While the stock market has seen a solid start to the year, macroeconomic concerns are expected to keep the market under pressure in the near term. With volatility expected to remain, I think dividend-paying stocks Gilead Sciences, Inc. (GILD) and Altria Group, Inc. (MO) could be worth buying now to ensure a steady income stream.
Job creation was again stronger than expected last month despite the Fed’s efforts to slow the economy and bring down inflation. Nonfarm payrolls rose by 311,000 for the month, significantly higher than the 225,000 Dow Jones estimate. The tight labor market is prompting the Fed to continue its rate hike regime, adding to the recession worries.
The Fed’s inflation-fighting efforts have led to high-profile bank failures that have rattled the financial system over the past few days.
Michael Gapen, the chief U.S. economist for Bank of America, said, to bring inflation back to near its 2% target, “The Fed still has more work to do. If the Fed is successful at corralling the recent market volatility and ringfencing the traditional banking sector, then it should be able to continue its gradual pace of rate hikes until monetary policy is sufficiently restrictive.”
While the market is likely to stay turbulent, sound dividend-paying stocks GILD and MO might be great picks.
Gilead Sciences, Inc. (GILD)
Biopharmaceutical company GILD discovers, develops, and commercializes medicines in the areas of unmet medical need in the United States, Europe, and internationally for over three decades.
On February 22, 2023, Kite, a GILD company, acquired Tmunity Therapeutics, a clinical-stage biotech business focused on next-generation CAR T-therapies and technology.
This acquisition expands Kite’s existing in-house cell therapy research capabilities by providing pipeline assets, platform capabilities, and a unique connection with the University of Pennsylvania.
On February 3, 2023, According to GILD, the FDA approved Trodelvy for treating metastatic breast cancer in adult patients who have received endocrine-based therapy and at least two additional systemic drugs.
GILD also reported last month that the European Medicines Agency (EMA) accepted Trodelvy’s Marketing Authorization Application (MAA) to treat adult patients with previously treated HR+/HER2-metastatic breast cancer. This is expected to increase patient access to Trodelvy across the EU.
GILD has paid dividends for seven consecutive years. Over the last three years, GILD’s dividend payouts have grown at a 4.6% CAGR. While GILD’s four-year average dividend yield is 4%, the company’s annual dividend of $3 yields 3.77% at the current price level.
For the fourth quarter that ended December 31, 2022, GILD’s total revenues came in at $7.39 billion, up 2% year-over-year. Its adjusted operating income increased 79.1% from the year-ago value to $2.70 billion. Its non-GAAP net income attributable to GILD and non-GAAP EPS came in at $2.11 billion and $1.67, up 143.2% and 142%, respectively.
Analysts expect GILD’s revenue to increase 2% year-over-year to $27.23 billion in 2024. Its EPS is expected to grow 5.3% year-over-year to $7.19 in 2024. It surpassed EPS estimates in all four trailing quarters. GILD’s shares have gained 37.1% over the past year to close the last trading session at $79.51.
GILD’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
GILD has an A grade for Growth and Value and a B for Sentiment and Quality. Within the Biotech industry, it is ranked first among 392 stocks. Click here for the additional POWR Ratings for Stability and Momentum for GILD.
Altria Group, Inc. (MO)
MO and its subsidiaries manufacture and distribute smokeable and oral tobacco products in the United States. The corporation sells cigarettes, primarily under the Marlboro brand. It sells tobacco products to wholesalers and major retail businesses.
On March 6, 2023, MO announced the signing of a definitive agreement to acquire NJOY Holdings, Inc. for $2.75 billion in cash payable upon close. The terms of the acquisition include an extra $500 million in cash payments subject to regulatory outcomes for specific NJOY goods.
MO’s improved smoke-free portfolio is planned to comprise full global ownership of products and technologies across the three main smoke-free categories and a joint venture with JT Group to commercialize heated tobacco stick products due to this deal.
MO has paid dividends for 53 consecutive years. Over the last three years, MO’s dividend payouts have grown at a 3.9% CAGR. While MO’s four-year average dividend yield is 7.49%, the company’s annual dividend of $3.76 yields 8.05% at the current price level.
MO’s operating revenue came in at $2.82 billion for the fourth quarter that ended December 31, 2022, up 3.1% year-over-year. Its adjusted net earnings attributable to MO increased 6% from the prior-year quarter to $2.11 billion. In addition, its adjusted EPS came in at $1.18, representing an increase of 8.3% year-over-year.
Street expects MO’s revenue to increase marginally year-over-year to $21.04 billion in 2023. Its EPS is estimated to grow 4.5% year-over-year to $5.06 in 2023. It surpassed EPS estimates in three of four trailing quarters. Over the past six months, the stock has gained 8.6% to close the last trading session at $46.68.
MO has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Quality. It is ranked #5 out of 9 stocks in the A-rated Tobacco industry.
We have also rated MO for Value, Growth, Stability, Sentiment, and Momentum. Get all MO ratings here.
What To Do Next?
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GILD shares were trading at $78.97 per share on Tuesday morning, down $0.54 (-0.68%). Year-to-date, GILD has declined -8.01%, versus a 2.22% rise in the benchmark S&P 500 index during the same period.
About the Author: RashmiKumari
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.
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