While the markets seem temporarily buoyed by better-than-expected earnings and easing of the turmoil in the U.K., the latest inflation data will keep investors worried. The hotter-than-expected employment and inflation reports are expected to keep the Fed on track to respond with a fourth consecutive 75-bps rate hike in its meeting next month. Therefore, the stock market will likely remain under pressure.
“When you’re in the throes of a bear market, to see meaningful moves higher for stocks, you also need to see a big move in the bond markets. You need yields to meaningfully fall,” said Michael Antonelli, managing director and market strategist at Baird. However, with persistent macroeconomic headwinds, the yields on U.S. government bonds have been climbing higher.
With a soft landing for the economy increasingly seeming like an improbable scenario, markets are expected to witness heightened volatility in the upcoming months. Hence, loading up shares of companies with fundamental strength, pricing power, attractive dividend records, and long-term growth would be the best strategy for generating stable returns.
Hence, we think it could be wise to buy fundamentally solid stocks, Comcast Corporation (CMCSA) and Energy Transfer LP (ET), and hold them forever.
Comcast Corporation (CMCSA)
CMCSA is a global media and technology company. It operates through three segments: Cable Communications; Media; Studios; Theme Parks; and Sky.
On September 21, 2022, CMCSA announced that it is working with Samsung to deliver 5G Radio Access Network (RAN) solutions that can be used to enhance 5G connectivity for Xfinity Mobile and Comcast Business Mobile customers in Comcast service areas. The company expects this to deliver more next-generation applications and services to its customers seamlessly.
On September 14, CMCSA announced an expansion in its share repurchase authorization to a total of $20.0 billion, with $9 billion worth of shares repurchased to date. This demonstrates the company’s financial strength and commitment to enhancing shareholder value.
On July 28, CMCSA declared its quarterly dividend of $0.27 a share on the company’s common stock, payable on October 26, 2022. The company pays $1.08 as a dividend annually, which translates to a yield of 3.5% at the current price. This compares favorably to the 4-year average dividend yield of 2.02%.
CMCSA’s dividend payouts have grown for the past five years at an 11.7% CAGR.
For the second quarter of the fiscal year 2022 ended June 30, CMCSA’s revenue increased 5.1% year-over-year to $30.02 billion. During the same period, the company’s adjusted EBITDA increased 10.1% year-over-year to $9.83 billion, while its adjusted net income increased 14.3% year-over-year to $4.51 billion. As a result, its adjusted EPS grew 20.2% year-over-year to $1.01.
Analysts expect CMCSA’s revenue to increase 4.5% year-over-year to $121.57 billion in the current fiscal year, ending December 31, 2022, while its EPS is expected to grow 11% year-over-year to $3.59 for the same period. Also, the company has an impressive earnings history, surpassing the consensus EPS estimates in each of the four trailing quarters.
The stock has gained 7.2% over the past five days to close the last trading session at $30.75.
CMCSA’s POWR Ratings reflect its promising outlook. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
It has a grade of B for Value and Quality. CMCSA tops the list of nine stocks in the Entertainment – TV & Internet Providers industry.
Click here for the additional POWR Ratings for Growth, Momentum, Stability, and Sentiment for CMCSA.
Energy Transfer LP (ET)
ET owns and operates a portfolio of energy assets in the United States. The company sells natural gas to electric utilities, independent power plants, local distribution, and industrial end-users.
On August 24, 2022, ET announced that its subsidiary, Energy Transfer LNG Export, LLC, has entered into a 20-year LNG Sale and Purchase Agreement (SPA) with Shell NA LNG LLC related to its Lake Charles LNG project. Under the agreement, Energy Transfer LNG will supply Shell with 2.1 million tonnes of LNG per annum (mtpa). This SPA is expected to boost the company’s revenue streams.
On August 19, ET paid a quarterly dividend of $0.23 per share. The company pays $0.92 as a dividend annually, translating to a yield of 7.86% on the current price. The 4-year average yield stands at an impressive 10.45%. The company’s payout ratio is 60.6%, and its dividends have grown at a 1.9% CAGR over the last ten years.
In addition, ET announced the completion of the sale of its 51% interest in Energy Transfer Canada ULC (Energy Transfer Canada). The company expects the sale of these assets would allow it to deleverage its balance sheet further and redeploy capital within its footprint across the United States.
During the fiscal 2022 second quarter ended June 30, 2022, ET’s revenue increased 71.8% year-over-year to $25.95 billion. Its operating income grew 32.3% year-over-year to $2.11 billion. The company’s adjusted EBITDA amounted to $3.23 billion, up 23.4% year-over-year.
Furthermore, the company’s net income attributable to partners and net income per common unit came in at $1.33 billion and $0.39, registering increases of 111.8% and 95% from the prior-year period, respectively.
Analysts expect ET’s revenue and EPS for the fourth quarter of the current fiscal (ending December 2022) to increase 29.5% and 37.5% year-over-year to $24.16 billion and $0.38, respectively. The company has topped the consensus EPS estimates in three of the trailing four quarters.
ET’s stock has gained 35.4% year-to-date to close the last trading session at $11.79.
ET’s strong performance and stable prospects have earned it an overall rating of B, which equates to a Buy in our POWR Ratings system. It has an A grade for Momentum and a B grade for Value.
ET is ranked #32 among 94 stocks in the B-rated Energy-Oil & Gas industry.
Beyond what has been discussed above, we have also given ET grades for Sentiment, Growth, Quality, and Stability. Get access to all ET ratings here.
CMCSA shares were unchanged in after-hours trading Wednesday. Year-to-date, CMCSA has declined -38.02%, versus a -21.52% rise in the benchmark S&P 500 index during the same period.
About the Author: Santanu Roy
Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.
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