Amid macroeconomic headwinds, investors are anticipating the possibility of a US debt default, which could keep the stock market under pressure. So I think dividend paying stocks Nippon Steel (NPSCY), HeidelbergCement (HDELY) and Smurfit Kappa Group (SMFKY), which are relatively stable and appear undervalued, could be ideal buys. Keep reading.
US stocks closed with a mixed performance yesterday, as investors reviewed financial reports from major banks and tracked a rise in bond yields driven by global inflation concerns. In addition, concerns about a possible US debt default and a recession are expected to further dampen investor confidence.
Therefore, I think it could be ideal to invest in quality stock Nippon Steel Corporation (NPSCY), HeidelbergCement AG (HDEL) and Smurfit Kappa Group Plc (SMFKY), which seem undervalued and are relatively stable. In addition, the companies pay stable dividends.
The US consumer price index has a significant delay as it peaked at 9% in June 2022 and currently stands at 5%, the lowest since May 2021. Some experts believe that the CPI has reached a tipping point.
However, inflation remains at a worrying level. Despite GDP growth in the fourth quarter of 2022, Americans are pessimistic about the performance of the economy in 2023. According to a recent survey, 75% of Americans fear a recession this year due to high inflation.
In addition, according to LPL Research, investors are anticipating the possibility of a US debt default as the US Treasury market shows signs of pricing in, which could lead to increased volatility in the stock market.
Let’s take a look at the stocks mentioned above:
Nippon Steel Corporation (NPSCY)
Headquartered in Tokyo, Japan, NPSCY is engaged in steel fabrication and steel fabrication, engineering and construction, chemicals and materials, and system solutions in Japan and internationally.
NPSCY’s forward EV/Sales multiple of 1.09 is 28.6% lower than the 1.53x industry average. It’s forward P/S multiple of 0.57 is 49.2% lower than the industry average of 1.12. In terms of future EV/EBITDA, the stock’s 4.44x is 41.6% lower than the industry average of 7.60x.
NPSCY’s $0.44 annual dividend yields 5.84% over the current share price. It has a four-year average dividend yield of 3.61%. In addition, the company’s dividend payments have increased at a CAGR of 91.9% over the past three years.
During the fiscal third quarter ended December 31, 2022, NPSCY’s revenue increased 20.6% year-over-year to ¥5.96 trillion ($44.28 billion). Gross profit grew 9.6% from the same quarter last year to ¥991.51 billion ($7.37 billion) and profit increased 3.7% year-over-year to ¥548.45 billion ($4.07 billion).
The company has beaten consensus revenue estimates in three of the last four quarters, which is impressive.
It is up 59% over the past six months and closed its last trading session at $7.48. It has a 24-month beta of 0.77.
NPSCYs POWR ratings reflect this promising outlook. The stock has an overall A rating, which equates to a Strong Buy in our POWR Ratings system. The POWR ratings are calculated by considering 118 different factors, each with an optimal weight.
The stock also ranks B in Value, Stability, Growth and Sentiment. Within the A rating Steel industry, it ranks first out of 34 stocks.
In addition to what we mentioned above, we also provided NPSCY numbers for Momentum and Quality. Get all NPSCY ratings here.
Heidelberg Cement AG (HDEL)
HDELY, headquartered in Heidelberg, Germany, is a cement company that produces and distributes cement, aggregates, ready-mixed concrete and asphalt worldwide.
In terms of forward non-GAAP P/E, HDELY is currently trading at 9.25x, which is 30.9% lower than the 13.39x industry average. Its 0.93x forward EV/Sales is also 40% lower than the 1.53x industry average. The stock’s forward P/S multiple of 0.62 is 45.1% lower than the industry average of 1.12.
While HDELY has a four-year average dividend yield of 4.11%, it pays an annual dividend of $0.50 that yields 3.25% at the prevailing price level. The company has increased its dividend payout at a CAGR of 7.6% over the past five years.
HDELY’s revenue increased 9.7% year over year to €1.04 billion ($1.14 million) during the fiscal year ended December 31, 2022. Profit for the fiscal year was €257 million ($ 281.59 million), while the balance sheet profit was €494.30 million ($542.50 million).
HDELY’s estimated revenue of $23.42 billion for fiscal year 2023 reflects a 2.4% year-over-year improvement. Earnings per share are expected to be $1.68 in the same year.
The stock is up 81.6% over the past six months to close out its last trading session at $15.45.
HDELY’s strong fundamentals are reflected in the POWR ratings. The stock has an overall rating of A, which equates to a strong buy in our proprietary rating system.
HDELY has a B grade for Value, Stability, Momentum and Quality. It is number 5 out of 46 stocks in the A rating Industrial – Building materials industry.
In addition to the POWR ratings that I just highlighted, one can see HDELY’s growth and sentiment ratings here.
Smurfit Kappa Group Plc (SMFKY)
Headquartered in Dublin, Ireland, SMFKY manufactures, distributes and sells board, corrugated board and other paper-based packaging products in the Americas and Europe.
SMFKY’s forward non-GAAP P/E multiple of 10.64 is 20.5% lower than the 13.39x industry average. Its 1x forward EV/Sales is 34.6% lower than the 1.53x industry average. The forward P/S multiple of 0.75 is 33.5% lower than the industry average of 1.12.
SMFKY has increased its dividend payout to a CAGR of 7.1% over the past three years. It has an average four-year dividend yield of 3.75%. The company pays an annual dividend of $1.46, which is 3.85% on the current market price.
During the fiscal year ended December 31, 2022, SMFKY’s revenue increased 26.8% year-over-year to €12.82 billion ($14.04 billion). EBITDA increased by 38.4% over the previous year to €2.36 billion ($2.59 billion). In addition, the company’s earnings for the period grew 39.8% year-on-year to €945 million ($1.04 billion).
Street expects SMFKY’s revenue and earnings per share to reach $3.57 and $13.04 billion in the current fiscal year 2023.
Shares of SMFKY are up 21% over the past six months to close out the last trading session at $37.86. The 60-month beta is 0.96.
SMFKY’s solid outlook is reflected in its POWR ratings. The stock has an overall rating of A, which translates to a strong buy in our proprietary rating system.
SMFKY has an A grade for quality and a B for value, stability and momentum. Within the Industrial – Packaging industry, it ranks first out of 22 stocks.
click here to access additional SMFKY assessments for growth and sentiment.
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NPSCY shares remained unchanged in premarket trading Thursday. Year-to-date, NPSCY is up 25.93%, versus an 8.71% increase in the benchmark S&P 500 index over the same period.
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About the author: Kritika Sarmah
Her interest in risky instruments and passion for writing turned Kritika into an analyst and financial journalist. She received her bachelor’s degree in commerce and is currently attending the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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