5 Best Income Stocks For Your Portfolio
Zacks Investment Research | Oct 16, 2017 04:15AM ET
Not all investors intend to wait forever to generate returns from their investments. Nor do they have an appetite for risk. They also might have the need for immediate and regular income generation.
Here are five stocks for such investors-
Vedanta Resources Plc VDNRF
Headquartered in London, Vedanta Resources plc is engaged in exploring, extracting and processing minerals, and oil and gas. It produces zinc, lead, silver, copper, aluminum, iron ore, oil and gas and commercial power. The company operates primarily in India, Zambia, Namibia, South Africa, Liberia, Ireland, Australia and the United Arab Emirates.
The Basic Materials-Mining segment, of which Vedanta is a part, is in the top 23% of the 265 Zacks-classified industries. As may be expected, this isn’t a seasonal business, so output varies on other considerations. Operating and interest expenses form a smaller part of the outlay than COGS. Financial leverage is usually high, but the debt-to total capitalization ratio is maintained at very manageable levels of within 38% (which dropped down to nearly 30% in the June 2017 quarter).
Vedanta is reportedly one of India’s leading exporters, especially in the zinc, aluminum and refined copper, iron ore and crude oil segments, so it is set to benefit from the government’s recent growth initiatives. Given the increasingly favorable operating climate, the company plans to significantly expand operations over the next few years.
As far as valuation is concerned, the company’s share price is up 19.3% in the last six months compared to 13.5% for the industry.
Its P/S of 7.4X is significantly ahead of the industry’s 3.3X, roughly in line with historical trends.
Other details:
The dividend yield (18.34%) is significantly higher than the industry:
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Zacks Rank #1
VGM Score B
Wheeler Real Estate Investment Trust, Inc. (NASDAQ:WHLR)
Headquartered in Virginia Beach, Wheeler Real Estate Investment Trust, Inc. is engaged in acquiring, financing, developing, leasing, owning and managing income producing assets, such as strip centers, neighborhood centers, grocery-anchored centers, community centers and free-standing retail properties. It operates in the mid-Atlantic, southeastern and southwestern United States.
The REIT & Equity Trust-Retail segment, of which WHLR is a part, is in the top 40% of the 265 Zacks-classified industries. The business is somewhat seasonal with strength in the December quarter, which is the biggest retail selling season. While revenues have been range bound in the last five years, gross profit, net income and earnings have been trending up. Interest expense has come down steadily as debt levels were lowered. The debt-to total capitalization ratio has therefore gone down to under 60%.
Wheeler has been adding properties while selling off those that weren’t yielding enough, which together have increased its revenues and earnings. It has also leased out over 94% of its gross leasable area (GLA), an indication of the efficiency of its operations. But it’s also to be noted that the company’s credit facility may be reduced in the very near future, which could impact its ability to make new purchases.
Other details:
Wheeler generated a positive surprise of 14.3% in the last quarter. Its earnings estimates for 2017 and 2018 are up 5.6% and 10.3%, respectively in the last 60 days. Earnings are currently expected to grow 175.0% this year on revenue growth of 32.6%. Next year, earnings and revenues are expected to be up 7.3% and 3.2%, respectively.
The dividend yield (11.33%) is significantly higher than the industry:
Zacks Rank #1
VGM Score A
Abercrombie & Fitch Company (NYSE:ANF)
Abercrombie & Fitch Co. is principally engaged in the purchase, distribution and sale of men's, women's and kids' casual apparel. The company's retail activities are conducted under the Abercrombie & Fitch and abercrombie trade names through retail stores, a catalogue, a magazine/catalogue and a website, all bearing some form of the company name. Merchandise is targeted to appeal to customers in specialty markets who have distinctive consumer characteristics.
The Retail-Apparel and Shoes segment, of which ANF is a part, is in the top 34% of the 265 Zacks-classified industries. Revenues typically peak in the January quarter, dropping off sharply in the following quarter and recovering slightly in the quarter after that. Gross profit, EBIT, net income and earnings show a similar pattern. Interest expense spiked in 2016 but stabilized through 2017 as debt levels were lowered. The debt-to total capitalization ratio has therefore gone down to between 56% and 57%.
