The Federal Reserve’s interest rate increases to lower inflationary pressure could drive the economy into a recession in the near term. The stronger-than-expected May jobs report increases the chances of more interest rate hikes. This, along with continuing geopolitical headwinds, has kept the stock market highly volatile. The CBOE Volatility Index (VIX) has gained 51.5% year-to-date, reflecting significant market volatility. After witnessing a moderate slowdown in inflation in April, investors are awaiting the Consumer Price Index (CPI) data for May, which is scheduled for release this week, to gauge how things stand macroeconomically.
Because the stock market is expected to remain under pressure in the coming months, it could be wise to bet on high-yield but reasonably priced dividend stocks to generate a steady income stream and with capital appreciation potential. Investors’ interest in high-yield value stocks is evident in the AAM S&P 500 High Dividend Value ETF’s (SPDV) 1.3% returns over the past month versus SPDR S&P 500 Trust ETF’s (SPY) 1.4% loss.
Given their lower valuations and high dividend yields, we think it could be wise to bet on the stocks of fundamentally strong SK Telecom Co., Ltd (SKM), A.P. Møller – Mærsk A/S (AMKBY), KT Corporation (KT), and Covestro AG (COVTY).
SK Telecom Co., Ltd (SKM)
SKM is a mobile and telecommunications operator headquartered in Seoul, South Korea. The company operates through MNO; Subscription; Metaverse; AI; and Digital Infrastructure Service businesses. It provides cellular voice, wireless data, wireless internet services, and fixed-line and platform services. As of Dec. 31, 2021, it had 3.6 million fixed-line telephone and 31.9 million wireless subscribers.
On May 16, 2022, SKM launched an AI service named A. (A dot) as an open beta version for Android on One Store and Google Play. Built with advanced natural language processing and sentiment analysis technologies, the key AI technology applied to ‘A.’ naturally combines daily conversations based on the Generative Pre-trained Transformer 3 (GPT-3), while handling many different tasks on customers’ smartphones. Furthermore, SKM plans to add new features to ‘A.’ in collaboration with other companies in the second half of this year. This should help the company strengthen its AI business and gain wider recognition across the industry.
SKM paid a $0.36 quarterly cash dividend on May 24, 2022. The stock pays a $1.44 per share dividend annually, translating to a 5.74% yield. The company’s dividend has grown at a 10% rate over the past five years.
For its fiscal 2022 first quarter, ended March 31, 2022, SKM’s operating revenue increased 4% year-over-year to KRW4.28 trillion ($3.38 billion). The company’s operating income came in at KRW432.40 billion ($345.26 million), up 15.6% from the prior-year period. It had KRW436.70 billion ($348.69 million) in cash and cash equivalents as of March 31, 2022.
The $13.62 billion consensus revenue estimate for its fiscal year 2022, ending Dec. 31, 2022, represents a 34.4% rise from the year-ago period. The stock’s 11.23x non-GAAP forward P/E is 37.6% lower than the 18x industry average. In terms of forward EV/EBIT, SKM is currently trading at 13.96x, which is 10% lower than the 15.52x industry average. And over the past week, the stock has declined 2.1% in price to close Friday’s trading session at $25.13.
SKM’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
It has an A grade for Value and a B grade for Growth. In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for SKM’s Momentum, Stability, Sentiment, and Quality here.
SKM is ranked #17 of 45 stocks in the A-rated Telecom - Foreign industry.
A.P. Møller – Mærsk A/S (AMKBY)
Based in Copenhagen, Denmark, AMKBY is an integrated transport and logistics company worldwide. The company offers container vessels, supply ships, special vessels, terminals, tugboat activities, and reefer container box manufacturing through its Ocean, Logistics & Services, and Terminals segments.
AMKBY paid a $1.85 annual cash dividend per share on April 4, 2022, translating to a 12.04% yield. The company’s dividend has grown at a 76.63% rate over the past five years.
On June 2, 2022, AMKBY completed the acquisition of Senator International Spedition GmbH, a Germany-based international shipping and logistics company. Having a well-developed airfreight network of own controlled flights, a well-established FCL and LCL network, and specialized services, such as packaging, warehousing, and distribution across five continents, Senator’s acquisition will help AMKBY provide customers with increased flexibility and redundancy in their supply chains.
For its fiscal year 2022 first quarter, ended March 31, 2022, AMKBY’s revenue increased 55.1% year-over-year to $19.29 billion. The company’s EBITDA came in at $9.08 billion, up 124.9% from the prior-year period. Its net profit was $6.81 billion for the quarter, indicating a 150.6% rise from the year-ago period. AMKBY’s EPS was $363, representing a 161.2% rise from the prior-year period. The company had $12.08 billion in cash and cash equivalents as of March 31, 2022.
