3 Secure Dividend Shares to Defeat Inflation

Has inflation scared you? If you are an investor, you should. With inflation running at an annual rate of 7.9% for the 12 months ended in February, this would outpace the growth of many investments. To address this, you may want to look at dividend stocks, especially those with yields of 8% or more that have secure, sustainable payment ratios for those returns. They must also demonstrate security with at least three consecutive years of dividend growth and at least four consecutive years of revenue growth.

Camping World Holdings (CWH 2.03% ), OneMain Holdings (OMF -0.78% )and Arbor Realty Trust (APR 0.56% ) They all achieved these measurements and all three prices have an attractive price based on the price-to-earnings ratio (P / E).

A family is enjoying a meal outside their caravan.

Image source: Getty Images.

1. Camping World Holdings dividends travel well

Camping World Holdings is the largest recreational (RV) retailer in the United States. It sells new and used RVs, including spare parts and accessories, and provides RV services. During the pandemic, Camping World businesses flourished as families looked for safer ways to vacation. While Camping World shares have fallen 30% so far this year, the company ‘s activity has not slowed down even with the COVID-19 cases falling.

What the price drop did, however, is make the stock a better buy with a price-to-earnings ratio (P / E) of 4.46, compared to the car / truck industry average P / E of 55.50. I think the fall in the stock price has more to do with what investors expect to happen than with what is happening, as the industry still has accumulated RV orders.

Camping World just raised its quarterly dividend by 25% to $ 0.625 per share, giving it a yield of 8.73% on Friday’s share price. The company has been increasing its revenue every year since it went public at the end of 2016 and more than tripled its annual net income during this period. There is also plenty of room for further growth, as the company’s dividend payout ratio is only 22.1%.

In 2021, the company reported revenue of $ 6.9 billion, up 26.9% from 2020. Net income was $ 642.1 million, up 86.5% from the previous year and annual earnings per share (EPS) was $ 6.07 compared to $ 3.09 in 2020.

Businesses do not seem to be slowing down yet, despite rising gas costs and reduced COVID-19 cases. The company reported a record $ 1.4 billion for the fourth quarter, up 21.5% year-on-year, with net profit of $ 59.3 million, up 46.9% and an EPS of $ 0.90, compared with $ 0.48 earnings per share for the same period in 2020. helps boost the stock is that, in January, the company’s board approved an increase in the initial $ 225 million share repurchase program to spend an additional $ 152.7 million on share repurchases.

2. OneMain Holdings is a good place to park an investment

OneMain Holdings is an online finance company with 1,400 locations in 44 states in the United States. Specializes in lending to non-core customers. The recent rise in interest rates is likely to help the company improve its profit margins. The company’s share price has fallen more than 6% to start this year, giving it a P / E of 4.59, well below the typical P / E in the financial services sector of 21.86. Like Camping World, OneMain seems to be a good deal based on the company’s financial data.

In 2021, the company reported annual revenue of $ 3.93 billion, up 0.5% from 2020 and its fourth consecutive year of rising revenue, while net profit was $ 1.3 billion, up 78% on compared to the same period in 2020. The company’s annual EPS was $ 9.87 compared to $ 5.41 in 2020.

The company just increased its dividend by 36% to $ 0.95 per share, giving it a return of 8.15% from Friday’s share price. Even with the push, the dividend payment is well covered. Based on last year’s EPS, the forward payment ratio is 38.5%. You need to keep in mind that OneMain dividends are inconsistent, but not bad. The company regularly pays two major special dividends in two quarters that really help boost returns for investors.

Last year, in February, it issued a dividend of $ 3.95 per share and then in August, the dividend was $ 4.20 per share, but the other two quarters were $ 0.70 per share. In 2020, OneMain issued smaller dividends of $ 0.33 and $ 0.45 in the second and fourth quarters, but larger dividends of $ 2.83 in the first quarter and $ 2.33 in the third quarter.

Like Camping World, OneMain helped shareholders repurchase shares last year (6.7 million in total) and said it plans to repurchase $ 1 billion worth of shares by 2024.

3. The Arbor Realty Trust will grow on you

As a real estate investment trust (REIT), the Arbor Realty Trust is a different animal from the previous two stocks, but has similarly strong financial data. It is a REIT mortgage that provides loans and services for rental properties for apartment buildings and detached houses. The company’s shares have fallen more than 7% so far this year, reducing the company’s P / E to 7.29, well below the standard REIT P / E.

Arbor reported revenue of $ 585.3 million last year, up 25.7% from 2020. Over the past five years, it has increased revenue and distributable net income each year. Last year, the company reported an EPS of $ 2.28, a 15% year-over-year increase, and spent $ 1.38 per share on dividends, giving it a 60.5% payback rate, which is quite low for a REIT. Like OneMain, the Arbor Realty Trust should benefit from the interest rate hike, especially since the average maturity of most loans is only 24.6 months.

The company increased its quarterly dividend for 10 consecutive years to the last seven consecutive quarters, most recently to $ 0.37 per share, representing a 23% increase over those seven quarters. The current dividend yield is a juicy 8.39%.

ABR overall performance level chart

ABR overall performance level data from YCharts.

Good choices, but with risks

Any dividend share with such high returns can carry a bit of risk. Although orders for RVs are high, they could eventually rest and this will slow down Camping World businesses. While rising interest rates are helping the profit margins of OneMain Holdings and the Arbor Realty Trust, they could also significantly reduce demand for loans.

Overall, however, all three companies are well managed and given their relatively low valuations, these risks have already been taken into account in stock prices. Looking at the last three years, everything goes with or exceeds its overall rate of return S&P 500thanks in large part to high-yield dividends.

This article represents the opinion of the author, who may disagree with the “official” position of setting up a Premium Motley Fool consulting service. We are motley! Challenging an investment dissertation – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier and richer.

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