The Federal Reserve is expected to raise interest rates by three-quarters of a percentage point for the fourth time in a row this week, as inflation still remains high and the economy expanded in the third quarter.

Chester Spatt, professor of finance at Carnegie Mellon University’s Tepper School of Business and former chief economist of the Securities and Exchange Commission, said, “The impacts on the consumer have created potentially difficult economic circumstances and are likely to get considerably worse as we get more of these rate hikes kicking in.”

The S&P 500 has lost more than 18% year-to-date on concerns over the economy witnessing a recession. CNBC’s Jim Cramer said, “According to the S&P oscillator I’ve followed for ages, we’re very overbought right now. You have to hold your nose and sell something because we’re due for a pullback.”

As the market outlook remains bleak, investors could opt for fundamentally sound dividend stocks to ensure a steady income stream. Investors’ interest in dividend stocks is evident from the iShares Core Dividend Growth ETF’s (DGRO) 10.2% gains over the past month.

We think dividend-paying stocks PepsiCo, Inc. (PEP), Cisco Systems, Inc. (CSCO), Abbott Laboratories (ABT), Albertsons Companies, Inc. (ACI), and Hillenbrand, Inc. (HI) could solid investment to cushion one’s portfolio.

PepsiCo, Inc. (PEP)

PEP manufactures, markets, distributes, and sells beverages and convenient foods worldwide. It has seven segments- Frito-Lay North America; Quaker Foods North America; PepsiCo Beverages North America; Latin America; Europe; Africa, Middle East, and South Asia; Asia Pacific, Australia and New Zealand; and China Region.

On September 14, 2022, PEP and agriculture company Archer Daniels Midland Co. (ADM) announced a 7.5-year strategic commercial partnership. This collaboration aims to enhance regenerative agriculture across the companies’ shared North American supply chains and is a commendable step toward sustainable development.

PEP has paid dividends for 49 consecutive years. Its dividend payouts have increased at 7.4% CAGR over the past five years. Its current dividend yield is 2.53%, while its four-year average yield is 2.81%.

PEP’s net revenue came in at $21.97 billion for the third quarter that ended September 3, 2022, up 8.8% year-over-year. Its gross profit increased 8% year-over-year to $11.66 billion. Also, its operating profit came in at $3.53 billion, up 6.1% year-over-year.  

Analysts expect PEP’s revenue to increase 7.1% year-over-year to $85.11 billion in the current year. Its EPS is estimated to grow 8.1% year-over-year to $6.77 in 2022. It has surpassed EPS estimates in all four trailing quarters. Over the past year, the stock has gained 12.4% to close the last trading session at $181.58. 

PEP’s strong fundamentals are reflected in its POWR Ratings. The stock’s overall A rating indicates a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

PEP has an A grade for Quality and a B for Growth, Stability, and Sentiment. In the A-rated Beverages industry, it is ranked #9 out of 33 stocks.

Click here for the additional POWR Ratings for Value and Momentum for PEP.

Cisco Systems, Inc. (CSCO)

CSCO designs, manufactures, and sells Internet Protocol-based networking and other products related to the communications and information technology industry in the Americas, Europe, the Middle East, Africa, the Asia Pacific, Japan, and China. 

On October 12, 2022, CSCO and Microsoft Corporation (MSFT) announced a new partnership to provide customers with more choices. In the first half of 2023, CSCO and MSFT will offer the ability to run Microsoft Teams natively on Cisco Room and Desk devices Certified for Microsoft Teams, with Teams as the default experience option.

CSCO has paid dividends for 11 consecutive years. Its dividend payouts have increased at 6% CAGR over the past five years. Its current dividend yield is 3.35%, while its four-year average yield is 2.97%.

CSCO’s service revenue increased marginally year-over-year to $3.41 billion for the fourth quarter that ended July 30, 2022. Revenue from its EMEA segment came in at $3.58 billion, up 8% year-over-year. Moreover, revenue from end-to-end security products came in at $984 million, up 20% year-over-year.   

CSCO’s revenue is expected to increase 5% year-over-year to $54.13 billion in 2023. Its EPS is estimated to grow 5.1% year-over-year to $3.53 in 2023. It surpassed EPS estimates in all four trailing quarters. Over the past month, the stock has gained 13.6% to close the last trading session at $45.43.

CSCO’s overall B rating equates to a Buy in our POWR Ratings system. Additionally, it has an A grade for Quality. It is ranked #6 out of 49 stocks in the B-rated Technology – Communication/Networking industry.

Click here to see the additional POWR Ratings for Growth, Momentum, Stability, Sentiment, and Value for CSCO. 