Analysts expect the company’s revenue to improve 23.7% year-over-year to $76.43 billion for its fiscal 2022, ending Dec. 31, 2022. The stock’s 2.56x non-GAAP forward P/E is 84.5% lower than the 16.52x industry average. In terms of forward EV/EBIT, AMKBY is currently trading at 2.34x, which is 84.1% lower than the 14.64x industry average. Over the past month, the stock has gained 7% in price to close Friday’s trading session at $15.37.
AMKBY’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.
It has an A grade for Value and a B grade for Growth, Quality, and Momentum. Click here to see the additional ratings for AMKBY’s Stability and Sentiment.
AMKBY is ranked #1 of 46 stocks in the A-rated Shipping industry.
KT Corporation (KT)
Based in Seongnam, South Korea, KT is an integrated telecom and digital platform service provider worldwide. The company offers principal services that include mobile, Broadband, IPTV, B2B communications, and fixed-line telephony. It operates media content production, finance, real estate development, and commerce through its subsidiaries.
KT paid a $0.75 annual cash dividend per share on May 4, 2022, which translates to a 5.08% yield. The company’s dividend has grown at a 16.55% rate over the past five years.
On March 21, 2022, KT signed a Memorandum of Understanding (MOU) with CJ ENM, a South Korean entertainment and mass media company, to strengthen KT’s media/content business and widen its original content distribution channels. The companies agreed to broadcast KT StudioGenie's original content on CJ ENM-owned channel and platforms, such as tvN & tving, and intends to create global box-office hit content by co-production. Furthermore, CJ ENM will invest KRW100 billion ($80.04 million) in cash as a strategic investor. This should allow KT to strengthen production capacity and content distribution channels and accelerate media/content business growth.
KT’s operating revenue for its fiscal 2022 first quarter, ended March 31, 2022, increased 4.1% year-over-year to KRW6.28 trillion ($5.01 billion). The company’s operating income came in at KRW626.60 billion ($499.86 million), representing a 16.5% year-over-year improvement. Its net income was KRW455.40 billion ($363.32 million) for the quarter, indicating a 39.5% rise from the prior-year period. The company had KRW2.68 trillion ($2.14 billion) in cash and cash equivalents as of March 31, 2022.
KT’s 6.67x non-GAAP forward P/E is 63% lower than the 18x industry average. In terms of forward EV/EBIT, the stock is currently trading at 8.26x, which is 46.8% lower than the 15.52x industry average. Over the past month, it has gained 5.7% in price to close Friday’s session at $14.87.
KT’s strong fundamentals are reflected in its POWR Ratings. It has an overall A rating, which equates to Strong Buy in our proprietary rating system.
The stock has an A grade for Value, Stability, and Sentiment. Click here to see the additional ratings for KT (Momentum, Growth, and Quality).
The stock is ranked #1 in the A-rated Telecom - Foreign industry.
Covestro AG (COVTY)
COVTY is a Leverkusen, Germany-based company that develops, produces, and markets polymer materials for various industries. The company operates through three segments–Polyurethanes; Polycarbonates; and Coatings, Adhesives, Specialties (CAS). It markets its products through trading houses and distributors.
COVTY paid an $1.81 annual cash dividend per share on May 6, 2022, which translates to a 7.74% yield.
On April 22, 2022, COVTY announced the expansion of its production capacities for thermoplastic polyurethane (TPU) films in the platilon range and associated infrastructure and logistics by investing a low double-digit million-euro amount. Scheduled for completion by the end of 2023, the new capacity is intended to meet the rising global demand for multilayer TPU films, primarily used in automotive interiors and construction.
COVTY’s fiscal 2022 first-quarter sales increased 4.2% year-over-year to €4.68 billion ($5.03 billion). The company’s gross profit came in at €1.19 billion ($1.28 billion), indicating a 13.4% year-over-year improvement. Its EBIT was €589 million ($632.97 million) for the quarter, up 5.9% from the prior-year period. While its net income increased 5.7% year-over-year to €417 million ($448.13 million), its EPS grew 5.9% to €2.15. As of March 31, 2022, the company had €623 million ($669.51 million) in cash and cash equivalents.
The $19.11 billion consensus revenue estimate for the same fiscal year represents an 8% year-over-year improvement. The stock’s 8.35x non-GAAP forward P/E is 28% lower than the 11.58x industry average. In terms of forward EV/EBIT, COVTY is currently trading at 6.97x, which is 31.8% lower than the 10.22x industry average. Over the past month, the stock has gained 13.7% to close Friday’s trading session at $23.45.
COVTY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has an A grade for Value and a B grade for Quality and Stability. Click here to see the additional ratings for COVTY (Momentum, Sentiment, and Growth).
COVTY is ranked #20 of 91 stocks in the A-rated Chemicals industry.
SKM shares were trading at $25.20 per share on Monday morning, up $0.07 (+0.28%). Year-to-date, SKM has declined -4.48%, versus a -12.37% 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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