“High yield, low quality.”
It’s an association that many investors have stuck in their minds. High yield stocks are usually on the cheaper side, and as a result, can look like bargain bin merchandise. Surprisingly, however, the biggest profits in the market often come from buying low and selling high.
While it would be ideal to find a high-quality stock with a massive yield, in reality, there needs to be some perceived risk before stocks acquire such yields. Nonetheless, it is not impossible to find high yield and quality in the same stock. Careful scrutiny may yield stocks that score high on both the quality factor and the yield factor.
Take A Deeper Look at Postal Savings Bank of China
Postal Savings Bank of China (OTCPK:PSTVY) is a Chinese bank that boasts an 8% yield and a 10% CAGR five-year dividend growth rate. Despite being part of a sector that has been largely beaten down, PSTVY stands out due to a significantly lower exposure to China’s ailing real estate sector compared to its peers, at just 3%. This aspect renders it less vulnerable to the present real estate downturn in China.
Trading at shockingly low multiples according to Seeking Alpha Quant, PSTVY has been growing its revenue by 11.3% and its EPS by 8.7% CAGR over the past five years, achieving a 27.7% net margin and a 9.3% return on equity. Despite its beaten down stock price, Postal Savings Bank is thriving as a business.
Unveiling the Potential of Oaktree Specialty Lending
Oaktree Specialty Lending (OCSL), a U.S. non-bank lender, offers a 10.35% dividend yield, paying out approximately 88% of its earnings as dividends. The company is performing impressively, delivering consistent investment income and boasting a 50.4% net margin. Notably, its entire fiscal year saw a revenue growth of 44%, EBIT growth of 49.5%, and net income growth of 233%, indicating a strong trajectory.
Given the current high interest rate environment, Oaktree Specialty Lending is poised to thrive, as it tends to make more money when rates are high.
Deciphering TORM plc’s Potential
TORM plc (TRMD), a Norwegian shipping company primarily operating as an oil tanker company, offers a sizable 17% yield. However, its earnings can fluctuate due to the highly cyclical nature of the industry, influenced by oil prices and availability of tankers. Despite this, TORM plc has seen considerable growth and expects to continue its upward trajectory, with revenue growing 33% and earnings growing 103% in the trailing 12-month period.
With a 44% net margin and an 11.65% free cash flow margin, TORM plc appears to be managing the current environment very well, offering the potential for sustained dividends in the long term.
Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.
