Should you invest in SLM after a 267% dividend raise?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Oct 21, 2021
  • SLM shares on Thursday spiked nearly 3% after announcing its most recent quarterly results.
  • The company reported its fiscal Q3 results Wednesday after markets closed, beating analyst estimates.
  • SLM also boosted its quarterly dividend by a whopping 267% to $0.11 per share.

On Thursday, SLM Corp (NASDAQ:SLM) shares advanced by nearly 3% after announcing its most recent quarterly results. The company reported its fiscal Q3 revenue and earnings Wednesday after markets closed, beating analyst expectations. Sallie Mae also boosted its quarterly dividend by a whopping 267% to $0.11 per share from $0.03, previously. 

The company posted FQ3 GAAP earnings per share of $0.24, beating the consensus Street expectation of $0.15. In addition, its quarterly revenue of $372 million came in $29.48 million ahead of estimates despite edging lower by 0.8% from the same quarter a year ago.

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The student loan company saw private education loan originations rise by 10% Y/Y to $2.1 billion, whilst also spending $244 million in share repurchases.

SLM looks undervalued

From an investment perspective, SLM shares seem substantially undervalued at the current P/E ratio of just 4.74. Therefore, the stock could be a compelling option for value investors. 

Moreover, analysts forecast SLM’s earnings per share to skyrocket by more than 72%this year, before rising at an average annual rate of 20% over the next five years.

As a result, the stock could also gain the attention of growth investors whilst its current forward dividend boost could be attractive to dividend investors.

Source – TradingView

Technically, SLM shares seem to be trading within a gently descending channel formation in the intraday chart. However, the stock recently bounced off the key support at $17.35 to surge towards the 100-day moving average before funding solid resistance.

As a result, the stock has moved closer to the overbought conditions of the 14-day RSI, creating an opportunity for a pullback. 

However, given the company’s exciting growth prospects and compelling valuation multiples, investors could target extended gains at $19.28 and $20.33, while $17.35 and $16.25 are support levels.

It may not be too late to buy

In summary, although SLM shares are up nearly 8% since the 13th of October, the stock is yet to reach overbought conditions, leaving room for more upwards movements. 

Therefore, given its exciting valuation and growth prospects, it may not be too late to buy SLM shares.

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