The Amazon (NASDAQ:AMZN) effect took a toll on most retail players including ANF. The increased competition led to surplus inventory, made worse by weak consumer spending, lower tourist spending and consumer preferences for experiences rather than goods. ANF engineered a turnaround plan, which appears to be bearing fruit. As a result, its revenue declines are moderating. The all-important Hollister brand in particular has started showing momentum with both increased traffic and better conversions.
As far as valuation is concerned, the company’s share price is up 20.3% in the last six months compared to -16.6% for the industry.
Its P/S of 0.3X is currently below the industry’s 0.5X, roughly in line with historical trends.
Other details:
The company topped estimates in the last quarter by 52.9%, but the negative surprises in two of the last four quarters led to a 4-quarter average of -10.8%. The loss estimate for 2018 has gone down from $0.29 to $0.01. For 2019, the estimate is up from -$0.12 to $0.01. This boils down to earnings and revenue growth of 77.1% and -0.2% in 2018 and 136.4% and -1.3% in 2019.
The dividend yield (5.98%) is significantly higher than the industry:
Zacks Rank #1
VGM Score A
Vodafone Group plc (NASDAQ:VOD)
Vodafone Group is a telecommunications company operating in Europe, Africa, Middle East and the Asia Pacific. The company provides a range of services, including voice, messaging and data across mobile and fixed networks. Mobile services are offered through acquired spectrum and licenses to use radio frequencies. Its fixed capabilities include cable, fiber and copper networks to enable television, broadband and voice services.
The Wireless Non-U.S. segment, of which it is a part, is in the top 20% of the 265 Zacks-classified industries. Industry revenues peaked in 2008, but have since moved mostly sideways. The March quarter is generally the weakest, but the revenue growth trend line shows that a protracted weakness since 2013 started reversing last year. The gross profit line shows a bottom in the March 2016 quarter. Strictly controlled interest expenses and rising non-operating income are helping earnings. The debt-to total capitalization ratio, which had jumped to 42% in June 2016, is now back down to a little over 22%.
Vodafone has significant exposure to emerging markets like South Africa, India, Turkey and Egypt with a leadership position in each of these markets. So it is well positioned to benefit from the increased smartphone usage and rising digitization in these countries. It’s also getting ready to make a sizeable investment $2 billion euros in new ultrafast fiber technologies in Germany and is exploring partnerships. This segment is likely to grow faster than traditional lines and may offer quicker payback and higher ROI.
As far as valuation is concerned, the company’s share price is up 12.6% in the last six months compared to just 1.6% for the industry.
Its P/S trails the industry by a wide margin.
Other details:
The dividend yield (5.70%) is significantly higher than the industry:
Zacks Rank #1
VGM Score B
Guess?, Inc. (NYSE:GES)
Guess, Inc. designs, markets, distributes and licenses one of the world's leading lifestyle collections of casual apparel, accessories and related consumer products, including denim and cotton clothing, jeans, pants, overalls, skirts, dresses, shorts, blouses, shirts, jackets and knitwear. In addition, it has granted licenses to manufacture and distribute a broad range of products that complement its apparel lines, including clothing for infants and children, activewear, footwear, eyewear, watches and home products.
The Textile-Apparel manufacturing segment, of which it is a part, is in the top 10% of the 265 Zacks-classified industries. Industry revenues have consistently trended up over the last 15 years, typically rising in the September quarters and dipping notably in the March quarters. Gross profit, EBIT, net income and earnings have therefore also followed this trend. Interest expenses however show an upward trend since June 2014 in tandem with rising financial leverage. The debt- to total capitalization ratio is therefore also rising although it remains manageable at around 44%.
GES is seeing continued strength in Europe and Asia, where better brand positioning, new store openings, rising comps and ecommerce are all helping sales. The Americas remain a challenge, with store closures hurting revenues. GES increased its debt levels this year to fund its international growth opportunities, but the amount raised remains small at just 4% of its total capital.
As far as valuation is concerned, the company’s share price is up 44.7% in the last six months compared to just 9.1% for the industry.
Its P/S indicates that the shares are undervalued:
Other details:
GES topped estimates in two of the last four quarters with the positive surprise moving up. The average surprise was +20.6%. Its 2018 earnings estimate is up 45%, 2019 estimate up 30% in the last 60 days. Earnings are on track to grow 31.1% this year and 35.3% in the next. Sales are expected to grow 6.0% and 5.0%, respectively.
The dividend yield (5.66%) is significantly higher than the industry
Zacks Rank #1
VGM Score B
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