With inflation still hovering near its highest level in 40 years and the central bank raising interest rates by another 75 basis points last week to control it, the market is expected to remain under pressure.
While the Fed indicated slower rate hikes in the future amid widespread support in its favor, some investors fear that the interest rates could go as high as 6%, the highest since 2000. Moreover, with anticipations and apprehensions regarding the outcome of the midterm elections adding to the already high entropy, wild swings on either side are set to continue in the foreseeable future.
Amid an environment of compressing business margins with increased borrowing costs and softening consumer demand, geographically diversified and robust businesses, well-positioned to survive the heightened volatility and deliver stable returns, could be ideal investments now.
Microsoft Corporation (MSFT) and Walmart Inc. (WMT) could act as ballast for your portfolio in a topsy-turvy market. These stocks offer stable income streams through dividend payouts and have the potential to gain steadily.
Microsoft Corporation (MSFT)
Being one of the global technology behemoths, MSFT needs no introduction. The company operates through three segments: Productivity and Business Processes; Intelligent Cloud; and More Personal Computing.
On October 20, MSFT and UBS Group AG (UBS) announced a landmark expansion of their partnership to accelerate UBS’s public cloud footprint over the next five years. MSFT’s rich set of productivity and collaboration tools would enable UBS to increase the speed at which it can deliver and improve upon its digital experiences for clients and employees.
On October 12, MSFT and Cisco Systems, Inc. (CSCO) announced a new partnership to provide customers with more choices. In the first half of 2023, CSCO and MSFT will offer the ability to run Microsoft Teams natively on Cisco Room and Desk devices Certified for Microsoft Teams, with Teams as the default experience option. This is expected to broaden the reach of MSFT’s suite of productivity and collaboration tools.
In September, MSFT declared a quarterly dividend of $0.68 per share, reflecting a 10% sequential increase. The dividend is payable on December 8, 2022. MSFT pays $2.72 annually as a dividend, representing a yield of 1.19% at the current price, better than the 4-year average dividend yield of 1.06%. The company has raised its dividend for 17 consecutive years.
For the first quarter of the fiscal year 2023 ended September 30, MSFT’s total revenue increased 10.6% year-over-year to $50.12 billion, while its operating income grew 6.3% from the year-ago value to $21.52 billion.
Analysts expect MSFT’s revenue for the fiscal year ending June 2023 to come in at $259.03 billion, representing an increase of 30.7% year-over-year, while its EPS is expected to increase 3.5% year-over-year to $9.53. The company has an impressive earnings surprise history since it surpassed the consensus EPS estimates in three of the trailing four quarters.
Shares of MSFT have declined marginally over the past month to close the last trading session at $228.87.
MSFT’s POWR Ratings reflect its promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its weighting.
Also, the stock has grade B for Stability and Quality. Within the Software – Business industry, it is ranked #9 of 53 stocks.
Click here for MSFT’s additional POWR Ratings for Growth, Value, Sentiment, and Momentum.
Walmart Inc. (WMT)
As a world-renowned big box retailer, WMT offers opportunities to shop an assortment of merchandise and services at everyday low prices (EDLP) in retail stores and through e-commerce platforms. The company operates through three segments: Walmart U.S.; Walmart International; and Sam’s Club.
On October 27, WMT and Netflix (NFLX) announced an in-store expansion of the popular Netflix Hub in more than 2,400 stores. It would offer customers a brand-new streaming gift card, fan-favorite exclusives, and more.
On October 26, WMT announced the completion of the renovations made to the retrofitted regional distribution center in Texas, transforming it into a high-tech automation center. This investment is set to modernize Walmart’s vast supply chain network to increase the speed, efficiency, and safety of product distribution.
Also, on October 26, WMT and ANGI HomeServices Inc. (ANGI) announced the launch of a new product integration where customers who purchase nearly any Christmas lighting from Walmart can easily add installation by a pro on Angi. Since this bundling would provide additional value to customers, it is expected to impact the topline for both companies positively.
For the second quarter of the fiscal year 2023 ended July 2022, WMT’s total revenues increased 8.4% year-over-year to $152.86 billion. The company’s consolidated net income attributable to WMT increased 20.4% from the prior-year period to $5.15 billion or $1.88 per common share, up 23.7% year-over-year. WMT’s total assets stood at $247.20 billion as of July 31, 2022, compared to $238.55 billion a year ago.
WMT pays $2.24 annually as a dividend, translating to a yield of 1.57% at the current price. The company has a four-year average dividend yield of 1.72%. The company has increased its dividend for 48 consecutive years.
WMT’s revenue and EPS for the fiscal year ending January 2024 are expected to increase 3% and 12.7% year-over-year to $613.28 billion and $6.59, respectively. The company has an impressive earnings surprise history as it surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has gained 10.7% over the past month to close the last trading session at $142.79.
WMT’s solid prospects are reflected in its overall POWR Rating of A, equating to a Strong Buy in our proprietary rating system. Also, it has a grade of A for Sentiment and a B for Growth, Stability, and Quality.
WMT is ranked #5 of 38 stocks within the A-rated Grocery/Big Box Retailers industry
Click here to see the additional POWR Ratings of WMT for Value and Momentum.
MSFT shares were trading at $225.26 per share on Wednesday afternoon, down $3.61 (-1.58%). Year-to-date, MSFT has declined -32.58%, versus a -20.01% 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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