The Federal Reserve has been steadily increasing interest rates to draw money out of the economy and ease inflationary pressures. Inflation slowed down in December 2022 to an annual rate of 6.5% and is expected to tick down to 6.2% in January, continuing the disinflation trend that began last summer.
However, inflation remains significantly higher than the Federal Reserve’s 2% target rate, threatening to tip the economy into a recession. Moreover, top economist Mohamed El-Erian recently warned that inflation has a 75% chance of rebounding or remaining elevated.
In addition, Marko Kolanovic, JPMorgan’s top strategist, recently wrote, “With equities trading near last summer’s highs and at above-average multiples, despite weakening earnings and the recent sharp move higher in interest rates, we maintain that markets are overpricing recent good news on inflation and are complacent of risks.”
Given this backdrop, quality dividend-paying stocks Gilead Sciences, Inc. (GILD), Honda Motor Co., Ltd. (HMC), and Sysco Corporation (SYY) might be solid buys.
Gilead Sciences, Inc. (GILD)
GILD, a biopharmaceutical company discovers, develops, and commercializes medicines in the areas of unmet medical need in the United States, Europe, and internationally.
On February 9, GILD announced the three-year follow-up results from the pivotal ZUMA-3 study of the CAR T-cell therapy Tecartus, which showed a median overall survival of 26 months and demonstrated that responses remained durable in adults with relapsed/refractory B-cell acute lymphoblastic leukemia with a consistent safety profile observed since the two-year analysis.
Bijal Shah, MD, ZUMA-3 investigator and medical oncologist, Moffitt Cancer Center, Florida, said, “The continued durable response and significant improvement in survival indicated by these new data can potentially establish a new standard of care for adult patients living with this aggressive form of leukemia.”
On February 03, GILD announced the U.S. Food and Drug Administration (FDA) had approved Trodelvy for the treatment of adult patients with breast cancer who have received endocrine-based therapy and at least two additional systemic therapies in the metastatic setting.
Trodelvy is also recommended as a Category 1, preferred treatment for metastatic HR+/HER2- breast cancer by the National Comprehensive Cancer Network (NCCN) as defined in the Clinical Practice Guidelines in Oncology.
On February 02, GILD announced an increase of 2.7% in the company’s quarterly cash dividend beginning in the first quarter of 2023. The increase will result in a quarterly dividend of $0.75 per share of common stock and is payable on March 30, 2023.
GILD pays $3.00 annually as dividends. This translates to a yield of 3.43% at the current price, compared to the 4-year average dividend yield of 4.00%. Its dividend payments have grown at a CAGR of 5% and 7% over the past three and five years, respectively. Also, it has raised dividends for seven consecutive years.
GILD’s total revenues increased 2% year-over-year to $7.39 billion in the fourth quarter, which ended December 31, 2022. The company’s non-GAAP net income increased 143.2% year-over-year to $2.11 billion, while non-GAAP EPS rose 142% year-over-year to $1.67.
Analysts expect GILD’s revenue for the fiscal second quarter ending June 2023 to be $6.49 billion, indicating a 3.7% year-over-year growth. The company’s EPS is expected to increase 8.9% from the prior-year quarter to $1.72 for the same quarter. Additionally, it has topped consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 41% over the past year to close the last trading session at $87.49.
GILD’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
GILD also has an A grade for Value and Growth and a B for Quality. It is ranked #3 of 400 stocks in the Biotech industry.
To access additional ratings for GILD’s Stability, Sentiment, and Momentum, click here.
Honda Motor Co., Ltd. (HMC)
Headquartered in Tokyo, Japan, HMC develops, manufactures, and distributes motorcycles, automobiles, power products, and other products in Japan, North America, Europe, Asia, and internationally. It operates through four segments: Motorcycle Business; Automobile Business; Financial Services Business; and Life Creation and Other Businesses.
On January 13, HMC and LG Energy Solution announced the formal establishment of a joint venture to produce lithium-ion batteries for electric vehicles produced by HMC.
The joint venture will begin construction of a new battery plant early this year with the goal of completion by the end of 2024 and starting mass production of advanced lithium-ion battery cells by the end of 2025. The plant aims to have an annual production capacity of approximately 40GWh.
HMC pays $1.42 per share dividends annually, which translates to a 5.66% yield on the current price. Its dividend payments have grown at a CAGR of 6.7% over the past three years. The company has a four-year average dividend yield of 3.99%.
During the fiscal third quarter that ended December 31, 2022, HMC’s sales revenue increased 20.3% year-over-year to ¥4.44 trillion ($33.53 billion). The company’s profit for the period grew 27.7% year-over-year to ¥265.14 billion ($2 billion), while EPS attributable to owners of the parent increased 28.5% year-over-year to ¥144.49.
HMC’s revenue is expected to rise 381.7% year-over-year to $128.67 billion in the current fiscal year ending March 2023. The company’s EPS for the same fiscal year is expected to increase 2.2% year-over-year to $3.27. Additionally, it has topped consensus revenue estimates in three of the trailing four quarters.
Shares of HMC have gained 7.9% over the past month to close the last trading session at $25.44.
HMC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
The stock has an A grade for Value and a B for Quality and Stability. Within the Auto & Vehicle Manufacturers industry, it is ranked #4 out of 61 stocks.
Beyond what is stated above, we’ve also rated HMC for Growth, Momentum, and Sentiment. Get all HMC ratings here.
Sysco Corporation (SYY)
SYY engages in the marketing and distribution of various food and related products primarily to the food service or food-away-from-home industry. It operates through U.S. Foodservice Operations, International Foodservice Operations, SYGMA, and Other segments.
On February 8, SYY launched its new ‘Recipe for Sustainability program. Through this program, SYY will collaborate with top universities to explore innovations that will accelerate climate action and lead the industry toward a more sustainable future. This aligns with the company’s sustainability initiatives.
The company pays a $1.96 dividend annually, which translates to a yield of 2.51% at the current price, higher than the 4-year average dividend yield of 2.41%. Its dividend payouts have grown at 6.2% and 7.5% CAGRs over the past three and five years, respectively. It has also paid dividends for 52 consecutive years.
SYY’s non-GAAP sales rose 16% year-over-year to $16.32 billion in the second quarter that ended December 31, 2022. The company’s adjusted EBITDA increased 23.9% year-over-year to $831.3 million, while its adjusted EPS increased 40.4% year-over-year to $0.80.
SYY’s revenue is expected to rise 9.1% year-over-year to $18.44 billion for the current quarter ending March. The company’s EPS for the current quarter is expected to increase 30.9% year-over-year to $0.93. Additionally, the stock has topped the consensus revenue estimates in each of the trailing four quarters.
The stock has gained 2.3% year-to-date to close the last trading session at $78.23.
SYY’s robust prospect is reflected in its POWR Ratings. The stock has an overall B rating, equating to a Buy in our proprietary rating system.
SYY has a B grade for Value, Growth, and Stability. It is ranked #5 out of 81 stocks in the B-rated Food Makers industry.
Click here to see the additional POWR Ratings for SYY (Quality, Momentum, and Sentiment).
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GILD shares were trading at $85.62 per share on Tuesday morning, down $1.87 (-2.14%). Year-to-date, GILD has declined -0.27%, versus a 7.60% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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