Rising interest rates had a profound impact on some stocks. Contrary to expectation, even decent paying dividend stocks saw major losses in value during the last couple of months. A reallocation of the portfolio may be needed.
- Fuchs Petrolub: The company was mentioned on this blog in May 2022 and has increased from a stock price in the low twenties to almost €32 per share. The share buy-back will come to an end in spring 2024 and although the company is expected to show solid figures also in the future, it may make sense to switch into firms which are valued cheaper. Excluding the dividend payment, Fuchs trades approx. 34% higher than in May 2022.
- Organon: One of these companies seeing major corrections is Organon, which was initially mentioned on this blog in August 2021. Organon has been busy to become fully independent after the spin-off from Merck. Hence, we can expect that some one-off integration costs will disappear in due course. What’s currently missing is revenue (and profit) growth having inherited the portfolio from Merck. Although the company has still more than $8bn in debt, the valuation is compelling: A mid-term free cash flow of around $1bn per year, a P/E ration in the low single digit range, a dividend yield of more than 10% and a payout of roughly one third. Debt has to be amortized only after 2027 giving them the possibility to work on their strategy. The expectations for Organon could not be lower and the company will be looking different in 2 to 3 years.
Current Prices
$11.01 per Organon share
€31.75 per Fuchs Petrolub ordinary share
