DTurns are the perfect time to stock up on high-quality dividend-paying stocks. Falling stock prices drive up dividend yields, which means you’ll get more for your money in the long run, assuming the stocks you buy eventually return to growth.
However, not all companies will live up to this assumption, which is why it’s crucial to understand why their stocks are damaged in the first place. Let’s take a look at a pair of stocks that have enough vitality to recover from their recent mishaps.
Viatris (NASDAQ: VTRS) manufactures an assortment of common generic drugs and also produces reputable brands like EpiPens, Viagra, and Lipitor. Overall, thanks to the many products, the company has generated last 12 months revenue of more than $17.6 billion. The company is barely profitable, but its shares have fallen more than 20% in the past year. Market turmoil aside, weak revenue growth is undoubtedly partly responsible for the damage; its first-quarter net sales were 1% lower than a year ago due to lower-than-expected adoption of its generic drugs.
Nevertheless, over the next two years, Viatris plans to launch up to seven new generic drugs, including a few with strong sales potential, such as the attention deficit hyperactivity disorder (ADHD) drug Vyvanse. It is also on track to realize over $1 billion in cost synergies resulting from its recent separation from Pfizer before the end of 2023. So when management asserts that the company’s free cash flow (FCF) will be sufficient to sustain its dividend increase, there is more than one driver in place to suggest that they are right.
Speaking of which, its forward dividend yield is currently above 3.9%, which is quite high. And its last dividend hike was over 9%, which is pretty quick. While there’s no guarantee that Viatris will ever beat the market with such growth – and because generic drugs aren’t likely to have an explosion in demand anytime soon (it’s safer to bet that ‘they won’t) – it’s still an attractive stock for own investors looking for dividend income at a relatively low price compared to last year’s prices.
2. AFC Gamma
Advanced Flower Capital Gamma, or Gamma CAF (NASDAQ: AFCG) as it prefers to be known, is a company that provides secured loans to marijuana businesses in need of financing. With $483 million in outstanding loans and an estimated 18% return on its list of existing liabilities, it will make millions in interest income for years to come even if it stops issuing new loans today. which will not be the case. And if its debtors don’t pay, the company can seize real estate held as collateral, so shareholders won’t be liable for the cost of default.
Unlike Viatris, AFC Gamma hasn’t experienced any setbacks with revenue growth recently, and its 12-month sales grew more than 33.9% to just over $51 million in the first trimester. The roughly 25% decline in the stock over the past year is likely caused by general negative sentiment surrounding cannabis stocks rather than a specific issue with the company’s future prospects. Right now, its forward dividend yield of over 12.2% is positively stratospheric, and its upside of over 44.7% over the past 12 months is equally impressive.
Additionally, this stock is valued at a premium given its price-to-book (PB) ratio of around 1. Such a low PB multiple means investors pay nothing extra for their write-down in value. the company. But don’t expect AFC Gamma shares to always be attractively priced. As the cannabis market expands over the next few years, unless federal legalization of cannabis in the United States occurs, an increasing number of businesses will seek out his services.
And as long as it can continue to receive interest payments and raise new capital itself through debt or equity issuance, it will continue to have the fuel it needs to lend money and secure future returns.
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Alex Carchidi has no position in the stocks mentioned. The Motley Fool recommends Viatris Inc. The Motley Fool has a Disclosure Policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.