Five student loan stocks to watch in April: DFS to SLM

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Five student loan stocks to watch in April: DFS to SLM

Five student loan stocks to watch in April: DFS to SLM
Image source: © PureSolution | Megapixl.com

Highlights 

  • Discover Financial Services (DFS) launched a benefits-packed Cashback Debit account on April 6.
  • Nelnet, Inc. (NNI) plans to launch a new private student loan product. 
  • Citizens Holding Company (CIZN) has an annualized dividend of 0.96.

The US had suspended students’ loan repayments during the pandemic. Many borrowers had benefitted from the Covid-era government scheme. However, with the covid situation improving, the administration is expected to announce an update on loan repayments. 

According to people familiar with the matter, the Biden administration might extend the moratorium on federal student loans for another few months. If that happens, it would be the sixth extension spanning two presidencies. The following are five student loan stocks worth exploring in the second quarter.   

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Discover Financial Services (NYSE: DFS)

Closing price on April 5, 2022: US$110.75
Market capitalization: US$31.54 billion 

Riverwoods, Illinois-based Discover Financial Services is a bank. The bank issues credit and debit cards, and offers banking products, including deposit accounts and student and personal loans. 

The company will announce its Q1, 2022 earnings on April 27.  

In January, the company announced to employ approximately 1,000 individuals this year to fill its customer care center positions to meet the growing demand. 

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On April 6, it announced launching a benefits-packed Cashback Debit account where users may get early access to paychecks up to two days in advance and a mobile-first banking experience. However, it is not related to student loans but is a crucial feature for the other users.

On the financial front, the company posted a net interest income of US$10.65 billion for the fiscal year ended December 31, 2021. The net interest income was US$11.1 billion in the previous fiscal. Its net income attributable to common shareholders came in at US$5.35 billion or US$17.83 per diluted share compared to US$1.1 billion or US$3.60 per diluted share in FY 2020.

In the fourth quarter, its total loans were US$93.7 million with a 4% increase YoY, and the private student loans increased by US$159 million, a 2% increase YoY. 

The stock has a P/E ratio of 6.29 and a forward P/E for one year of 7.89. Its dividend yield is 1.8%, with an annualized dividend of US$2.0. 

The stock traded in the range of US$135.69 to US$94.91 in the last 52 weeks.

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Five student loan stocks to watch in April: DFS to SLMSource: Pixabay

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Nelnet, Inc. (Finance: NNI)

Closing price on April 5, 2022: US$85.05
Market capitalization: US$3.2 billion

Nelnet Inc provides student loans and tuition payment services. Lincoln, Nebraska-based company earns most of its income from student loans. 

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On April 5, 2021, the company announced a new private student loan product launch. 

The company earned a net interest income of US$523.8 million for the fiscal year 2021 compared to US$619.6 million a year ago. The net income attributable to the company came to be US$393.3 million or US$10.20 per diluted share compared to US$352.4 million or US$9.02 per diluted share in fiscal 2020.

NNI stock has a P/E ratio of 8.35. Its dividend yield is 1.12%, with an annualized dividend of US$0.96.

The stock traded in the range of US$99.78 to US$72.00 in one year.

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Citizens Holding Company (NASDAQ: CIZN)

Closing price on April 5, 2022: US$19.25
Market capitalization: US$107 million

Philadelphia, Mississippi-based Citizens Holding Co is a bank holding company. It offers demand deposits, savings & time deposit accounts, secured and unsecured loans, letters of credit, mortgage loans, etc. 

Citizens earned a total interest income of US$38.5 million in fiscal 2021 compared to US$40.6 million in the previous fiscal year. Its net income came in at US$7.49 million or US$1.34 per share diluted compared to US$6.9 million or US$1.24 per share diluted in fiscal 2020.  

The stock has a P/E ratio of 14.33. Its dividend yield is 4.99%, with an annualized dividend of 0.96.

 The stock traded in the range of US$21.45 to US$17.00 in the last 52 weeks.

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SLM Corporation (NASDAQ: SLM)

Closing price on April 5, 2022: US$18.13
Market capitalization: US$4.96 billion

SLM Corp is one of the largest student lenders. It is headquartered in Newark, Delaware.

The company issues student loans through private channels and Federal Family Education Loan Program.

SLM’s net interest income for the fiscal year ended December 31, 2021, was US$1.78 billion compared to US$2.02 billion in the previous year. Its net income attributable to the company came in at US$1.16 billion or US$3.61 per diluted share compared to US$0.870 billion or US$2.25 per diluted share in fiscal 2020.

The stock has a P/E ratio of 5.12 and a forward P/E for one year of 6.13. Its dividend yield is 2.46%, with an annualized dividend of 0.44.

 The stock moved between US$21.40 and US$16.36 in the last 52 weeks.

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Five student loan stocks to watch in April: DFS to SLM

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Navient Corporation (NASDAQ: NAVI)

Closing price on April 5, 2022: US$17.07
Market capitalization: US$2.59 billion 

Navient Corp is a financial services company. The company provides education loan management and business processing services to education, healthcare, and government clients. It is based in Wilmington, Delaware.

Its three business segments are Federal Education Loans, Consumer Lending and Business Processing. 

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For the fiscal year ended December 31, 2021, Navient’s net interest income was US$1.39 billion compared to US$1.1 billion in fiscal 2020. The net income for the FY 2021 was US$717 million or US$4.18 per diluted share compared to US$412 million or US$2.12 per diluted share in the previous fiscal year. 

 The stock has a P/E ratio of 4.24 and a forward P/E for one year of 5.60. Its dividend yield is 3.85%, with an annualized dividend of 0.64.

 The stock traded in the range of US$23.80 to US$14.30 in the last 52 weeks.

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Bottom line:

Some 41 million student borrowers have benefited from the loan payment pause. But as the health crisis wanes, students may soon have to resume paying their dues. Although the government hasn’t decided yet, the student loan stocks may see profits swelling if it decides to revoke the suspension. However, investors should analyze the companies and the broader financial market before investing in stocks.  

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