Inflation closed out 2022 in a modest retreat, with the consumer price index (CPI) accelerating 6.5% year-over-year in December, down from 7.1% in November and a 9.1% peak hit in June last year. Despite the significant slowdown in price increases, inflation continues to hover way above the Fed’s target of 2%.
According to Richmond Fed president Thomas Barkin, with the inflation slowing down considerably, the central bank doesn’t need to increase interest rates as aggressively as it did last year. However, he warns of still-high median inflation and sees the rate path as “slower, but longer and potentially higher.”
A favorable December CPI report is likely to keep the Fed on track to reduce the size of the rate hike to 25 basis points at its meeting on February 1. Although cooling inflation bolsters hopes that the U.S. economy can avert a recession, markets are still expected to remain highly volatile in the near future since Fed policymakers signal a rate-hike slowdown but no pause this year.
Amid an uncertain market backdrop, fundamentally sound, dividend-paying stocks Honda Motor Company, Ltd. (HMC), Gilead Sciences, Inc. (GILD), and Sisecam Resources LP (SIRE) could be ideal investments to ensure a stable income stream.
Honda Motor Company, Ltd. (HMC)
Headquartered in Tokyo, Japan, HMC develops, manufactures, and distributes motorcycles, automobiles, power products, and other products in Japan, North America, Europe, Asia, and internationally. Its four segments include Motorcycle Business; Automobile Business; Financial Services Business; and Life Creation and Other Businesses.
On December 8, 2022, HMC’s Honda Motor (China) Investment Co., Ltd signed a battery-for-electric-vehicle deal with Contemporary Amperex Technology Co Limited. As per the contract, Honda would buy 123 GWh of batteries from CATL for use in China’s pure electric vehicles between 2024 and 2030.
The battery supply contract will guarantee Honda a long-term supply of batteries amid current supply chain headwinds in the economy.
In October, HMC and LG Energy Solution announced plans to build a new joint venture battery plant in Fayette County, Ohio, and intend to invest $3.5 billion and create 2,200 jobs. The firm aims to invest in a workforce that will provide the power source for future Honda and Acura electric vehicles. It has set a goal of having battery-electric and fuel-cell electric vehicles account for 100% of its vehicle sales by 2040.
HMC’s sales revenue increased 25% year-over-year to ¥4.26 trillion ($32.61 billion) for the quarter that ended September 30, 2022. Its operating profit grew 16.2% year-over-year to ¥231.20 billion ($1.77 billion). In addition, the company’s profit rose 13.6% year-over-year to ¥189.20 billion ($1.45 billion).
Over the last five years, HMC’s dividend payouts have grown at a 1.2% CAGR. While HMC’s four-year average dividend yield is 3.39%, its current dividend translates to a 3.90% yield annually.
Analysts expect HMC’s revenue to increase 10.2% year-over-year to $143.73 billion for the fiscal year ending March 2024. The company’s EPS for the next year is expected to grow 24.6% year-over-year to $3.02. HMC has surpassed the consensus revenue estimates in each of the four trailing quarters.
Over the past month, the stock has gained 1.1% to close the last trading session at $24.10.
HMC’s strong fundamentals are reflected in its POWR Ratings. The stock’s overall A rating translates to a Strong 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 an A grade for Value and a B for Quality and Stability. The stock is ranked #6 among the 62 stocks in the Auto & Vehicle Manufacturers industry.
Beyond the grades above, we’ve also rated HMC for Momentum, Sentiment, and Growth. Get all HMC ratings here.
Gilead Sciences, Inc. (GILD)
GILD is a biopharmaceutical company focusing on developing and commercializing medicine for treating life-threatening diseases, including HIV, viral hepatitis, and cancer.
On January 3, 2022, GILD announced that the European Medicines Agency (EMA) had validated the Marketing Authorization Application (MAA) for Trodelvy to treat adult patients with pre-treated HR+/HER2- metastatic breast cancer. Given the limited treatment options, this plays a significant role in making Trodelvy accessible to more patients across the European Union (EU).
On the same day, GILD, and EVOQ Therapeutics, Inc. announced a collaboration and licensing agreement to advance EVOQ’s proprietary technology for treating rheumatoid arthritis (RA) and lupus. Under the agreement, GILD would receive the rights to exclusively license EVOQ’s NanoDisc technology to develop and commercialize immunotherapy products clinically.
GILD has a record of seven years of consecutive dividend growth. The company pays an annual dividend of $2.92, which yields 3.41% at the current price level. Its dividend payouts have increased at a 5% CAGR over the past three years and a 7% CAGR over the past five years.
GILD’s total product sales, excluding Veklury, increased 11% year-over-year to $6.05 billion for the fiscal third quarter that ended September 30, 2022. The company’s HIV product sales increased 7% year-over-year to $4.49 billion, and its oncology sales rose 79% from the prior-year period to $578 million.
As of September 30, 2022, GILD’s current liabilities were $62.56 billion, compared to $67.95 billion as of December 31, 2022.
For the quarter that ended December 31, 2022, GILD’s EPS is expected to increase 116% year-over-year to $1.49. Moreover, the company has surpassed the consensus EPS estimates in three of the trailing four quarters. The stock has gained 37.5% over the past six months and 18.6% over the past year to close the last trading session at $85.72.
It is no surprise that GILD has an overall A rating which equates to a Strong Buy in our POWR Ratings system.
GILD has an A grade for Value and a B for Sentiment and Quality. Out of the 396 stocks in the Biotech industry, it is ranked #4.
Click here to see the other ratings of GILD for Growth, Momentum, and Stability.
Sisecam Resources LP (SIRE)
SIRE is engaged in trona ore mining and soda ash production with its facility in the Green River basin of Wyoming. It processes trona ore into soda ash, an essential raw material in flat glass, container glass, detergents, chemicals, paper, and other consumer and industrial products.
For the fiscal third quarter that ended September 30, 2022, SIRE’s net sales increased 40.5% year-over-year to $190.50 million. The company’s operating income rose 295.2% from the year-ago value to $32.80 million, while the adjusted EBITDA attributable to SIRE increased 69.2% year-over-year to $20.30 million.
Also, net income attributable to SIRE grew 108.1% year-over-year to $15.40 million. In addition, its EPS came in at $0.76, up 111.1% year-over-year.
SIRE’s four-year average dividend yield is 7.15%, and its current dividend translates to a 9.61% yield. The company’s dividend payouts have grown at a CAGR of 10.7% over the past three years. It paid a quarterly dividend of $0.50 per share on November 17, 2022.
Shares of SIRE have gained 23.7% over the past six months to close the last trading session at $22.38.
SIRE’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
SIRE has an A grade for Growth and Quality and a B for Value and Stability. Within the B-rated Chemicals industry, it is ranked first out of 89 stocks.
To access additional POWR Ratings for SIRE (Sentiment and Momentum), click here.
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HMC shares fell $0.33 (-1.37%) in premarket trading Friday. Year-to-date, HMC has gained 5.42%, versus a 3.80% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More...
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