The stock market continues to be on a rollercoaster ride, with equities falling across the board this week on economic jitters. The S&P 500 notches the fifth day of losses while the Dow remained flat. Despite the Fed indicating a slower magnitude of interest rate hikes, high inflation, low unemployment, and weak global data cloud the prospects for the stock market.
“The market’s kind of bobbing and weaving and finding its breath after the big rally off the October lows,” said Ryan Detrick, chief market strategist at the Carson Group. He expects the trend to continue until investors receive more clarity from the Fed’s December policy meeting and November’s CPI report.
Recession fears are widespread. According to the fourth-quarter AICPA & CIMA Economic Outlook Survey, 51% of U.S. business executives believe that the economy is either already in recession or will be by 2023. In addition, economists at Bank of America (BofA) expect a recession in the first quarter of 2023.
Given this backdrop, investing in dividend-paying stocks could help cushion one’s portfolio by generating a steady income stream. Thus, we think it could be wise to invest in quality dividend-paying stocks Flowers Foods, Inc. (FLO) and Genie Energy Ltd. (GNE), which are currently trading under $35.
Flowers Foods, Inc. (FLO)
FLO is one of the largest producers and marketers of packaged bakery foods. Its offerings, including bread, buns, rolls, snack cakes, and tortillas, are sold under six brand names: Nature’s Own, Dave’s Killer Bread (DKB), Wonder, Canyon Bakehouse, Tastykake, and Mrs. Freshley’s.
On October 3, 2022, FLO introduced a website to enable a direct-to-consumer trial of new products and follow their valuable feedback. Joe Ewell, vice president of innovation at FLO, said, “The site gives us the ability to directly connect with consumers more apt to purchase online and seek their feedback. It also provides the flexibility to test new products on a smaller scale than what is required for an in-store trial.”
The company’s four-year average dividend yield is 3.33%, and its forward annual dividend of $0.88 translates to a 3.05% yield. Its dividends have grown at 5.1% and 5.4% CAGRs over the past three and five years. On November 18, 2022, its board of directors declared a quarterly dividend of $0.22 per share, an increase of 4.8% over the same quarter last year.
In the fiscal third quarter (ended October 8, 2022), FLO’s sales increased 12.7% year-over-year to $1.16 billion. Its net income increased 4.3% from the year-ago value to $40.53 million, while adjusted EBITDA grew 1.6% year-over-year to $120.41 million. The company’s net income per common share came in at $0.19, representing a 5.6% year-over-year improvement.
For the fiscal 2022 fourth quarter (ending December 31, 2022), FLO’s revenue is expected to increase 12.4% from the prior-year period to $1.11 billion. The Street expects its EPS to increase 17.2% year-over-year to $0.23 in the same quarter. FLO has surpassed the EPS estimates in three of the trailing four quarters.
The stock has gained 13.2% over the past nine months and 6.3% year-to-date to close the last trading session at $29.21.
FLO’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has a B grade for Growth and Quality. The stock is ranked #16 of 83 in the B-rated Food Makers industry. Click here to see the other ratings of FLO for Value, Momentum, Stability, and Sentiment.
Genie Energy Ltd. (GNE)
GNE and its subsidiaries supply electricity and natural gas to residential and small business customers internationally. It has three operational segments: Genie Retail Energy (GRE), GRE International, and Genie Renewables.
On November 30, 2022, the company acquired a portfolio of residential and small commercial customer contracts from Mega Energy. This acquisition is backed by its strong cash flows and enables GNE to expand its footprint across seven states of retail supply markets.
On December 6, 2022, GNE’s Genie Solar subsidiary received notice to proceed with constructing its first company-owned community solar generation project. Given the environmental benefit and the economics driving community solar development, GNE looks forward to expanding to additional sites in the coming months. In addition, the company expects a notice to proceed with the second project in upstate New York in early 2023.
GNE’s four-year average dividend yield is 2.99%, and its current dividend translates to a 2.92% yield. The company paid a dividend of $0.08 per share on November 21, 2022.
For the fiscal third quarter ended September 30, 2022, GNE’s gross profit increased 24.7% year-over-year to $43.14 million. The company’s income from operations rose 34.8% year-over-year to $23.54 million, while its adjusted EBITDA increased 35.3% from the year-ago value to $24.50 million.
Also, its net income attributable to common stockholders came in at $18.31 million compared to a net loss of $2.66 million in the prior-year period. In addition, its EPS stood at $0.70 compared to a net loss per share of $0.10 in the same quarter last year.
GNE has gained 90.9% over the past year and 88.9% year-to-date to close the last trading session at $10.52.
GNE's strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
It has an A grade for Value and a B for Growth, Momentum, and Sentiment. Within the Utilities - Domestic industry, it is ranked first out of 67 stocks. To see GNE’s rating for Stability and Quality, click here.
FLO shares were unchanged in premarket trading Thursday. Year-to-date, FLO has gained 9.74%, versus a -16.26% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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