Abbott Laboratories (ABT)

ABT discovers, develops, and sells healthcare products focused on cardiovascular, diabetes care, diagnostics, neuromodulation, nutrition, and medicine worldwide. Its products are sold directly to wholesalers, distributors, government agencies, healthcare facilities, pharmacies, and independent retailers.

On October 19, 2022, Robert B. Ford, ABT’s chairman and CEO, said, “Our results and increased guidance in the current macroeconomic environment reflect the strength of our diversified business model and execution.”

ABT has paid dividends for 33 consecutive years. Its dividend payouts have increased at a 12.1% CAGR over the past five years. Its current dividend yield is 1.90%, while its four-year average yield is 1.49%.

ABT’s net sales came in at $33.56 billion for the nine months that ended September 30, 2022, up 6.2% year-over-year. Its net earnings came in at $7.66 billion, up 9.3% year-over-year, while its EPS came in at $4.31, up 10.8% year-over-year.

Street expects ABT’s revenue to increase marginally year-over-year to $43.21 billion in the current year. Its EPS is estimated to grow marginally year-over-year to $5.22 in 2022. It surpassed EPS estimates in all four trailing quarters. Over the past month, the stock has gained 2.3% to close the last trading session at $98.90.

ABT has an overall B rating, which equates to a Buy in our POWR Ratings system. It also has a B grade for Value, Stability, Sentiment, and Quality. ABT is ranked #6 out of 141 stocks in the Medical – Devices & Equipment industry.

Click here to see the additional POWR Ratings for ABT (Growth and Momentum).

Albertsons Companies, Inc. (ACI)

ACI operates as a food and drug store in the United States. The company’s food and retail drug stores offer groceries, general merchandise, health and beauty care products, pharmacy, fuel, and other items and services. In addition, it manufactures and processes food products for sale in stores.

On October 14, 2022, ACI and Kroger Co. (KR) entered a definitive agreement. Under this agreement, the companies will merge two complementary organizations with iconic brand value and deep roots in their local communities to establish a national footprint.

ACI’s current dividend yield is 2.34%, while its four-year average yield is 1.94%.

ACI’s net sales and other revenues came in at $17.92 billion for the second quarter that ended September 10, 2022, up 8.6% year-over-year. Moreover, its net income came in at $342.70 million, up 16.1% year-over-year, while its EPS came in at $0.59, up 13.5% year-over-year.

ACI’s revenue is expected to increase by 6.6% year-over-year to $76.6 billion in 2023. Its EPS is expected to grow 8% per annum for the next five years. It surpassed EPS estimates in all four trailing quarters. Over the past month, the stock has gained 9.9% to close the last trading session at $20.51.

ACI’s overall A rating indicates a Strong Buy in our proprietary rating system. Also, the stock has an A grade for Value and a B for Quality. In the A-rated Grocery/Big Box Retailers industry, it is ranked #9 out of 38 stocks.

Click here for ACI’s additional POWR Ratings for Growth, Stability, Sentiment, and Momentum.

Hillenbrand, Inc. (HI)

HI is a diversified industrial company in the United States and globally. The company operates through three segments: Advanced Process Solutions; Molding Technology Solutions; and Batesville.

On October 6, 2022, HI announced the completion of its acquisition of LINXIS Group from IBERIS INTERNATIONAL S. R.L, an affiliate of IK Partners and other sellers.

Kim Ryan, President and CEO of Hillenbrand, said, “The completion of the LINXIS Group acquisition marks a clear step forward in the execution of our strategy to grow as a world-class industrial company and deliver long-term value to our shareholders.”

HI has paid dividends for 13 consecutive years. Its dividend payouts have increased at a marginal CAGR over the past five years. Its current dividend yield is 1.97%, while its four-year average yield is 2.36%.

HI’s net revenues came in at $720.60 million for the third quarter that ended June 30, 2022, up 3.7% year-over-year. Moreover, its net income came in at $48.8 million, up 20.8% year-over-year. Its EPS came in at $0.68, up 28.3% year-over-year.

HI’s revenue is expected to increase by 4.1% year-over-year to $3.04 billion in 2023. Its EPS is expected to grow 7.5% year-over-year to $4.18 in 2023. It surpassed EPS estimates in all four trailing quarters. Over the past six months, the stock has gained 8.2% to close the last trading session at $44.18.

HI has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has a B for Growth, Value, Quality, and Sentiment. In addition, the stock is ranked #3 out of 36 in the B-rated Industrial – Manufacturing industry.

Beyond what is stated above, we’ve also rated HI for Stability and Momentum. Get all HI ratings here.

PEP shares were trading at $180.46 per share on Tuesday afternoon, down $1.12 (-0.62%). Year-to-date, PEP has gained 6.00%, versus a -17.99% rise in the benchmark S&P 500 index during the same period.

About the Author: Rashmi Kumari

Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions. More...

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