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2 Dividend Stocks to Buy Hand Over Fist in August

Considering the uncertainties surrounding the economic recovery and stock market volatility, we believe dividend-paying stocks with stable fundamentals are safer bets because they provide a steady income stream. As such, dividend-paying stocks Rio Tinto (RIO) and Ennis (EBF) could be solid bets now to hedge one’s portfolio against short-term market fluctuations. Read on to learn more.

With the world witnessing a spike in COVID-19 cases due to the rapid spread of the Delta variant, the stock market remains volatile. This, along with uncertainties surrounding the pace of economic recovery and declining Treasury yields, make dividend-paying stocks ideal bets now. That’s because dividend stocks ensure a steady income stream and help reduce portfolio losses caused by market fluctuations.

The CBOE Volatility Index has gained 3.6% over the past month. In addition, Democrat Senator Joe Manchin recently stated that he is "deeply concerned" that the Fed’s additional fiscal stimulus could result in unavoidable inflation  and “overheating” of the U.S. economy.

Therefore, we believe fundamentally sound dividend-paying companies Rio Tinto Group (RIO) and Ennis Inc. (EBF) could be great picks now for a stable, passive stream of income.

Rio Tinto Group (RIO)

London-based RIO is a global mineral resource exploration, mining, and processing company. Its product portfolio includes aluminum, copper, diamonds, gold, borates, titanium dioxide, salt, iron ore, and uranium. In addition, it owns and operates open pit and underground mines, mills, refineries, smelters, power stations, and research and service facilities.

This month, RIO and Komatsu formed  a partnership to accelerate the development and deployment of zero-emission mining haulage technologies, such as haul trucks. RIO will test the new equipment in a pre-production environment and will also have the option to acquire some of the first trucks from Komatsu once they are commercially viable. RIO aims to work on product planning, development, testing, and deployment of the next generation zero-emission mining equipment and infrastructure through this collaboration.

During the six months ended June 30, 2021, RIO’s sales revenue increased 70.9% year-over-year to $33.08 billion. Its operating profit increased 198.1% year-over-year to $17.44 billion, while its net income grew 271.3% from the prior-year quarter to $12.31 billion. Furthermore, the company’s net cash from operating activities increased 142.7% year-over-year to $13.66 billion over this period.

The company's EPS is expected to grow 113.6% year-over-year to $16.44 in the current year. Analysts expect RIO's revenue to increase 50.3% year-over-year to $67.06 billion in its fiscal year 2021. RIO's stock has gained 40.4% over the past year and 13.8% over the past nine months.

RIO’s $7.52 annual dividend  yields 8.8% on its current stock price. On January 07, the company approved a $3.76 quarterly dividend, payable on September 23. The stock has  a 7.5% four-year average dividend yield.

RIO's POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

RIO has also rated a B grade for Stability, Sentiment, and Quality. Additionally, within the Industrial – Metals industry, it is ranked #3 of 38 stocks.

To see additional POWR Ratings for Momentum, Value, and Growth for RIO, click here.

Ennis Inc. (EBF)

EBF  manufactures and sells printed business goods, business forms, and other business supplies. Under the Ennis tag & label brand, the Midlothian, Tex., company sells custom printed, high-performance labels and stock tags.

In June, EBF acquired  the assets and business from AmeriPrint Corporation in Harvard, Illinois. Through this acquisition, the company aims to expand its operational capabilities and product portfolio.

EBF’s revenue increased 8.9% year-over-year to $96.93 million in its  first quarter ended May 31, 2021. Its operating income grew 78.9% from its  year-ago value to $10.55 million, while its net income surged 74.5% year-over-year to $7.30 million over this period. The company’s EPS increased 75% from the year-ago value to $0.28.

The company’s EPS is expected to grow 40.9% year-over-year to $1.31 in its fiscal year 2021. Analysts expect EBF’s revenue to increase 10.9% year-over-year to $397.13 million in the current year. The stock has gained 11.5% over the past year and 12.3% year-to-date.

EBF declared a $0.25 quarterly dividend, payable on April 20. While the stock’s four-year average dividend yield  is 4.7%, the current dividend translates to a 5% yield.

It is no surprise that EBF has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock also has an A grade for Quality, and a B for Stability and Sentiment. In the Consumer Goods industry, it is ranked #2 of 71 stocks.

In addition to the POWR Ratings grades we have just highlighted, one  can see the EBF ratings for Growth, Momentum, and Value here.

RIO shares were trading at $85.54 per share on Wednesday morning, down $1.40 (-1.61%). Year-to-date, RIO has gained 18.98%, versus a 19.27% rise in the benchmark S&P 500 index during the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.


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