Steve Cohen knows a thing or two about making money. So when he speaks, investors listen. The legendary stock picker, who began his investing career at Gruntal & Co. where he managed proprietary capital for 14 years, founded S.A.C Capital Advisors in 1992. In 2014, his investment operations were converted to Point72 Asset Management, a 1,500-plus person registered investment advising firm. Throughout his career, Cohen has consistently delivered huge returns to clients, giving the Point72 Chairman, CEO and President guru-like status on the Street.
Turning to Cohen for inspiration, we took a closer look at two dividend stocks Cohen’s Point72 made moves on recently. We've used TipRanks’ database to find out what the analyst community has to say about the prospects of these two. Let's take a closer look.
OneMain Holdings (OMF)
The first Cohen's pick we're looking at is OneMain. This is a holding company whose subsidiaries offer consumer financing services to retail customers who are unable to access the mainstream banking and credit industry. These are customers who have – for whatever reasons – poor credit histories, but they are not necessarily poor risks. OneMain offers them a range of financial services, including consumer finance, insurance, and personal loans.
OneMain’s share price has been gaining steadily for the past year. The stock’s 12 month gain is 135%, far outpacing the broader markets. The gains are standing on a solid, steady revenue stream; the company has posted a top line of $1.2 billion or better in every quarter since 3Q19.
In 1Q21, the company reported $1.2 billion in revenue, down slightly from the $1.26 billion in the year-ago quarter – but EPS, at $3.06, was up strongly compared to the 23 cents reported in 1Q20.
The company felt confident after the first quarter, and announced an increase in its regular quarterly dividend by 56%, making the new payment 70 cents per common share. The new payment went out on May 13. At an annualized rate of $2.80, the dividend yields 4.7%. This compares favorably to the current low-yield regime promoted by the Federal Reserve.
OMF has impressed the likes of Steven Cohen, with his firm pulling the trigger on the stock for the first time. Point72 bought 813,500 shares in Q1, which are now worth over $48 million.
Covering OMF for Credit Suisse, 5-star analyst Moshe Orenbuch notes that while the company deals with high payment delinquency rates, the underlying business model is strong.
“We expect OMF’s balances to grow sequentially in 2Q. We believe consumer demand for OMF’s products has been less impacted by the stimulus (than other nonprime lenders) given larger loan sizes at OMF. OMF expects to be profitable even in a downturn, and has significant and increasing capital return and multiple growth initiatives while shares trade at a cheap multiple," Orenbuch wrote.
In line with these comments, Orenbuch rates the stock an Outperform (i.e. Buy), and his $72 price target implies ~21% one-year upside potential. (To watch Orenbuch’s track record, click here)
Overall, OMF shares get a Strong Buy rating from the analyst consensus, based on 10 recent reviews which include 9 to Buy and 1 to Hold. The shares are priced at $59.65 and their average price target, of $66.10 suggests room for ~11% upside in the year ahead. (See OMF stock analysis on TipRanks)
LyondellBasell is a global chemical company, and the world’s largest owner of polyethylene and polypropylene technologies, from which it profits by licensing production. LYB has a large footprint in plastics and chemical refining, as well as holding a world-leading position in polyolefin technologies. The company has corporate offices in Texas, the UK, and the Netherlands.
Like many industrial companies, LYB saw its business dip and revenues fall sharply during the COVID pandemic. The top line bottomed out in 2Q20, but has been rising in the last three reported quarters as the economy has reopened – and with it product demand has resumed. The most recent quarterly report, for 1Q21, showed $9.08 billion in revenue, the highest top line in the last two years.
Revenues were not the only bright spot. EPS came in at $3.18 per share, also the highest in the last two years – and far higher than the 42-cent EPS recorded one year ago. The company repaid $500 million worth of debt in both January and April of this year, part of a concerted plan to ‘fortify the balance sheet.’
Along with solid financials and reduced debt, LYB was able to bump up its common share dividend by 7.6%, making the new payment $1.13 per share. At that rate, the dividend annualizes to $4.52 and gives a yield of 4%. This makes a favorable comparison to the ~2% yield found among S&P-listed companies.
In the first quarter, Point72 picked up 42,566 shares of LYB. Like OMF, this is a new holding for Cohen’s firm, and at current valuation, it is worth $4.79 million.
In coverage of this stock – and petrochemical industry generally – for JPMorgan, analyst Jeffrey Zekauskas writes: “Domestic PE outages, rising oil values lifting Asian PE values, good demand in China, increased opportunities for North American producers to ship PE to Asia because of rising global shipping costs and logistics issues, and continued good domestic demand have led to a snug market. We expect the company to continue to pay its ~4% dividend and generate an attractive free cash flow yield above 10%.”
Zekauskas sees a sound future for LYB, and rates the stock as Overweight (i.e. Buy). His $142 price target indicates room for ~25% growth in the next 12 months. (To watch Zekauskas’s track record, click here)
With 11 recent reviews on record, including 6 to Buy and 5 to Hold, LYB gets a Moderate Buy rating from the analyst consensus. The average price target of $123.09 implies ~8% upside potential from the current trading price of $113.25. (See LYB stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.