The Dow Jones Industrial Average dropped 2.1%, and the S&P 500 index slid 2% on Tuesday as fear of higher rates continued to pressure market sentiment. Also, the latest batch of retail earnings raised concerns about the state of consumer spending.
Morgan Stanley’s chief US equity strategist Mike Wilson said that stocks could crash by 26% over the coming months after surging unsustainable highs. He sees similarities between current valuations and the “death zone” in Mt. Everest, representing the excessive levels that stock prices have climbed to since 2023 started.
Moreover, Jan Hatzius, Goldman Sachs’ head of global investment research and chief economist, said that he expects the Fed to raise rates by 25 basis points at its next three meetings.
On the other hand, markets have grown increasingly confident that the slowdown in inflation would drive the Federal Reserve to end the cycle of aggressive interest-rate hikes soon. However, the high rates could push the economy into a recession.
Given this backdrop, quality dividend-paying stocks Altria Group, Inc. (MO), International Paper Company (IP), ICL Group Ltd (ICL), and Spok Holdings, Inc. (SPOK), yielding greater than 4%, might be ideal buys now.
Altria Group, Inc. (MO)
MO manufactures and sells smokeable and oral tobacco products. The company provides cigarettes primarily under the Marlboro brand; cigars and pipe tobacco principally under the Black & Mild brand; and moist smokeless tobacco products under the Copenhagen, Skoal, Red Seal, and Husky brands, as well as provides on! Oral nicotine pouches.
Earlier this month, MOS announced that its board had authorized a new $1 billion share repurchase program, which the company expects to complete by December 31, 2023. This should enhance shareholders’ returns.
MO pays an annual dividend of $3.76 per share, which translates to a 7.82% yield on the current price. Its dividend payments have grown at CAGRs of 3.9% and 7.7% over the past three and five years, respectively. The company has a four-year average dividend yield of 7.46%. Also, it has paid dividends for 53 consecutive years.
During the fiscal fourth quarter that ended December 31, 2022, MO’s gross profit increased 5.9% year-over-year to $3.51 billion. Adjusted net earnings grew 6% year-over-year to $2.11 billion, while its adjusted EPS increased 8.3% year-over-year to $1.18.
MO’s revenue is expected to rise 2% year-over-year to $4.92 billion for the current fiscal quarter ending March 2023. The company’s EPS is expected to increase 5.8% year-over-year to $1.19 for the same fiscal quarter. Additionally, it has topped consensus EPS estimates in three of the trailing four quarters, which is impressive.
Shares of MO have gained 5.6% over the past month to close the last trading session at $47.44.
MO’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade for Quality. Within the A-rated Tobacco industry, it is ranked #5 out of 9 stocks.
Beyond what is stated above, we’ve also rated MO for Growth, Value, Stability, Momentum, and Sentiment. Get all MO ratings here.
International Paper Company (IP)
IP produces renewable fiber-based packaging and pulp products in North America, Latin America, Europe, and North Africa. It operates through Industrial Packaging and Global Cellulose Fibers segment.
On January 20, IP announced formal plans to invest approximately $103 million to build and operate two natural gas power boilers to generate steam for its Containerboard Mill in Cedar Rapids, Iowa. Construction is set to begin in the second quarter of this year and be fully operational by the end of 2025. This should boost the revenue stream of the company.
On January 10, IP announced a quarterly dividend of $0.46 per share of common stock, payable on March 15, 2023.
IP pays $1.85 annually as dividends. This translates to a yield of 5.12% at the current market price, compared to the 4-year average dividend yield of 4.56%. Also, it has paid dividends for 33 years consecutively.
IP’s net sales increased marginally year-over-year to $5.13 billion in the fourth quarter, which ended December 31, 2022. The company’s earnings from continuing operations increased 249% year-over-year to $171 million, while adjusted operating earnings per share rose 42.6% year-over-year to $0.87.
