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Fight a Hawkish Fed With These 3 Top Financial Stocks
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Eyes are entirely focused on the FOMC’s meeting this week, where the consensus is that the Fed will be cranking interest rates by 75 basis points.
The Fed’s pivot to a hawkish nature in 2022 has been a thorn in the side of stocks. However, the financial sector stands to be positively impacted by the tightening cycle.
During a higher-interest rate environment, profit margins can expand for those in the sector, particularly insurance companies and banks.
Three highly-ranked stocks in the Zacks Financial Sector – Bank OZK (OZK - Free Report) , Ares Capital Corporation (ARCC - Free Report) , and Unum Group (UNM - Free Report) – could all be options for investors to consider in fighting back against a hawkish Fed.
Below is a chart illustrating the share performance of all three companies in 2022, with the S&P 500 blended in as a benchmark.
Image Source: Zacks Investment Research
As we can see, all three stocks have already widely outperformed the general market in 2022, undoubtedly a positive.
For the cherry on top, all three stocks sport a Zacks Rank #1 (Strong Buy).
Let’s take a deeper dive into each one.
Unum Group
Unum Group provides disability insurance, long-term care insurance, life insurance, and employee-paid group benefits and related services.
Analysts have been overwhelmingly bullish over the last several months, pushing their earnings estimates higher across all timeframes.
Image Source: Zacks Investment Research
UNM carries a very favorable growth profile; the Zacks Consensus EPS Estimate resides at $6.11 for FY22, reflecting a stellar double-digit 40% Y/Y uptick.
Image Source: Zacks Investment Research
In addition to rising earnings estimates and supercharged bottom line growth, UNM’s annual dividend yields a rock-solid 3.2% paired with a five-year annualized dividend growth rate of 6.2%.
Further, the company’s yield is much higher than its Zacks Financial Sector average of 2.4%.
Image Source: Zacks Investment Research
For the icing on the cake, UNM shares are cheap; the company’s 6.7X forward earnings multiple represents a staggering 54% discount relative to its Zacks Sector.
UNM carries a Style Score of an A for Value.
Image Source: Zacks Investment Research
Bank OZK
Bank OZK offers financial products and services, including savings accounts, personal and business loans, debit and credit cards, mortgages, cash management, online banking services, and many others.
OZK’s earnings outlook has turned visibly bright over the last several months.
Image Source: Zacks Investment Research
OZK has been on a blazing-hot earnings streak, exceeding both revenue and earnings estimates in each of its previous nine quarters. Just in its latest print, Bank OZK penciled in an 8% bottom line beat and a 2.4% revenue beat.
Bank OZK is dedicated to rewarding its shareholders – the company has upped its dividend payout an almost unbelievable 20 times over the last five years, paired with a 12.4% five-year annualized dividend growth rate.
OZK shares could also be considered undervalued – the company’s 9.4X forward earnings multiple sits nicely below its five-year median of 10.8X and represents a 35% discount relative to its Zacks Sector.
Image Source: Zacks Investment Research
Ares Capital Corporation
Ares Capital Corporation is a specialty finance company offering customized financing solutions, ranging from senior-debt instruments to equity capital, focusing on senior secured debt.
Analysts have pushed their bottom-line outlook substantially higher over the last several months.
Image Source: Zacks Investment Research
ARCC’s bottom line growth is worth highlighting – the Zacks Consensus EPS Estimate for the company’s current fiscal year (FY22) resides at $1.93, good enough for a sizable 16.3% Y/Y uptick.
And in FY23, earnings are projected to climb a further double-digit 10%.
Image Source: Zacks Investment Research
Ares Capital’s dividend metrics would make any income-focused investor thrilled; ARCC’s annual dividend yields a massive 9.1%, nowhere near its Zacks Sector average.
In addition, the company has upped its dividend payout five times over the last five years.
Image Source: Zacks Investment Research
ARCC carries a 9.8X forward P/E ratio, nicely beneath its 10.4X five-year median and representing an attractive 32% discount relative to its Zacks Sector.
Image Source: Zacks Investment Research
Bottom Line
With the Fed fully pivoting to a hawkish nature, it spells bad news for many stocks. Still, those in the financial sector can realize higher profit margins, providing a more defensive approach for investors.
For those searching for strong stocks in the realm, Bank OZK (OZK - Free Report) , Ares Capital Corporation (ARCC - Free Report) , and Unum Group (UNM - Free Report) all fit the criteria and could all be considerations.
All three stocks sport the highly-coveted Zacks Rank #1 (Strong Buy) paired with solid dividend payouts, undoubtedly major perks that instill confidence.
