates in each of the trailing four quarters. A $3.60 billion consensus revenue estimate for the current quarter represents a 106.3% rise from the prior-year period. Analysts expect the stock’s EPS to grow at 37.6% per annum over the next five years. TX has gained 124.4% over the past year and closed yesterday’s trading session at $33.97.
TX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock also has an A grade for Growth, Sentiment, and Quality, and a B grade for Value and Momentum. To see more of TX’s component grades, click here.
TX is ranked #1 of 34 stocks in the A-rated Steel industry.
Note that TX is one of the few stocks handpicked by our Chief Value Strategist, David Cohne, currently in the POWR Value portfolio. Learn more here.
Star Group L.P. (SGU)
Stamford, Conn.-based SGU is a service energy provider to residential and commercial customers. It sells diesel, gasoline, and home heating oil on a delivery-only basis, as well as plumbing services. It also installs, maintains, and repairs heating and air conditioning equipment.
SGU distributed $0.14 in quarterly cash dividends per common unit on May 11, 2021, indicating a 7.5% increase sequentially. The stock’s $0.57 annual dividend translates to a 5.05% dividend yield. This comports with company’s 5.10% four-year average dividend. The company’s dividend has grown at a 6.9% rate over the past five years.
For its fiscal second quarter, ended March 31, 2021, SGU’s total sales came in at $604.14 million, representing an 11.2% improvement year-over-year. The company’s operating income is reported at $119.70 million, up 39% from the prior-year period. SGU’s net income for limited partners was $84.48 million, up 45.7% from the prior-year period. Its EPS has increased 66% year-over-year to $1.71. SGU has gained 38.7% over the past year and ended yesterday’s trading session at $11.29.
SGU's POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system.
The stock has an A grade for Quality, and a B grade for Growth and Value. To see additional POWR Ratings for SGU’s Stability, Sentiment, and Momentum, click here.
SGU is ranked #1 of 39 stocks in the B-rated MLPs - Oil & Gas industry.
TX shares were trading at $34.83 per share on Wednesday afternoon, up $0.86 (+2.53%). Year-to-date, TX has gained 26.37%, versus a 13.96% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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