This year has been arduous for the stock market due to record-high inflation, Fed’s aggressive interest rate hikes, and geopolitical tensions, triggering fears of a potential recession next year. However, the recent inflow of positive macroeconomic data suggests that a ‘soft landing’ of the economy might be possible.
Inflation cooled more than expected in October and November, while the labor market showed resilience. In addition, the Fed lowered the size of interest rate increases from 75 basis points down to 50 basis points in December.
These factors, along with better-than-expected consumer confidence data for December, have led economists to forecast a mild recession in 2023. Chief investment strategist Jeff Korzenik stated, “We simply have too much momentum in the labor market. We’re adding 200,000 to 300,000 jobs every month, and it takes a longer period of erosion before you actually get into a recession.”
According to Goldman Sachs, the stock market will experience relatively less pain next year compared to 2022. The bank estimates that the Fed will continue to hike rates by another 125 basis points, eventually reaching a target of 5.0%-5.25% in May of next year.
Given this backdrop, investing in fundamentally strong stocks Verizon Communications Inc. (VZ) and Campbell Soup Company (CPB) could be ideal starter options for new investors. These stocks have a steady dividend-paying history.
Verizon Communications Inc. (VZ)
VZ offers communication, information, and entertainment products and services to consumers, businesses, and governmental agencies. The company operates through two segments: Consumer Group; and Business Group, providing wireless and wireline communications services and products in the United States.
On November 15, VZ launched an advanced technology in its stores ahead of the holidays to give its customers an all-new exciting experience in tech shopping. Vivek Gurumurthy, CIO and Senior Vice President, VZ Global Technology Solutions, Consumer, said, “We are equipped to serve customers by creating a seamless retail experience that is tailored to you and can be continued as an Omni experience in any other channel of choice.”
VZ’s four-year average dividend yield is 4.66%, and its current dividend translates to a 6.80% yield. Its dividends have grown at a 2% CAGR over the past three years and a 2.1% CAGR over the past five years. On December 1, the company declared a quarterly dividend of $0.65 per outstanding share, payable to its shareholders on February 1, 2023.
During the third quarter ended September 30, 2022, VZ’s total operating revenues grew 4% year-over-year to $34.24 billion. Its wireless equipment revenues rose 22.9% from the year-ago value to $6.56 billion. Also, its total assets came in at $375.09 billion for the quarter ended September 30, 2022, compared to $366.60 billion for the fiscal year ended December 31, 2021.
The consensus revenue estimate of $35.30 billion for the fourth quarter ending December 31, 2022, indicates a 3.6% increase year-over-year. Its EPS is expected to increase by 2.2% per annum over the next five years. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has gained marginally over the past three months to close the last trading session at $39.25.
VZ’s solid prospects are reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Growth and Stability. Out of 19 stocks in the Telecom - Domestic industry, it is ranked #3. Click here to see the additional VZ ratings for Value, Momentum, Sentiment, and Quality.
Campbell Soup Company (CPB)
CPB manufactures and markets food products, including soups, sauces, biscuits, and confectionery, through its Meals & Beverages and Snacks segments. It sells its products through retail food chains, mass discounters and merchandisers, club stores, convenience stores, drug stores, dollar stores, e-commerce, and independent contractor distributors.
On November 21, CPB announced a 12-year virtual renewable power purchase agreement with Enel North America to advance greenhouse gas reduction targets. The renewable energy credits retained through the agreement will reduce the company’s Scope 2 GHG emissions, enabling it to make substantial progress towards reducing its combined Scope 1 and 2 GHG emissions by 42% by the fiscal year 2030.
In the same month, the company’s board of directors declared a quarterly dividend of $0.37 per share on its capital stock, payable on January 30, 2023. It pays a $1.48 per share dividend annually, which translates to a 2.58% yield on the current price. Its four-year average dividend yield is 3.01%. Its dividend payments have grown at CAGRs of 1.9% and 1.1% over the past three and five years, respectively.
For the fiscal 2023 first quarter ended October 30, 2022, CPB’s net sales grew 15.2% year-over-year to $2.58 billion, while its adjusted EBIT increased 15.4% year-over-year to $449 million. The company’s adjusted net earnings increased 13.3% from the year-ago value to $307 million. Also, its adjusted EPS came in at $1.57, representing a 14.6% increase year-over-year.
Street expects the company’s EPS and revenue for the second quarter ending January 31, 2023, to increase 6.8% and 9.9% year-over-year to $0.74 and $2.43 billion, respectively. Furthermore, CPB has surpassed its consensus EPS in three of the four trailing quarters.
Shares of CPB have gained 36.4% over the past year to close the last trading session at $57.55.
CPB’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has a B grade for Quality and is ranked #28 out of 83 stocks in the B-rated Food Makers industry. Click here to see the other ratings of CPB for Growth, Value, Momentum, Stability, and Sentiment.
VZ shares were trading at $38.93 per share on Wednesday morning, down $0.32 (-0.82%). Year-to-date, VZ has declined -20.98%, versus a -18.86% 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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