Though the stock market got a recent boost from solid third-quarter earnings reports and positive economic data, concerns surrounding the continuing spread of COVID-19, high inflation, and supply chain crises have been raising questions about the sustainability of the uptrend.

Furthermore, the Fed has signaled that it will likely begin tapering its $120 billion in monthly purchases of Treasury bonds and mortgage-backed securities next month. Amid this environment, investors could turn toward dividend-paying mega-cap stocks to hedge their portfolios against short-term market volatility by ensuring a steady income stream.

So, we think it could be wise to invest in mega-cap stocks Pfizer Inc. (PFE), The Coca-Cola Company (KO), Merck & Co., Inc. (MRK), and Novartis AG (NVS) because of their market dominance and solid long-term growth prospects. Their current dividends yield is 3% or more.

Pfizer Inc. (PFE)

New York City-based PFE discovers, develops, manufactures, markets, distributes, and sells biopharmaceutical products worldwide. It offers medicines and vaccines in various therapeutic areas. In addition, the company is involved in the contract manufacturing business. Its market capitalization is $240.92 billion.

On October 15, 2021, the European Medicines Agency’s (EMA) Committee for Medicinal Products for Human Use (CHMP) positively opined about PFE’s Abrocitinib, to treat moderate to severe atopic dermatitis (AD) in adults. Michael Corbo, Ph.D., Chief Development Officer, Inflammation & Immunology, Pfizer Global Product Development, said, “The CHMP’s positive recommendation brings us closer to our goal of helping people living with moderate to severe atopic dermatitis in Europe find relief.”

PFE’s revenues increased 92.4% year-over-year to $18.98 billion in the second quarter of 2021. While its net income increased 59.4% year-over-year to $5.56 billion, its EPS came in at $0.98, up 58.1% year-over-year.

The company began paying dividends in 1989. In the last three years, PFE’s dividend payout has grown at 6.4% CAGR. While PFE’s four-year average dividend yield is 3.6%, its current dividend translates to a 3.6% yield. On September 23, 2021, PFE announced a 39 cent fourth-quarter 2021 dividend, payable on December 6, 2021.

Analysts expect PFE’s revenue and EPS to come in at $703.15 billion and $35.8, respectively, for its fiscal year 2021. In addition, its EPS is expected to grow at 106.7% per annum over the next five years. Over the past nine months, the stock has gained 18.6% in price to close yesterday’s trading session at $42.97.

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

PFE has an A grade for Value, and a B grade for Growth and Quality. Within the Medical – Pharmaceuticals industry, it is ranked #10 of 202 stocks. Click here to see the additional POWR Ratings for Sentiment, Momentum, and Stability for PFE.

Click here to checkout our Healthcare Sector Report for 2021

The Coca-Cola Company (KO)

Beverage company KO in Atlanta, Ga., manufactures, markets, and sells various non-alcoholic beverages worldwide. It operates through a network of independent bottling partners, distributors, wholesalers, retailers & bottling-distribution operators. Its market capitalization is $239.66 billion.

On October 22, 2021, KO joined hands with Tech Partners to create a Bottle Prototype made from 100% plant-based sources. Nancy Quan, Chief Technical and Innovation Officer, said, “We have been working with technology partners for many years to develop the right technologies to create a bottle with 100% plant-based content—aiming for the lowest possible carbon footprint—and it’s exciting that we have reached a point where these technologies exist and can be scaled by participants in the value chain.”

For its fiscal third quarter, ended October 1, 2021, KO’s revenue increased 16.1% year-over-year to $10.04 billion. The company’s gross profit increased 17.1% from the same period last year to $6.07 billion. Its net income came in at $2.47 billion, up 42.3% year-over-year.

The company began paying dividends in 1964. In the last three years, its dividend payout has grown at a 2.7% CAGR. While KO’s four-year average dividend yield is 3.2%, its current dividend translates to a 3% yield. The company made a cash dividend payment of $0.42 per share on October 1, 2021.

