OneMain Holdings (NYSE: OMF) is likely one of the mostly requested shares for Security Internet.
I evaluated the inventory’s dividend security in 2022, giving it a grade of “B,” after which coated it once more final September, upgrading it to an “A.”
For a lot of final yr, it paid a double-digit yield, although an increase within the inventory value late in 2023 introduced the yield down to eight%. (The dividend itself stayed intact, however the increased inventory value brought on the yield to shrink.)
OneMain lends cash to subprime debtors, a class that at present contains 100 million Individuals. The corporate operates in 44 states and has been round since 1912.
Although OneMain is 112 years outdated, its dividend historical past solely goes again to 2019. But it surely has raised its dividend yearly since then, and it paid particular dividends in 2019, 2020 and 2021.
It at present pays a $1 per share quarterly dividend. Ought to traders count on to proceed to obtain a minimum of $1 every quarter?
As a result of OneMain is a lender, we take a look at internet curiosity revenue, or NII, to guage how a lot money the corporate is bringing in.
NII has risen in every of the previous 5 years. However this yr, it’s anticipated to fall barely.
In 2024, NII is forecast to drop from $3.6 billion to $3.3 billion – its lowest stage because it totaled $3.2 billion in 2019.
A decline in money movement is an automated ding in opposition to an organization’s dividend security ranking, as it could possibly typically be a warning of a change within the firm’s enterprise.
Luckily for shareholders, OneMain paid out simply $480 million in dividends final yr for a really sustainable payout ratio of simply 13.5%. This yr, Wall Avenue estimates that the corporate’s whole dividends paid will inch as much as $481 million, which might trigger the payout ratio to crawl to 14.4%. That’s nonetheless extraordinarily low.
OneMain ought to have completely no downside paying its dividend, and there’s loads of room for one more elevate or particular dividend.
Simply keep watch over the corporate’s NII. If it falls this yr after which is projected to say no once more subsequent yr, it could possibly be the beginning of a regarding development.
However till that occurs, OneMain’s massive dividend is protected.
Dividend Security Ranking: B
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