While the stock market has been highly volatile amid lingering fears of a recession, investing in stocks with a robust fundamental profile and an attractive dividend record, The Coca-Cola Company (KO) and Cardinal Health, Inc. (CAH) could provide a steady source of income. Adding these stocks to your long-term portfolio could make you wealthier in the coming years.
According to the latest data from the Bureau of Labor Statistics, Consumer Price Index (CPI) rose by 6% from a year earlier, in-line with economist expectations. Although inflation shows signs of cooling, it remains well above the Federal Reserve's 2% target.
Traders have assigned an 85% probability of a 0.25 percentage point interest rate increase in the next FOMC meeting. The Fed is expected to continue its restrictive monetary policy despite the recent high-profile bank failures.
Dr. Anirban Basu, an economist and the chairman and CEO of Sage Policy Group Inc., forecasts an economic recession later this year or in early 2024. “It's going to get worse before it gets better, the global economy is weakening, the national economy is weakening, borrowing costs are higher and excess inflation persists."
So, let’s delve deeper into these stocks mentioned above:
The Coca-Cola Company (KO)
KO is a beverage company that operates through segments, including Europe, the Middle East, and Africa; Latin America; North America; Asia Pacific; Global Ventures; and Bottling Investments. It owns and markets five non-alcoholic sparkling soft drink brands, and its products are sold in more than 200 countries.
KO’s trailing-12-month gross profit and EBITDA margins of 58.14% and 31.42% are 83.9% and 169.9% higher than the industry averages of 31.61% and 11.64%.
KO has paid dividends for 60 consecutive years. Over the last three years, KO’s dividend payouts have grown at a 3.2% CAGR. While KO’s four-year average dividend yield is 3.05%, its current dividend translates to a 3.07% yield.
KO’s net operating revenue increased 7% year-over-year to $10.13 billion in the fourth quarter that ended December 31, 2022. Its gross profit grew 4.4% from the year-ago value to $5.16 billion, while its operating income increased 24.1% year-over-year to $2.08 billion.
KO’s revenue is expected to increase 4.4% year-over-year to $44.92 billion in 2023. Its EPS is expected to grow 4.4% year-over-year to $2.59 in 2023. It surpassed EPS estimates in three of four trailing quarters. KO’s shares have gained 2.6% over the past year to close the last trading session at $60.03.
KO’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
KO has a B for Stability, Sentiment, and Quality. Within the A-rated Beverages industry, it is ranked #18 out of 36 stocks. To access KO’s ratings for Growth, Value, and Momentum, click here.
Cardinal Health, Inc. (CAH)
CAH is an integrated healthcare service and solutions provider. It offers customized solutions for healthcare organizations like hospitals, pharmacies, ambulatory surgery facilities, clinical laboratories, and patients receiving care at home. The company operates through two segments: Pharmaceutical and Medical.
On March 6, 2023, CAH partnered with Signify Health, Inc. (SGFY) to provide in-home clinical and pharmaceutical management services through its OutcomesTM division. The company expects this agreement to help cut expenses and close gaps in care for more than 2.3 million members nationwide by providing coordinated care from SGFY clinicians.
On February 16, 2023, CAH and RxLive collaborated with Outcomes to increase data exchange and bridge communication gaps between hospitals, physicians, and pharmacists. This venture is expected to enhance the company’s services.
In terms of the trailing-12-month, the stock’s EBIT margin and ROTC of 0.82% and 20.32% compare with the negative industry averages of 0.86% and 22.05%, respectively.
CAH has paid dividends for 28 consecutive years. Over the last three years, CAH’s dividend payouts have grown at a 1% CAGR. While CAH’s four-year average dividend yield is 3.59%, its current dividend translates to a 2.80% yield.
CAH’s revenues came in at $51.47 billion for the second quarter that ended December 31, 2022, up 13.2% year-over-year. Moreover, its gross margin was $1.66 billion, indicating a marginal increase year-over-year.
The company’s total current assets came in at $34.60 billion for the period ended December 31, 2022, compared to $32.94 billion for the period ended June 30, 2022.
Street expects CAH’s revenue to increase 12% year-over-year to $203.06 billion in 2023. Its EPS is expected to grow 7.9% year-over-year to $5.46 in 2023. The stock has gained 38.4% over the past nine months to close the last trading session at $70.72.
It’s no surprise that CAH has an overall A rating, equating to a Strong Buy in our POWR Ratings system.
It has a B for Growth, Value, and Sentiment. It is ranked #2 out of 76 stocks in the Medical – Services industry. Click here for the additional POWR Ratings for Stability, Momentum, and Quality for CAH.
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KO shares were trading at $59.58 per share on Wednesday afternoon, down $0.45 (-0.75%). Year-to-date, KO has declined -6.34%, versus a 0.63% 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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