KO’s revenue is expected to be $37.95 billion in its fiscal year 2021, representing a 15% year-over-year rise. The company’s EPS is expected to increase 16.4% year-over-year to $2.27 in the current year. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 14.4% in price to close yesterday’s trading session at $55.52.

It’s no surprise that KO has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has a B grade for Growth, Stability, Sentiment, and Quality.

KO is ranked #10 of 36 stocks in the B-Rated Beverages industry. Click here to see the additional POWR Ratings for KO (Value and Momentum).           

Merck & Co., Inc. (MRK)

MRK operates as a healthcare company worldwide. The Kenilworth, N.J-based concern operates through two segments, Pharmaceutical and Animal Health segments. The company tries to help protect public health and effectively address local concerns. Its market capitalization is $206.41 billion.

On October 27, 2021, MRK and The Medicines Patent Pool partnered on a license agreement for Molnupiravir, an investigational Oral Antiviral COVID-19 medicine, to broaden access across low- and middle-income countries. Charles Gore, MPP executive director, said, “The interim results for Molnupiravir are compelling and we see this oral treatment candidate as a potentially important tool to help address the current health crisis.”

MRK’s total revenue increased 21.9% year-over-year to $11.4 billion for its fiscal second quarter, ended June 30, 2021. The company’s non-GAAP net income came in at $3.32 billion, up 28.4% year-over-year, and its non-GAAP EPS was $1.31, also up 28.4% year-over-year.

The company began paying dividends in 1990. In the last three years, its dividend payout has grown at an 11.5% CAGR. While its four-year average dividend yield is 3%, the current dividend translates to a 3.2% yield. On July 27, 2021, MRK announced a quarterly dividend of $0.65 per share of the company’s common stock for the fourth quarter of 2021.

For its fiscal year 2022, analysts expect MRK’s revenue to be $53.52 billion, representing an 11.1% year-over-year rise. The company’s EPS is expected to increase 27.4% year-over-year to $5.77 in its fiscal year 2021. Over the past nine months, the stock has gained 5.8% in price to close yesterday’s trading session at $81.54.

MRK’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to a Strong Buy in our POWR Rating system. Also, the stock has a B grade for Value, Stability, Sentiment, and Quality.

Click here to see MRK’s ratings for Growth and Momentum as well. Again, MRK is ranked #12 in the  Medical – Pharmaceuticals industry.

Novartis AG (NVS)

Headquartered in Basel, Switzerland, NVS researches, develops, manufactures, and markets healthcare products worldwide. The company operates through two segments: Innovative Medicines, and Sandoz. Its market capitalization is $185.05 billion.

On October 27, 2021, NVS received priority review by the U.S. FDA and filed acceptance by EMA for Kymriah. Jeff Legos, Executive Vice President, Global Head of Oncology & Hematology Development, said, “This is an important milestone in our mission to bring Kymriah to adult patients with relapsed or refractory follicular lymphoma. Receiving orphan drug designation from the EC as well as priority review from the FDA underscores the unmet need and urgency for these patients.”

NVS’ sales increased 6.3% year-over-year to $13.03 billion in the third quarter ended September 30, 2021. Its operating income increased 34% year-over-year to $3.23 billion, while its EPS came in at $1.23, representing a 44.7% year-over-year rise.

The company began paying dividends in 1999. Over the last three years, NVS’ dividend payout has grown at a 2.9% CAGR. While the four-year average dividend yield for PFE is 3.5%, the current dividend translates to a 3.9% yield. Its dividend was paid on March 08, 2021.

For fiscal 2021, NVS’ revenue and EPS are expected to grow 6.7% and 8.5%, respectively, year-over-year to $51.89 billion and $6.27 Over the past year, the stock has gained 2.2% in price to close yesterday’s trading session at $82.73.

NVS’ 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.

In addition, it has an A grade for Growth and Stability, and a B grade for Value and Quality. NVS is ranked #2 in the Medical – Pharmaceuticals industry. Click here to see the additional POWR Ratings for NVS (Sentiment and Momentum).

PFE shares were trading at $43.16 per share on Thursday afternoon, up $0.19 (+0.44%). Year-to-date, PFE has gained 20.78%, versus a 23.38% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...

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