2 consumer loan stocks with a solid dividend yield to watch

Zacks’ consumer loan industry has been weighed down by muted consumer sentiment, driven primarily by record inflation and geopolitical issues. These have raised fears of an economic slowdown and even a recession in the coming months. Thus, the demand for consumer credit should fall and hinder the growth of the turnover of the players in the sector. Weakening asset quality as economic growth continues to slow is another major short-term headwind.

Additionally, the consumer lending sector has significantly underperformed the S&P 500 index and the Zacks Finance sector so far this year. Shares in this industry collectively lost 26% while the composite sector Zacks S&P 500 and Zacks Finance were down 18.3% and 16.3%, respectively.

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Do these challenges mean that investors are avoiding stocks in this industry? Well, the answer to that is a resounding no. We believe that strong dividend-paying consumer loan stocks – Ally Financial Inc. ALLY and Navient Corporation NAVI – should remain on investors’ radar despite short-term concerns. Along with a robust dividend yield, both of these companies have strong fundamentals to help them weather the current headwinds.

To choose these consumer loan providers, we ran the Zacks Stocks Screener to identify stocks with a dividend yield above 3% and a dividend payout ratio below 30%. Additionally, both stocks currently carry a Zacks rank of #3 (Hold). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here

Let’s discuss the consumer loan stocks mentioned above in detail:

Based in Detroit, MI Allied Financial is a diversified financial services company offering a wide range of financial products and services, primarily to automotive dealerships and their customers. It functions as a financial holding company and a bank holding company. Ally Bank is a wholly owned indirect banking subsidiary of Ally Financial.

Strong origination volumes, growth in retail lending, rising rates and rising deposit balances should continue to support Ally Financial’s earnings. Additionally, as part of its revenue diversification plan, the company has moved into the mortgage business, and its efforts in wealth management and online brokerage related to credit card offerings are commendable. . The acquisitions of Fair Square Financial (a credit card provider), TradeKing and Health Credit Services (a point-of-sale payment provider) will likely help improve ALLY’s product offerings.

The stock has a dividend yield of 3.67% and five-year annualized dividend growth of 19%. In addition, ALLY’s payout ratio is currently 15% of earnings. See Ally Financial’s dividend history here.

Ally Financial Inc. Dividend Yield (TTM)

Ally Financial Inc. Dividend Yield (TTM)

Ally Financial Inc. Dividend Yield (TTM)

Ally Financial Inc. yield-dividend-ttm | Submission by Ally Financial Inc.

navigate, headquartered in Wilmington, DE, is a leading provider of student loan management and business processing solutions for education, healthcare and government customers at the federal, state and local levels. As of June 30, 2022, the company had total assets of $78.05 billion, FFELP loans of $49.21 billion, and private education loans of $19.66 billion.

Navient’s efforts to reduce and simplify business risk bode well. Following receipt of all necessary approvals in October 2021, the company transferred all of its loan servicing contracts from the Ministry of Education to Maximus. With this decision, NAVI eliminated an operationally risky activity and amplified its focus on areas outside of the government’s student loan department. Decent economic growth and a historically low unemployment rate should further stimulate the growth of the private education refinance loan portfolio and improve the company’s business prospects.

The company has a dividend yield of 4.35%. Currently, NAVI’s payout rate is 28% of profits. View Navient’s dividend history here.

Navient Corporation Dividend Yield (TTM)

Navient Corporation Dividend Yield (TTM)

Navient Corporation Dividend Yield (TTM)

Navient Corporation yield-dividend-ttm | Quote Navient Corporation


Adding dividend-paying stocks to your portfolio is prudent, as they are a source of stable income and a cushion against market risk. Despite the benefits of dividend-paying stocks, it’s true that not every company can keep their dividend-paying steak. Thus, investors should be judicious when choosing dividend-paying stocks for stable returns.

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