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Buy Omnicom (OMC) Stock For its Dividend Yield Amid Coronavirus Uncertainty?

Benjamin Rains

Omnicom Group OMC is a global advertising powerhouse that topped our Q4 earnings and revenue estimates in February. The company is also part of a highly-ranked industry, pays a solid dividend, and might help investors weather the coronavirus storm.

Market Recap

The Dow, the S&P 500, and the Nasdaq all tumbled again Friday. This week’s volatility, which included two days of big gains and three downturns, followed last week’s ultra-quick market correction. The coronavirus continues to dent the world’s second-largest economy and beyond.

Earlier in the week, U.S. lawmakers passed an $8 billion-emergency spending package and the Fed cut its benchmark interest rate by half a percentage point to help curb both the economic and health impacts of the coronavirus. Alongside the rapid selling, the yield on the benchmark 10-year U.S. Treasury sank below 0.80% for the first time ever and hovered around 0.70% as of late afternoon trading Friday.  

Coronavirus market volatility looks set to remain until there are signs that it can be contained and Wall Street gains a better understating of how companies might be impacted, which might not come until Q1 reports start to roll in.

Still, even though Apple AAPL, Microsoft MSFT, and others have all lowered their guidance and stocks are down big from their recent highs, some investors are likely on the lookout for stocks, given our current interest rate environment and discounted prices.  

Why Omnicom

Omnicom is an advertising conglomerate that owns large creative and media buying firms, which include BBDO, DDB, and OMD. As a whole, OMC’s branded networks and specialty firms provide everything from advertising and strategic media planning and buying to digital and interactive marketing, public relations, and more. Omnicon, which is part of our Advertising and Marketing industry that rests in the top 17% of our more than 250 Zacks industries, currently boasts over 5,000 clients around the world.

The Madison Avenue powerhouse last month surpassed our fourth quarter estimates. Looking ahead, our Zacks estimates call for OMC’s fiscal 2020 revenue to pop 2% to reach $15.23 billion. Then its 2021 sales are expected to climb another 3.1% to $15.70 billion.

At the bottom end of the income statement, the firm’s adjusted fiscal 2020 earnings are set to climb over 6%, with 2021 expected to jump 5.8% higher. Omnicom’s earnings revisions activity has also popped since its February 11 earnings release. This positivity helps OMC earn a Zacks Rank #2 (Buy) at the moment.

Omnicom is trading relativity in-line with its industry to help it sport an “A” grade for Value in our Style Scores system. OMC also rocks a “B” grade for Growth to help it earn an overall “A” VGM score. And the company pays an annualized dividend of $2.60 a share right now, with a solid 3.82% yield. This clearly blows away the 10-year U.S. Treasury, top’s tech giant Cisco’s CSCO 3.54% and banking giant Morgan Stanley’s MS 3.29%

Bottom Line

Omnicom’s dividend yield also matches up well against its fellow highly-ranked industry peers Interpublic Group IPG and Publicis Groupe SA PUBGY. OMC stock is down 20% in 2020, but it might be worth considering.

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Microsoft Corporation (MSFT) : Free Stock Analysis Report
Cisco Systems, Inc. (CSCO) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
Omnicom Group Inc. (OMC) : Free Stock Analysis Report
Interpublic Group of Companies, Inc. (The) (IPG) : Free Stock Analysis Report
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Publicis Groupe SA (PUBGY) : Free Stock Analysis Report
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