Analysts expect IP’s revenue for the fiscal first quarter ending March 2023 to be $5.03 billion. The company’s EPS is expected to be $0.47 for the same quarter. Additionally, it has topped consensus revenue and EPS estimates in three of the trailing four quarters, which is impressive.
The stock has gained 4.3% year-to-date to close the last trading session at $36.11.
IP’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
IP also has a B grade for Value and Quality. It is ranked #4 out of 12 stocks in the A-rated Industrial – Paper industry.
To access additional ratings for IP’s Stability, Sentiment, Growth, and Momentum, click here.
ICL Group Ltd (ICL)
Headquartered in Tel Aviv, Israel, ICL operates as a specialty minerals and chemicals company worldwide. It operates in four segments: Industrial Products; Potash; Phosphate Solutions; and Innovative Ag Solutions.
On January 25, ICL announced its plans to build a $400 million lithium iron phosphate (LFP) cathode active material (CAM) manufacturing plant in St. Louis. This is expected to be the first large-scale LFP material manufacturing plant in the United States. The plant is expected to be operational by 2024 and produce high-quality LFP material for the global lithium battery industry.
ICL pays a $0.91 dividend annually, which translates to a yield of 7.49% at the current price, higher than the 4-year average dividend yield of 4.33%. Its dividend payouts have grown at 62% and 57.1% CAGRs over the past three and five years, respectively.
ICL’s adjusted sales rose 2.6% year-over-year to $2.09 billion in the fourth quarter that ended December 31, 2022. The company’s adjusted net income increased 5.6% year-over-year to $358 million, while its adjusted earnings per share increased 7.7% year-over-year to $0.28.
ICL’s revenue is expected to be $8.52 billion for the fiscal year 2022. The company’s EPS is expected to be $0.93 in the same fiscal year. Additionally, the stock has topped the consensus EPS estimates in three of the trailing four quarters.
The stock has declined 2.7% over the past five days to close the last trading session at $7.13.
ICL’s robust prospect is reflected in its POWR Ratings. The stock has an overall B rating, equating to a Buy in our proprietary rating system.
ICL has an A grade for Value and a B for Quality. It is ranked #4 out of 29 stocks in the Agriculture industry.
Click here to see the additional POWR Ratings for ICL (Growth, Stability, Momentum, and Sentiment).
Spok Holdings, Inc. (SPOK)
SPOK provides healthcare communication solutions. It delivers clinical information to care teams when and where it matters to enhance patient outcomes.
The company offers subscriptions to one-way or two-way messaging services; and ancillary services, such as voicemail, and equipment loss or maintenance protection services, as well as sells devices to resellers who lease or resell them to their subscribers.
Its four-year average dividend yield is 6.63%, and its current annual dividend of $1.25 translates to a 13.94% yield on prevailing prices. Over the past three and five years, SPOK’s dividend payouts have grown at 35.7% and 10.8% CAGRs, respectively. Also, it has paid dividends for 13 consecutive years.
During the third quarter of fiscal 2022 ended September 30, 2022, SPOK’s operating income came in at $3.54 million, compared to a loss of $3.56 million in the year-ago quarter. The company’s adjusted EBITDA came in at $4.66 billion, compared to a negative $2.50 billion in the previous-year quarter.
Also, its net income per common share came in at $0.15, compared to negative $0.13 in the previous-year quarter.
Street expects SPOK’s EPS and revenue for the fourth quarter ended December 2022 to be $0.07 and $32.48 million, respectively.
The stock has gained 26% over the past six months, closing the last trading session at $8.97.
It is no surprise that SPOK has an overall rating of B, which equates to a Buy in our POWR Ratings system.
It has an A grade for Growth and Sentiment and B for Quality. SPOK is ranked #2 out of 20 stocks in the Telecom – Domestic industry.
In addition to the POWR ratings above, we have also rated SPOK for Momentum, Value, and Stability. Get all the SPOK ratings here.
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MO shares were trading at $47.82 per share on Wednesday morning, up $0.38 (+0.80%). Year-to-date, MO has gained 4.62%, versus a 4.36% 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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