After the Federal Reserve’s first interest rate hike in three years last week, Jerome Powell’s plan to raise rates more aggressively this year, if needed, dampened investor sentiment yesterday. Thus, dividend investing is expected to gain popularity in response to the uncertain market conditions.
Dividend stocks with strong earnings growth potential from companies with robust financials could witness price appreciation in the coming months. So, these stocks could be ideal picks for investors. And investors’ interest in dividend stocks is evident in the iShares Select Dividend ETF’s (DVY) 6.3% returns over the past three months compared to the SPDR S&P 500 Trust ETF’s (SPY) 4% decline.
Wall Street analysts expect fundamentally sound dividend stocks Ambev S.A. (ABEV), Silicon Motion Technology Corporation (SIMO), and Diana Shipping Inc. (DSX) to rally more than 55% in the coming months. So, these stocks could be solid additions to one’s portfolio.
Ambev S.A. (ABEV)
Based in Sao Paulo, Brazil, ABEV and its subsidiaries produce, distribute, and sell beer, draft beer, carbonated soft drinks (CSD), other non-alcoholic beverages, malt, and food products in the Americas. Its four segments are Brazil; Central America and the Caribbean; Latin America South; and Canada.
ABEV’s four-year average dividend yield is 3.36%, and its current dividend translates to a 2.93% yield.
For its fourth quarter, ended Dec. 31, 2021, ABEV’s net revenue increased 18.6% year-over-year to R$22.01 billion ($4.34 billion). Its gross profit came in at R$11.51 billion ($2.27 billion), up 11.2% year-over-year. And the company’s total assets came in at R$138.60 billion (27.31 billion) for the period ended Dec. 31, 2021, compared to R$125.20 billion ($24.67 billion) for the period ended Dec. 31, 2020.
Analysts expect ABEV’s revenue to increase 15.4% year-over-year to $15.58 billion in its fiscal year 2022. Its EPS is estimated to grow 9.6% per annum for the next five years. Over the past three months, the stock has gained 7.5% in price to close yesterday’s session at $2.86. Wall Street analysts expect the stock to hit $5.00 in the near term, which indicates a potential 74.8% upside.
ABEV’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
ABEV has an A grade for Quality and a B for Stability and Sentiment. Within the B-rated Beverages industry, it is ranked #11 out of 37 stocks. Click here to see the additional POWR Ratings for Growth, Value, and Momentum for ABEV.
Silicon Motion Technology Corporation (SIMO)
Based in Kowloon, Hong Kong, SIMO is a global leader in supplying NAND flash controllers for solid-state storage devices and the merchant leader in supplying SSD controllers. The company designs, develops, and markets NAND flash controllers for solid-state storage devices.
On January 26, 2022, Wallace Kou, SIMO’s President and CEO said, “This year, similar to last year, we further expanded and strengthened our SSD controller program engagements with PC OEMs and eMMC/UFS controllers for smartphones, automotive applications, and IoT/smart devices. We are adding to this positive momentum the upcoming launch of our next-generation enterprise-class SSD controllers.”
SIMO’s dividend payout has grown at a 12.3% CAGR over the past three years. Its four-year average yield is 2.73%, while its current yield is 2.86%.
For its fiscal fourth quarter, ended Dec. 31, 2021, SIMO's net sales increased 83.7% year-over-year to $264.36 million. The company’s non-GAAP net income came in at $67.54 million, up 125.8% year-over-year. Also, its non-GAAP EPS was $1.90, up 120.9% year-over-year.
SIMO's revenue is expected to be $1.14 billion in its fiscal year 2022, representing a 24.1% year-over-year rise. In addition, the company's EPS is expected to increase 29.5% year-over-year to $8.04 in 2022. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 10.5% to close yesterday's trading session at $69.94. Wall Street analysts expect the stock to hit $120.60 in the near term, which indicates a potential 72.4% upside.
It is no surprise that SIMO has an overall B rating, which equates to a Buy in our proprietary POWR Ratings system. In addition, it has an A grade for Value and a B grade for Growth and Quality.
SIMO is ranked #18 of 97 stocks in the A-rated Semiconductor & Wireless Chip industry. Click here to see SIMO's ratings for Momentum, Sentiment, and Stability as well.
Note that SIMO is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Growth portfolio. Learn more here.
Click here to checkout our Semiconductor Industry Report for 2022
Diana Shipping Inc. (DSX)
Based in Athens, Greece, DSX provides shipping transportation services. The company transports a range of dry bulk cargoes, including commodities, such as iron ore, coal, grain, and other materials, in shipping routes worldwide and operates a fleet of approximately 34 dry bulk vessels.
DSX’s four-year average dividend yield is 0.25%, while its current dividend translates to a 16.74% yield.
DSX’s time charter revenues came in at $68.84 million for the fourth quarter, ended Dec. 31, 2021, up 61.4% year-over-year. Its net income came in at $39.70 million, compared to a $8.87 million loss in the year-ago period. In addition, the company’s EPS came in at $0.48, compared to a $0.10 per share loss.
DSX’s revenue is expected to increase 41.1% to $266.55 million in 2022. Its EPS is estimated to increase 197.4% to $1.16 in 2022. And over the past three months, the stock has gained 23.5% in price to close yesterday’s session at $4.78. Wall Street analysts expect the stock to hit $7.47 in the near term, which indicates a potential 56.3% upside.
DSX has an overall B rating equating to a Buy in our POWR Ratings system. It has an A grade for Growth and Momentum and a B grade for Quality.
DSX is ranked #9 of 48 stocks in the B-rated Shipping industry. Click here to check additional DSX ratings (Value, Stability, and Sentiment).
ABEV shares were trading at $2.91 per share on Tuesday morning, up $0.05 (+1.75%). Year-to-date, ABEV has gained 3.93%, versus a -5.48% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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