Finding the right stock plays in the current environment is a challenge for every investor. The crisis sparked by the coronavirus and the unprecedented economic shutdown policies has defied all the rules, making it difficult to predict where a given stock may head. Fortunately, TipRanks has developed the tool you need to interpret the market.
The Smart Score tool takes the range of TipRanks’ raw data, sorts it by 8 separate factors that are known to predict future stock behavior, and uses it to give each stock a single-digit store, on a scale of 1 to 10, indicating whether it is likely under- or overperform the general markets.
Today, we’ll look at three stocks that have earned the highest Smart Scores. These are strong investments for that reason alone; but they also offer investors solid dividend payouts. Let’s find out what else makes them so compelling.
OG&E Energy Corporation (OGE)
We’ll start in the energy sector, where Oklahoma Gas & Electric is regulated utility serving customers across the states of Oklahoma and Arkansas. OG&E’s status as an essential utility provider helped to insulate the company from the coronavirus recessionary pressures. While OGE reported a year-over-year dip in earnings for Q1, the results were well within the company’s historical pattern of showing lower earnings in the cooler months, when customers are not using their air conditioning. Despite the yoy drop, EPS still beat the estimates, coming in at 23 cents compared to 18 cents expected.
In another positive point for investors, the company has maintained its dividend – and has done so at a time when many peers are cutting back on dividends and share repurchases to shore up liquidity. OGE paid out its regular quarterly dividend of 38.75 cents in April, and has the next payment scheduled for the end of July. At an annualized rate of $1.55, the dividend has a high yield of 5.1%.
Evercore ISI analyst Durgesh Chopra sees OG&E holding an enviable position for surviving the COVID-19 pressures. In addition to the pandemic striking during the winter, rather than the peak usage months, both states where the company does business are working to restart their economies, but more importantly, the company is finding some regulatory relief. Chopra writes, “Both OK and AR have begun to reopen… OGE’s base rates include recovery of $3mm of bad debt and in ‘08 / ’09 bad debt rose to $3.1mm."
"OGE has amongst the strongest balance sheets in our coverage and is attractive to us from a value perspective at a 20% discount to peers on 2022 EPS," the analyst concluded.
In line with his bullish outlook, Chopra rates the stock a Buy. His price target of $35 suggests an upside potential or 15% for the coming year. (To watch Chopra’s track record, click here)
Overall, OG&E gets a Moderate Buy from the analyst consensus rating, based on 7 recent reviews. These break down to 4 Buys and 3 Holds. Shares are selling for $30.36, and the average price target of $33.60 implies a one-year upside of 10%. (See OG&E’s stock analysis on TipRanks)
MetLife, Inc. (MET)
Next on our list is a blue-chip stalwart of the S&P 500, Metlife. This insurance company is probably familiar to most of us, at the very least from its old ad campaign featuring the Peanuts characters. But the homely nature of ads underplayed Metlife’s status as a corporate giant. The company boasted over $69 billion in revenue last year, with a full-year net income of $5.7 billion.
While Metlife’s sheer size has helped the company weather the coronavirus storm, the company has still showed some mixed results in recent months. MET stock is down 28% from its February peak, and Q1 earnings showed a sharp sequential drop from Q2. However, the EPS of $1.58 was up 6.7% year-over-year, and beat the forecast by 8.9%. On the top line, the quarterly revenue of $15.5 billion was slightly better than the year-ago quarter’s $15.4 billion.
Metlife is one of the market’s most reliable dividend players. The company has a long history of slowly – but steadily – increasing the quarterly payment, and it has kept to that pattern despite corona. In April, at the height of the viral pandemic, Met raised its common stock dividend by 4.5%, to a payment of 46 cents per share. At this level, the dividend features a low payout ratio of 29%, indicating that it is easily affordable. The yield, of 5.1%, is excellent, especially when compared to the 2% average yield found among MET’s S&P peers.
RBC Capital analyst Mark Dwelle reviewed this stock, and reiterated his Buy rating. At $44, his price target indicates room for 20% upside growth over the next 12 months. (To watch Dwelle’s track record, click here)
Supporting his thesis, Dwelle wrote, “Sound capital position and a business model that's less exposed to interest rates and market volatility than most of the group remain our top reasons to own Met. Q1 results were strong in the US… we still expect a double digit ROE, which few financials will deliver this year.”
Overall, Metlife has a Strong Buy from the analyst consensus. The 7 recent reviews include 6 Buy opposed to just a single Hold. The average price target of $41.67 suggests a 14% upside from the current share price of $36.52. (See Metlife stock analysis on TipRanks)
Investors Bancorp (ISBC)
Last on our list is Investors Bancorp, parent company of Investors Bank. The subsidiary bank serves customers in New York and New Jersey, with over 150 branches. In a testament to the company’s strength, Investors Bancorp completed a major acquisition during the pandemic shutdowns, buying Gold Coast Bank in a deal worth $63.6 million.
The merger came after the Q1 results, in which Investors missed the EPS forecast and showed a year-over-year drop. The EPS miss came even as quarterly revenue rose to $187.9 million. The company prioritized employee and customer support during the pandemic quarter.
ISBC also remembered its shareholders. The most recent dividend, of 12 cents per share, was declared with the Q1 results in April, and paid out at the end of May. At 48 cents per share annualized, ISBC dividend gives a high yield of 5.7%. The company has raised the payment three times in the last three years, and has a 5-year history of keeping the payment reliable. The payout ratio is high, at 70%, but still affordable at current income levels.
Janney Montgomery analyst Jake Civiello also suggests confidence in this stock. He writes, “ISBC expects to consider adding residential mortgages and multi-family loans to portfolio. All branches are open, but traffic trends are down dramatically year-over-year. Deposits have exhibited relative strength, in particular munis versus expectations, leaving excess funding on the balance sheet…”
Civiello gives the stock a Buy rating with an $11 price target that indicates a strong 29% upside potential. (To watch Civiello’s track record, click here)
The Strong Buy analyst consensus on ISBC shares is unanimous, based on 6 Buy ratings. The stock is priced at $8.50, and its $10.88 average price target implies a 28% one-year upside. (See ISBC stock analysis on TipRanks)
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