The Labor Department recently reported an 8.3% year-over-year increase in Consumer Price Index (CPI) for August. As a result of the hotter-than-expected inflation report, investors expect the Federal Reserve to keep increasing rates aggressively, thereby increasing the odds of a recession and spurring market volatility.
“The problem with an aggressive Fed is that its moves could push an already slowing economy into recession. In fact, many leading indicators of economic activity have started to decelerate, making a soft landing increasingly unlikely,” a team of Charles Schwab stated.
Moreover, the Fed seems set to respond with another interest rate hike of 75 basis points for the third consecutive meeting this week. With the Fed’s persistent hawkish stance and increased market volatility, it is justified to look for reliable stocks that provide consistent dividends to ensure a stable income stream.
Philip Morris International Inc. (PM)
PM is an international tobacco company. It manufactures and sells cigarettes, other nicotine-based products, smoke-free products, and related electronic devices and accessories. Marlboro is the leading brand in the company’s portfolio, including international and local brands, such as Bond Street, Chesterfield, L&M, Lark, and Philip Morris.
On September 14, PM announced a 1.6% increase in its regular quarterly dividend to $1.27 per share, payable on October 12, 2022, to shareholders of record as of September 28. The company pays $5.08 per share annually as a dividend, which translates to a 5.3% yield on the current price. The company’s dividends have grown for 13 consecutive years.
PM’s 4-year average dividend yield stands at 5.49%, and its dividends have grown at 3.12% and 3.75% CAGRs over the past three and five years, respectively.
For the second quarter of fiscal 2022 ended June 30, 2022, PM’s net revenue increased 3.1% year-over-year to $7.83 billion. The company reported an adjusted operating income of $3.22 billion. Its net earnings rose 2.8% year-over-year to come in at $2.23 billion over the same period. As a result, adjusted EPS for the quarter came in at $1.64, up 3.8% year-over-year.
Analysts expect PM’s revenue and EPS for the fiscal year 2022 to come in at $29.80 billion and $5.62, respectively. Both metrics are expected to increase over the next two fiscals. Moreover, the company has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 1.9% over the past six months to close the last trading session at $95.92.
PM’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock also has an A grade for Quality and a B for Stability. Within the B-rated Tobacco industry, it is ranked #5 among 11 stocks.
Click here to see additional POWR Ratings for Growth, Value, Sentiment, and Momentum for PM.
CVS Health Corporation (CVS)
CVS operates as a health solutions company. The company operates through four segments: Health Care Benefits; Pharmacy Services; Retail/LTC; and Corporate/Other. Its offerings include health & wellness services, health plans, pharmacy services, and prescription drug coverage.
On September 5, CVS announced its entry into a definitive agreement to acquire Signify Health (SGFY) for approximately $8 billion. According to CVS President and CEO Karen S. Lynch, “Signify Health will play a critical role in advancing our health care services strategy and gives us a platform to accelerate our growth in value-based care.”
On July 6, CVS declared its quarterly dividend of $0.55, which was paid out on August 1. The company pays $2.20 annually, which translates to a 2.15% yield at its current price. The current dividend payout ratio is 24.5%. Its 4-year average dividend yield stands at 2.80%. Its dividends have grown at a 2.4% CAGR over the past three years and a 2.2% CAGR over the past five years.
For the fiscal 2022 second quarter ended June 30, 2022, CVS’ total revenue increased 11% year-over-year to $80.64 billion. During the same period, the company’s operating income grew 5.6% year-over-year to $4.57 billion, while its net income increased 6.1% year-over-year to $2.96 billion.
Analysts expect CVS’ EPS and revenue for the third quarter (ending September 30) to increase 1.5% and 4.4% year-over-year to $2 and $76.78 billion, respectively. It has surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 20.7% over the past year to close the last trading session at $102.11.
CVS’ POWR Ratings reflect solid prospects. It has an overall rating of A, translating to a Strong Buy in our proprietary rating system. It has a B grade for Growth, Stability, and Sentiment. It is ranked #1 of five stocks in the A-rated Medical – Drug Stores industry.
Click here to access additional ratings for Value, Momentum, and Quality for CVS.
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PM shares were unchanged in after-hours trading Tuesday. Year-to-date, PM has gained 3.72%, versus a -18.53% rise in the benchmark S&P 500 index during the same period.
About the Author: Santanu Roy
Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities. More...
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