Although inflation has shown signs of easing, the Fed is unlikely to stop rate increases this year. Amid recessionary concerns, it could be wise to buy and hold fundamentally strong and dividend-paying stocks, The Coca-Cola Company (KO), Comcast (CMCSA), and Verizon Communications (VZ). Keep reading….
Last year, the Federal Reserve’s seven interest rate hikes showed impressive results as inflation eased for the sixth consecutive month in December, rising 6.5% year-over-year and declining 0.1% sequentially.
Although progress has been made in bringing inflation down from its highs, minutes from the Fed’s policy meeting show that the central bank remains committed to bringing inflation down to its 2% target. So, a pause in interest rate hikes is highly unlikely this year.
Moreover, the U.S. jobless claims for the week ended January 14, 2023, fell to their lowest level in more than three months, signaling continued tightness in the labor market.
This is expected to push the economy into a recession leading to further instability in the stock market. Therefore, it could be wise to invest in shares of companies whose businesses remain resilient irrespective of the economic cycle.
To that end, long-term investors could consider buying and holding fundamentally strong and dividend-paying stocks, The Coca-Cola Company (KO), Comcast Corporation (CMCSA), and Verizon Communications Inc. (VZ).
The Coca-Cola Company (KO)
Famous beverage company KO is engaged in manufacturing, marketing, and selling various non-alcoholic beverages worldwide. It provides sparkling soft drinks, enhanced water, juice, dairy, and syrups. In addition, it sells products under Coca-Cola, Diet Coke/Coca-Cola Light, Coca-Cola Zero Sugar, and Fanta brands.
KO paid a dividend of 44 cents to shareholders on December 15, 2022. It has increased its dividend for 61 consecutive years. Its annual dividend of $1.76 yields 2.91% on the current share price. The company’s dividend payouts have increased at a 3.2% CAGR over the past three years and a 3.5% CAGR over the past five years.
In terms of the trailing-12-month gross profit margin, KO’s 58.49% is 86.5% higher than the 31.37% industry average. Likewise, its 31.96% trailing-12-month EBITDA margin is 187% higher than the industry average of 11.14%. Furthermore, the stock’s 3.34% trailing-12-month Capex/Sales is 4.9% higher than the industry average of 3.19%.
KO’s non-GAAP net operating revenues increased 10.2% year-over-year to $11.06 billion for the third quarter ended September 30, 2022. Its non-GAAP gross profit increased 6.5% year-over-year to $6.54 billion.
The company’s non-GAAP net income increased 6.7% year-over-year to $3.01 billion. Also, its non-GAAP EPS came in at $0.69, representing an increase of 6.2% year-over-year.
Analysts expect KO’s revenue for the quarter ending December 31, 2022, to increase 4.4% year-over-year to $9.89 billion. Its EPS for fiscal 2022 is expected to increase 7.3% year-over-year to $2.49. It surpassed consensus EPS estimates in each of the trailing four quarters. Over the past three months, the stock has gained 3.4% to close the last trading session at $60.93.
KO’s POWR Ratings reflect solid prospects. The company has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Sentiment and a B for Stability and Quality. It is ranked #16 out of 35 stocks within the A-rated Beverages industry. Click here to see the other ratings of KO for Growth, Value, and Momentum.
Comcast Corporation (CMCSA)
CMCSA is a media and technology company. Its Cable Communications segment consists of the operations of Comcast Cable, which provides broadband, video, voice, and other services under the XFINITY brand.
Its Media segment consists of television and streaming platforms. Its Studios segment consists of film and television studio production and distribution operations. The company has three primary businesses: Comcast Cable, NBCUniversal, and Sky.
The company is expected to pay a quarterly dividend of $0.27 on January 25, 2023. Its annual dividend of $1.08 yields 2.72% on the current share price. It has a four-year average yield of 2.09%. Its dividend payouts have increased at an 8.7% CAGR over the past three years and an 11.4% CAGR over the past five years.
In terms of trailing-12-month EBIT margin, CMCSA’s 18.91% is 104.5% higher than the 9.25% industry average. Likewise, its 30.40% trailing-12-month EBITDA margin is 60.4% higher than the industry average of 18.95%. Furthermore, the stock’s 8.63% trailing-12-month Capex/Sales is 110.1% higher than the industry average of 4.11%.
CMCSA’s adjusted net income increased 4.5% year-over-year to $4.22 billion for the third quarter ended September 30, 2022. Its adjusted EBITDA increased 5.9% year-over-year to $9.48 billion.
In addition, its adjusted EPS came in at $0.96, representing an increase of 10.3% year-over-year. Also, its net cash provided by operating activities increased 13.9% year-over-year to $6.95 billion.
For the quarter ending December 31, 2022, CMCSA’s EPS and revenue are expected to increase 0.8% and 0.1% year-over-year to $0.78 and $30.36 billion, respectively. It surpassed consensus EPS estimates in each of the trailing four quarters. Over the past three months, the stock has gained 27.1% to close the last trading session at $40.10.
CMCSA’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.
It has a B grade for Quality. Within the Entertainment – TV & Internet Providers industry, it is ranked first out of nine stocks. To see the other ratings of CMCSA for Growth, Value, Momentum, Stability, and Sentiment, click here.
Verizon Communications Inc. (VZ)
VZ and its subsidiaries offer communications, technology, information, and entertainment products and services worldwide to consumers, businesses, and governmental entities. Its segments are Consumer and Business.
On November 30, 2022, VZ announced a global Network-as-a-Service (NaaS) partnership with Wipro Limited (WIT). VZ’s Senior VP and Chief Revenue Officer, Global Enterprise and Public Sector, Massimo Peselli, said, “Our partnership with Wipro will enable businesses to future-proof their network in a manner that is more flexible, agile, and predictive, centered around their specific needs.”
It has increased its dividend for 18 consecutive years. VZ pays a $2.61 per share dividend annually, which translates to a 6.46% yield on the current share price. Its four-year dividend yield is 4.70%. The company’s dividend payouts have grown at CAGRs of 2% and 2.1% over the past three years and five years, respectively. VZ is expected to pay a quarterly dividend of 65.25 cents per share on February 1, 2023.
In terms of the trailing-12-month gross profit margin, VZ’s 56.97% is 13.2% higher than the 50.32% industry average. Likewise, its 32.02% trailing-12-month EBITDA margin is 69% higher than the industry average of 18.95%. Furthermore, the stock’s 16.87% trailing-12-month Capex/Sales is 310.7% higher than the industry average of 4.11%.
VZ’s total operating revenues increased 3.5% year-over-year to $35.25 billion in the fourth quarter ended December 31, 2022. Its adjusted EBITDA declined marginally to $11.75 billion. The company’s net income increased 41.4% from the prior-year quarter to $6.70 billion. In addition, its EPS came in at $1.56, representing an increase of 40.5% year-over-year.
Analysts expect VZ’s revenue for the quarter ending March 31, 2023, to increase 1.5% year-over-year to $34.06 billion. For fiscal 2024, its EPS is expected to increase 0.7% year-over-year to $4.97. It surpassed the Street EPS estimates in three of the trailing four quarters. Over the past three months, the stock has gained 10.7% to close the last trading session at $40.33.
It’s no surprise that VZ has an overall rating of B, which equates to a Buy in our POWR Ratings system. It also has a B grade for Stability and Growth.
VZ is ranked #5 of 19 Telecom – Domestic industry stocks. Click here to see the additional ratings of VZ for Value, Momentum, Sentiment, and Quality.
KO shares fell $0.18 (-0.30%) in premarket trading Thursday. Year-to-date, KO has declined -4.21%, versus a 4.69% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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