5 High-Yield But Safe Dividend Stocks to Buy Now

3. OneMain Holdings, Inc. (NYSE:OMF)

Dividend Yield as of July 22: 9.21%

OneMain Holdings, Inc. (NYSE:OMF) is an American financial services holding company that focuses on consumer finance and insurance.

OneMain Holdings, Inc. (NYSE:OMF) started paying dividends in 2019 and has maintained its dividends since then. At the end of March 2022, the company had $640 million available in cash and cash equivalents, up from $541 million in the previous quarter. Its dividend payment seems sustainable, as the cash flow payout ratio stands at 20%. In the last five years, its operating cash flow grew from $1.3 billion to $2.2 billion.

OneMain Holdings, Inc. (NYSE:OMF) pays a quarterly dividend of $0.95 per share, raising it by 35% in February. As of July 22, the stock’s dividend yield came in at 9.21%.

In July, Barclays lowered its price target on OneMain Holdings, Inc. (NYSE:OMF) to $62, highlighting the ongoing inflation and possibility of a recession. However, the firm kept an Overweight rating on the stock.

The number of hedge funds tracked by Insider Monkey owning stakes in OneMain Holdings, Inc. (NYSE:OMF) stood at 37 in Q1, declining from 44 in the previous quarter. The collective value of these stakes is nearly $866 million. Parsifal Capital Management was the largest stakeholder of the Indiana-based company, owning over 2 million shares.

ClearBridge Investments mentioned OneMain Holdings, Inc. (NYSE:OMF) in its Q4 2021 investor letter. Here is what the firm has to say:

“Similar to the energy sector, the financials sector is also trading at very depressed multiples relative to the market. While the sector’s strong fundamentals received some recognition in 2021, it was rewarded with substantially lower valuations than it should have had. Despite earnings growing over 30% and exceeding the overall market’s, financial stock multiples stayed flat and are currently selling at a discount of roughly 9x forward earnings.

Consumer lender OneMain is an excellent representation of the divide between perception and reality. Similar to the market’s outlook on natural gas prices for EQT, the outlook for consumer credit metrics are worse than the current reality. It is inevitable that record-low delinquencies and loss rates will rise. However, the market’s perception of these headwinds to future earnings growth has been excessive. Higher loan losses are just one piece of a larger pie, and we believe that accelerating loan growth and associated operating leverage provides a buffer to allow OneMain to continue to compound earnings for the foreseeable future. Concerns about credit have completely overshadowed these positive drivers and have resulted in the stock trading at just 5x its projected cash earnings for 2022.”