The Department of Labor recently reported a 8.3% year over year rise in the consumer price index (CPI) in August. Following the hotter-than-expected inflation report, investors expect the Federal Reserve to continue raising rates aggressively, increasing the chances of a recession and boosting market volatility.
“The problem with an aggressive Fed is that its actions could push an already slowing economy into recession. In fact, many leading indicators of economic activity have begun to slow, which soft landing increasingly unlikely“, said a team of Charles Schwab.
Moreover, the Fed seems ready to react with another interest rate hike of 75 basis points for the third consecutive meeting this week. With the Fed’s persistent hawkish stance and heightened market volatility, there is merit in looking for reliable stocks that provide consistent dividends to ensure a steady stream of income.
In this context, we believe that the dividend-paying shares of Philip Morris International Inc. (PM) and CVS Health Corporation (SVC) could be used to achieve quick risk-adjusted returns.
Philip Morris International Inc. (PM)
PM is an international tobacco company. It manufactures and sells cigarettes, other nicotine products, smokeless products and related electronic devices and accessories. Marlboro is the leading brand in the company’s portfolio, which includes 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 October 12, 2022 to shareholders of record as of September 28. The company pays $5.08 per share per year as a dividend, which translates to a 5.3% yield on the current price. The company’s dividends have increased for 13 consecutive years.
PM’s 4-year average dividend yield is 5.49% and its dividends have grown by 3.12% and 3.75% CAGR 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-on-year to $7.83 billion. The company reported adjusted operating profit of $3.22 billion. Its net profit rose 2.8% year-over-year to $2.23 billion over the same period. As a result, Adjusted EPS for the quarter was $1.64, up 3.8% year-over-year.
Analysts expect PM’s fiscal 2022 revenue and EPS to be $29.80 billion and $5.62, respectively. Both measures are expected to increase over the next two fiscal years. Additionally, the company has an impressive track record of earnings surprises, beating consensus EPS estimates in each of the past four quarters.
The stock has gained 1.9% over the past six months to close the last trading session at $95.92.
PM POWR Rankings reflect this promising prospect. The company has an overall rating of B, which translates to Buy in our proprietary rating system. POWR ratings rate stocks on 118 different factors, each with its own weighting.
The stock also has an A rating for quality and a B for stability. In category B the tobacco industry, it is ranked No. 5 among 11 stocks.
Click here to see additional POWR ratings for Growth, Value, Sentiment and Momentum for PM.
CVS Health Society (SVC)
CVS operates as a healthcare solutions company. The Company operates through four segments: healthcare delivery; pharmacy services; Retail/LTC; and Business/Other. Its offerings include health and wellness services, health plans, pharmacy services, and prescription drug coverage.
On September 5, CVS announced that it had entered into a definitive agreement to acquire Signify Health (SGFY) for about $8 billion. According to CVS President and CEO Karen S. Lynch, “Signify Health will play a critical role in advancing our healthcare services strategy and provide us with a platform to accelerate our growth in healthcare.” value based.
On July 6, CVS declared its quarterly dividend of $0.55, which was paid on August 1. The company pays $2.20 per year, which translates to a return of 2.15% at its current price. The current payout ratio is 24.5%. Its average dividend yield over 4 years is 2.80%. Its dividends have grown at a CAGR of 2.4% over the past three years and at a CAGR of 2.2% over the past five years.
For the second quarter of fiscal 2022 ended June 30, 2022, total CVS revenue increased 11% year-over-year to $80.64 billion. During the same period, the company’s operating profit increased 5.6% year-on-year to $4.57 billion, while its net profit increased 6.1% year-on-year to reach $2.96 billion.
Analysts expect CVS’s EPS and revenue for the third quarter (ending Sept. 30) to rise 1.5% and 4.4% year-over-year to 2 and 76, $78 billion, respectively. It has exceeded consensus EPS estimates in each of the past four quarters.
The stock has gained 20.7% over the past year to close the last trading session at $102.11.
CVS’s POWR ratings reflect a strong outlook. It has an overall rating of A, which translates to a strong buy in our proprietary rating system. It has a B rating for growth, stability and sentiment. It is ranked No. 1 out of five stocks in Rank A Medical – Pharmacies industry.
Click here to access additional assessments for value, momentum, and quality for CVS.
PM shares remained unchanged in after-hours trading on Tuesday. Year-to-date, PM has gained 3.72%, versus a -18.53% rise in the benchmark S&P 500 over the same period.
About the Author: Santanu Roy
Fascinated by the traditional and evolving factors that influence investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to moving into investment research, he was a process associate at Cognizant. With a master’s degree in business administration and a fundamental approach to business analysis, he aims to help retail investors identify the best long-term investment opportunities. After…