The stock market endured immense volatility throughout 2022 due to concerns about high inflation, the Fed’s incessant interest rate hikes to control it, Russia’s invasion of Ukraine, and increasing recessionary fears.

Although the Fed delivered a smaller rate hike last month, hotter-than-expected job additions and a higher wage rate in November have dampened investors’ sentiment. With the Fed keen on continuing its hawkish stance, it seems unlikely that the economy will achieve a soft landing and markets will return to stability anytime soon.

The American Association of Individual Investors’ weekly survey reported that the percentage of bearish investors consistently outnumbered the number of bullish investors by at least 20% for the past two weeks. 

In addition, Statista recently reported that there is a 38.1% chance that the United States will slip into a recession by November 2023. This reflected a significant increase from the 26% probability in the preceding month.

As the stock market is expected to remain highly volatile in the near term, adding fundamentally sound stocks, Cisco Systems, Inc. (CSCO - Get Rating) and CVS Health Corporation (CVS - Get Rating) to your portfolio could be wise. These stocks also pay reliable dividends.

Cisco Systems, Inc. (CSCO - Get Rating)

CSCO designs, manufactures, and sells Internet Protocol-based networking and other communications and information technology products. In addition, it provides infrastructure platforms, including networking technologies of switching, routing, wireless, and data center products.

On December 7, 2022, the company’s Board of Directors declared a quarterly cash dividend of $0.38 per common share, payable on January 25, 2023. Its annual dividend of $1.52 yields 3.17% at the current price level.

Its dividend payouts have increased at a 2.8% CAGR over the past three years and a 5.6% CAGR over the past five years. CSCO has a record of 11 years of consecutive dividend growth.

On November 29, 2022, the company launched new AppDynamics Cloud capabilities that allow organizations to achieve observability over cloud-native applications correlated to business context across the entire IT estate.

The new capabilities will initially support cloud-native applications and digital services running on AWS as both companies continue to empower organizations on their journey to full-stack observability.

CSCO’s total revenue increased 5.7% year-over-year to $13.63 billion for the fiscal first quarter ended October 29, 2022. The company’s operating income grew 3% year-over-year to $3.54 billion, while its non-GAAP net income came in at $3.55 billion, representing a 2.1% year-over-year increase. Also, its non-GAAP EPS came in at $0.86, up 4.9% year-over-year.

The consensus EPS estimate of $0.86 for the second quarter ending January 31, 2023, represents a 1.8% improvement year-over-year. The consensus revenue estimate of $13.41 billion for the current quarter represents a 5.4% increase from the same period last year.

The company has an excellent earnings surprise history, as it surpassed the consensus EPS estimates in each of the trailing four quarters. It has gained 13.7% over the past three months to close the last trading session at $47.55.

CSCO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong 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 Quality and a B for Stability. Within the Technology – Communication/Networking industry, it is ranked #4 out of 48 stocks. Click here to see the other ratings of CSCO for Growth, Value, Momentum, and Sentiment.

CVS Health Corporation (CVS - Get Rating)

CVS is a health service provider operating through four segments: Health Care Benefits, Pharmacy Services, Retail/LTC, and Corporate/Other. Its offerings include health & wellness services, health plans, pharmacy services, and prescription drug coverage.

On December 15, 2022, the company’s board of directors declared a quarterly dividend of $0.605 per share on its common stock, reflecting an increase of 10% from the previous quarter, payable on February 1, 2023.

CVS’ four-year average dividend yield is 2.77%, and its current dividend translates to a 2.60% yield. Its dividends have grown at a 3.2% CAGR over the past three years and a 1.9% CAGR over the past five years.

Earlier in the same month, CVS announced the opening of its first MinuteClinic locations in northern Delaware. MinuteClinic shall provide high-quality, affordable, and convenient care for acute and chronic conditions for patients aged 18 months and older.

“With only 16.4% of the primary care physicians needed currently available in Delaware, we are focused on expanding our presence to help increase access to high-quality, affordable health care for people in the communities where they live and work,” said Creagh Milford, Senior Vice President of Retail Health at CVS.

CVS’ total revenue for the fiscal third quarter ended September 30, 2022, increased 10% year-over-year to $81.16 billion. The company’s adjusted operating income grew 3.9% year-over-year to $4.23 billion, while its adjusted attributable net income rose 5.3% from the year-ago value to $2.76 billion. Also, its adjusted EPS increased 6.1% year-over-year to $2.09.

Analysts expect CVS’ EPS and revenue for fiscal 2022 to increase 2.6% and 7.7% year-over-year to $8.62 and $314.60 billion, respectively. It has surpassed the consensus EPS estimates in each of the trailing four quarters. The stock has lost 2.1% over the past six months to close the last trading session at $91.98.

CVS’ POWR Ratings reflect solid prospects. According to our proprietary rating system, it has an overall rating of A, translating to a Strong Buy.

It has an A grade for Growth and a B for Stability and Sentiment. It is ranked first out of four stocks in the B-rated Medical – Drug Stores industry. Click here to see the other ratings of CVS for Value, Momentum, and Quality.

CSCO shares were trading at $46.96 per share on Thursday morning, down $0.59 (-1.24%). Year-to-date, CSCO has declined -0.64%, versus a -0.70% rise in the benchmark S&P 500 index during the same period.

About the Author: Shweta Kumari

Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions. More...

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