Despite aggressive efforts by the Federal Reserve to cool demand for workers, the number of Americans filing new claims for unemployment benefits fell unexpectedly last week, pointing to another month of solid job growth and continued labor market tightness.
Moreover, while inflation is likely to drop further, considering its gradual decline over the past months, it remains above the Fed’s 2% target, leaving a slim chance of rate cuts anytime soon.
Furthermore, as per the majority of economists in a Reuters poll, the Federal Reserve will end its tightening cycle after a 25-basis-point hike at each of its next two policy meetings and then likely hold interest rates steady for at least the rest of the year.
Given the macro uncertainties, fundamentally strong stocks Caterpillar Inc. (CAT), ADT Inc. (ADT), and Ingles Markets, Incorporated (IMKTA) might be ideal buys to keep your portfolio safe in 2023. These stocks pay a reliable dividend.
Caterpillar Inc. (CAT)
CAT manufactures and sells construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. The company operates through its five segments: Construction Industries; Resource Industries; Energy & Transportation; Financial Products; and All Others.
On January 6, 2022, CAT announced an investment in Lithos Energy, Inc., a battery technology company based in the United States that manufactures lithium-ion battery packs.
CAT’s investment in Lithos further demonstrates the company’s commitment to supporting customers in the energy transition with lower-carbon advanced power technologies for its hybrid and full-electric machines and power generation products.
On December 15, 2022, CAT announced a collaboration with Luck Stone, the nation’s largest family-owned and operated producer of crushed stone, sand, and gravel.
Denise Johnson, President of Resource Industries at CAT, said, “CAT has a long-standing relationship with Luck Stone, and we look forward to working together to bring the demonstrated benefits of increased safety and productivity to the quarry industry.”
CAT’s annual dividend of $4.80 yields 1.95% on prevailing prices, and its four-year average dividend yield is 2.45%. Also, the company has raised its dividend payouts for 29 consecutive years.
The stock’s trailing-12-month P/E multiple of 17.86x is 7.6% lower than the 19.33x industry average.
CAT’s total sales and revenues increased 20.9% year-over-year to $14.99 billion in the third quarter that ended September 30, 2022. Profit attributable to common shareholders grew 43.1% from the year-ago value to $2.04 billion, while its profit per common share increased 48.8% from its year-ago value to $3.87.
The consensus EPS estimate of $4.01 for the fiscal fourth quarter ending December 2022 indicates a 49.2% improvement year-over-year. The consensus revenue estimate of $15.81 billion represents a 14.6% increase from the same quarter last year.
Additionally, CAT has topped consensus EPS estimates in each of the trailing four quarters and consensus revenue in three of the trailing four quarters, which is impressive.
The stock has gained 36.9% over the past six months and 10.9% over the past year to close the last trading session at $245.75.
CAT’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has a B grade for Sentiment. Within the B–rated Industrial-Machinery industry, it is ranked #13 out of the 80 stocks.
To see additional POWR Ratings for Value, Momentum, Quality, Growth, and Stability for CAT, click here.
ADT Inc. (ADT)
ADT provides security, interactive, and innovative home solutions to serve residential, small business, and commercial customers in the United States. Its segments include Consumer and Small Business (CSB); Commercial; and ADT Solar business (Solar).
On October 13, 2022, ADT announced it had issued and sold in a private placement to State Farm 133.3 million shares (approximately 15% stake) of ADT common stock for a gross purchase price of $1.2 billion.
This deepens the partnership between the companies, initially announced on September 6, which expect to deliver safe, smart, and sustainable solutions through innovative offerings, unrivaled safety, and premium experiences.
While it has an annual dividend of $0.14 which yields 1.60% on prevailing prices, its four-year average dividend yield is 4.42%.
In terms of forward EV/EBITDA, it is trading at 7.55x, 22.9% lower than the industry average of 9.79x. Its forward Price/Book multiple of 2.27 is 15.6% lower than the 2.69 industry average.
ADT’s total revenue increased 21.8% year-over-year to $1.60 billion in the third quarter of the fiscal year 2022 that ended September 30, while the company’s adjusted EBITDA grew 11.9% year-over-year to $620 million.
The company reported an adjusted net income of $83 million or $0.10 per share, compared to an adjusted net loss of $54 million or $0.07 per share in the previous-year quarter.
Analysts expect ADT’s revenue for the fiscal first quarter ending March 2023 to grow 9.6% year-over-year to $1.69 billion. Also, its EPS is likely to rise 31.1% year-over-year to $1.12 in the same quarter.
ADT’s stock has gained 22.8% over the past six months to close the last trading session at $8.73.
Its strong fundamentals are reflected in its POWR Ratings. ADT has an overall rating of B, translating to a Buy in our POWR Ratings system.
It has an A grade for Growth and a B for Stability and Sentiment. ADT is ranked #4 out of 60 stocks in the Home Improvement & Goods industry.
Click here to see the additional ratings of ADT for Value, Momentum, and Quality.
Ingles Markets, Incorporated (IMKTA)
IMKTA operates a chain of supermarkets in the southeast United States. It offers food products, non-food products, and private-label items. Its market capitalization is $1.86 billion.
Its annual dividend of $0.66 yields 1.70% on the current market prices. It has a four-year average yield of 1.36%.
In terms of its trailing-12-month EV/Sales, the stock is trading at 0.38x, 79% lower than the industry average of 1.81x. The stock’s trailing-12-month EV/EBIT multiple of 5.75 is 68.1% lower than the industry average of 18.00.
During the fiscal 2022 fourth quarter ended September 24, 2022, IMKTA’s net sales increased 8.7% year-over-year to $1.45 billion, while its gross profit grew 6.9% from the year-ago value to $364.78 million. The company reported an EPS of $3.69.
Street expects IMKTA’s revenue to increase 3% year-over-year to $4.70 billion in 2023.
The stock has gained 19.4% over the past year to close the last trading session at $94.67.
It is no surprise that IMKTA has an overall A rating, which equates to a Strong Buy in our proprietary rating system. Also, it has an A grade for Quality and a B for Value and Stability. IMKTA is ranked first among 39 stocks in the A-rated Grocery/Big Box Retailers industry.
Beyond what we’ve stated above, we have also given IMKTA grades for Growth, Momentum, and Sentiment. Get all IMKTA ratings here.
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REVISED: 2023 Stock Market Outlook (includes top 7 picks)
CAT shares rose $0.26 (+0.11%) in premarket trading Friday. Year-to-date, CAT has gained 3.18%, versus a 1.86% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...
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