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Fight a Hawkish Fed With These 3 Top Financial Stocks
Eyes are entirely focused on the FOMC’s meeting this week, where the consensus is that the Fed will be cranking interest rates by 75 basis points.
The Fed’s pivot to a hawkish nature in 2022 has been a thorn in the side of stocks. However, the financial sector stands to be positively impacted by the tightening cycle.
During a higher-interest rate environment, profit margins can expand for those in the sector, particularly insurance companies and banks.
Three highly-ranked stocks in the Zacks Financial Sector – Bank OZK (OZK - Free Report) , Ares Capital Corporation (ARCC - Free Report) , and Unum Group (UNM - Free Report) – could all be options for investors to consider in fighting back against a hawkish Fed.
Below is a chart illustrating the share performance of all three companies in 2022, with the S&P 500 blended in as a benchmark.
Image Source: Zacks Investment Research
As we can see, all three stocks have already widely outperformed the general market in 2022, undoubtedly a positive.
For the cherry on top, all three stocks sport a Zacks Rank #1 (Strong Buy).
Let’s take a deeper dive into each one.
Unum Group
Unum Group provides disability insurance, long-term care insurance, life insurance, and employee-paid group benefits and related services.
Analysts have been overwhelmingly bullish over the last several months, pushing their earnings estimates higher across all timeframes.
Image Source: Zacks Investment Research
UNM carries a very favorable growth profile; the Zacks Consensus EPS Estimate resides at $6.11 for FY22, reflecting a stellar double-digit 40% Y/Y uptick.
Image Source: Zacks Investment Research
In addition to rising earnings estimates and supercharged bottom line growth, UNM’s annual dividend yields a rock-solid 3.2% paired with a five-year annualized dividend growth rate of 6.2%.
Further, the company’s yield is much higher than its Zacks Financial Sector average of 2.4%.
Image Source: Zacks Investment Research
For the icing on the cake, UNM shares are cheap; the company’s 6.7X forward earnings multiple represents a staggering 54% discount relative to its Zacks Sector.
UNM carries a Style Score of an A for Value.
Image Source: Zacks Investment Research
Bank OZK
Bank OZK offers financial products and services, including savings accounts, personal and business loans, debit and credit cards, mortgages, cash management, online banking services, and many others.
OZK’s earnings outlook has turned visibly bright over the last several months.
Image Source: Zacks Investment Research
OZK has been on a blazing-hot earnings streak, exceeding both revenue and earnings estimates in each of its previous nine quarters. Just in its latest print, Bank OZK penciled in an 8% bottom line beat and a 2.4% revenue beat.
Bank OZK is dedicated to rewarding its shareholders – the company has upped its dividend payout an almost unbelievable 20 times over the last five years, paired with a 12.4% five-year annualized dividend growth rate.
Further, OZK’s 3% annual dividend yield handily beats its Zacks Sector average.
Image Source: Zacks Investment Research
OZK shares could also be considered undervalued – the company’s 9.4X forward earnings multiple sits nicely below its five-year median of 10.8X and represents a 35% discount relative to its Zacks Sector.
Image Source: Zacks Investment Research
Ares Capital Corporation
Ares Capital Corporation is a specialty finance company offering customized financing solutions, ranging from senior-debt instruments to equity capital, focusing on senior secured debt.
Analysts have pushed their bottom-line outlook substantially higher over the last several months.
Image Source: Zacks Investment Research
ARCC’s bottom line growth is worth highlighting – the Zacks Consensus EPS Estimate for the company’s current fiscal year (FY22) resides at $1.93, good enough for a sizable 16.3% Y/Y uptick.
And in FY23, earnings are projected to climb a further double-digit 10%.
Image Source: Zacks Investment Research
Ares Capital’s dividend metrics would make any income-focused investor thrilled; ARCC’s annual dividend yields a massive 9.1%, nowhere near its Zacks Sector average.
In addition, the company has upped its dividend payout five times over the last five years.
Image Source: Zacks Investment Research
ARCC carries a 9.8X forward P/E ratio, nicely beneath its 10.4X five-year median and representing an attractive 32% discount relative to its Zacks Sector.
Image Source: Zacks Investment Research
Bottom Line
With the Fed fully pivoting to a hawkish nature, it spells bad news for many stocks. Still, those in the financial sector can realize higher profit margins, providing a more defensive approach for investors.
For those searching for strong stocks in the realm, Bank OZK (OZK - Free Report) , Ares Capital Corporation (ARCC - Free Report) , and Unum Group (UNM - Free Report) all fit the criteria and could all be considerations.
All three stocks sport the highly-coveted Zacks Rank #1 (Strong Buy) paired with solid dividend payouts, undoubtedly major perks that instill confidence.