2020 has been a remarkable year for the stock market. While an apparent disconnect between the financial markets and real economy has been the focus of much discussion, rising stock market volatility has remained a primary concern for many investors. The CBOE volatility index has increased 66.1% year-to-date, reflecting a highly volatile market.

However, cloud computing stocks and some names in the retail sector have recorded double digit gains this year thanks to the stay-at-home effects of the pandemic. While panic shopping helped some retailers witness significant demand, remote working trends helped cloud and software companies.

The Fed’s near-zero interest rate policies have pushed many new investors into the stock markets seeking income in response to paltry income paid by credit securities–interest rates on Treasury bills and mortgage-backed securities are at all-time lows. Also, many investors are now shifting their focus away from dividend stocks and toward growth stocks to hedge their portfolios against market fluctuations, while generating a steady stream of income. In addition to beating the broader markets, Oracle Corporation (ORCL) and The Kroger Co. (KR) have maintained their dividend payments this year. Most importantly, these stocks have grown their dividend payouts over the past few years, making them solid bets for income investors.

Oracle Corporation (ORCL)

ORCL develops products and solutions to provide a comprehensive IT infrastructure to businesses worldwide. The company offers three types of cloud software and on-premise software, namely, Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS), and Infrastructure-as-a-Service (IaaS). It also offers hardware products and software support services.

ORCL pays $0.96 per share in dividends annually, yielding 1.6% on its current price. It has a payout ratio of 21.9% of the net income. The company’s dividend payments have grown at a CAGR of 14.9% over the past three years. A dividend of $0.24 per share for the first quarter of 2021 is payable on January 7, 2021.

ORCL’s net income and EPS has increased at CAGRs of 1.8% and 12.7%, respectively, over the past three years, while leveraged free cash flow grew 5.1% over this period. These impressive growth rates have allowed ORCL to increase its dividend payouts periodically.

ORCL’s revenues have increased slightly year-over-year to $9.80 billion in the fiscal second quarter ended November 30. This can be attributed to a 4% rise in its cloud services and licensing support revenue. The company’s operating income rose 13% from the year-ago value to $3.58 billion, while EPS increased 15.9% from the prior-year quarter to $0.80.

The consensus EPS estimate of $1.11 for the fiscal third quarter ending February 28, 2021 represents a 14.4% rise year-over-year. Moreover, ORCL beat the Street EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $10.07 billion for the ongoing quarter indicates a 2.8% rise from the same period last year.

ORCL gained more than 55% to hit its 52-week high of $62.60 on September 30, 2020 since hitting its 52-week low of $39.71 in March. The stock has gained 16.8% over the past year.

How does ORCL stack up for the POWR Ratings?

A for Trade Grade

A for Buy & Hold Grade

A for Peer Grade

A for Industry Rank

A for Overall POWR Rating.

You can’t ask for better. It is currently ranked #1 of 98 stocks in the Software – Application industry.

The Kroger Co. (KR)

KR owns and operates multi department convenience stores across the United States. It sells a variety of products across its retail chain, ranging from fresh produce to jewelry, electronics, and medicines. The company was included in the Dow Jones Sustainability North America Index on December 2, marking eight consecutive nominations. KR falls within the top 20% of the 600 largest companies operating in North America, in terms of S&P Global BMI criteria.

KR has gained 11% over the past year, capitalizing on surging demand as people panic shopped amid the pandemic. KR hit its 52-week low of $26.72 in January but has gained 39.3% since then to hit its 52-week high of $37.22 in September.

KR pays a $0.72 per share annual dividend, yielding 2.3% at the prevailing price. It has a dividend payout ratio of 21.7%. The company’s dividend has increased at a CAGR of 10.1% over the past three years. It paid the fourth quarter dividend of $0.18 on November12.

KR’s impressive dividend payout history is backed by its earnings growth. Its net income and EPS have increased at CAGRs of 24.2% and 30.4%, respectively, over the past three years. The company’s leveraged free cash flow has increased at a CAGR of 61.4% over the same period.

KR’s net sales increased 6.3% year-over-year in the third quarter ended September 30, 2020. This can be attributed to a 108% rise in digital sales. Operating profit increased 211.8% from the year-ago value to $792 million, while its EPS rose 150% from the same period last year to $0.80.

The consensus EPS estimate of $0.68 for the current quarter ending January 2021 indicates a 19.3% rise year-over-year. The company has an impressive earnings surprise history as well; it beat the street EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $30.86 billion for the ongoing quarter represents a 6.8% improvement from the year-ago value.

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ORCL shares were trading at $62.99 per share on Wednesday afternoon, up $1.13 (+1.83%). Year-to-date, ORCL has gained 20.99%, versus a 16.51% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

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