OneMain Holdings (NYSE: OMF), primarily based in Evansville, Indiana, is a monetary establishment that focuses on private loans to nonprime debtors.
The enterprise sounds dangerous, however over the previous a number of years, together with in the course of the early phases of the pandemic, OneMain’s numbers have held up.
Internet curiosity revenue, the measure of money move we use for lenders, has trickled increased in every of the previous few years, together with 2020 and 2021, which had been rocky years for some companies.
Internet curiosity revenue rose from $2.8 billion in 2018 to $3.2 billion in 2019. Then it inched increased by one other $100 million in every of the next two years. This yr, internet curiosity revenue is forecast to once more rise by one other $100 million, to $3.5 billion.
The corporate pays a $0.95 per share quarterly dividend, which comes out to a ten% yield. However the information will get even higher…
OneMain has paid out particular dividends prior to now. It paid two particular dividends in 2021, two in 2020 and one in 2019. And so they had been massive.
In February and August of 2021, the corporate paid a $3.50 per share particular dividend. This yr, the corporate has not introduced any particular dividends, so once we analyze the dividend, we’re trying solely on the common quarterly dividend, not particular dividends.
Within the 4 years OneMain has paid a dividend, the payout has grown yearly by a substantial quantity.
The corporate paid a $0.25 per share quarterly dividend in 2019, earlier than rising it to $0.33 after which to $0.45 in 2020. OneMain paid a $0.70 per share quarterly dividend in 2021, and it elevated the payout to $0.95 this yr.
Primarily based on projected internet curiosity revenue, OneMain’s payout ratio is a puny 13%. Once more, that’s the common dividend solely, with an anticipated whole payout of $467 million for 2022. Final yr, OneMain paid out $1.3 billion in dividends (together with particular dividends), which was nonetheless simply 38% of its internet curiosity revenue.
It’s fairly potential that in 2022, the corporate may pay a particular dividend and nonetheless have a low payout ratio, like final yr.
The one blemish on OneMain’s dividend security is that the dividend historical past is brief – simply 4 years. After 2023, assuming OneMain hasn’t reduce the dividend, that penalty will raise.
Even with out the particular dividend, OneMain’s yield is excessive. It’s uncommon to search out such a lovely yield that seems so safe within the brief time period. After all, a recession may hit OneMain’s debtors onerous. However for now, the dividend seems protected.
Dividend Security Score: B
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Good investing,
Marc