The Producer Price Index decreased by 0.5% in December, beating Dow Jones estimates. Additionally, the Consumer Price Index fell by 0.1% for the month, meeting expectations. Both were the most significant month-over-month drops since April 2020, indicating easing inflationary pressures.
However, Federal Reserve Governor Lael Brainard believes that interest rates should remain high despite evidence of decreasing inflation. The rate hikes might force the economy into a recession as inflation continues above the Fed’s 2% objective. Jamie Dimon, CEO of JPMorgan Chase & Co. (JPM), has warned that continued rate hikes “might derail the economy.”
Amid widespread recessionary concerns, stocks that offer high and stable dividends might be ideal investments. Investors’ interest in dividend stocks is evident from the SPDR S&P Dividend ETF’s (SDY) 9.3% returns over the past three months and 4.7% over the past six months.
Therefore, we think investors should buy fundamentally sound dividend stocks BHP Group Limited (BHP), Honda Motor Company, Ltd. (HMC), and ARC Document Solutions, Inc. (ARC) for the long term.
BHP Group Limited (BHP)
Headquartered in Melbourne, Australia, BHP operates as a resources company in Australia, Europe, China, Japan, India, South Korea, the rest of Asia, North America, South America, and internationally. It operates through Petroleum; Copper; Iron Ore; and Coal segments.
On December 12, 2022, BHP collaborated with I-ROX, under which the companies would work together to accelerate the development of I-ROX’s technology and business, and BHP would be offered direct access to this potentially disruptive technology. BHP also invested in and collaborated with I-Pulse to identify new applications for pulsed-power technology in a mining context.
The collaboration with I-Pulse and I-ROX is expected to enhance its potential to improve the competitiveness of its business and help decarbonize it.
BHP has paid dividends for 13 consecutive years. Over the past three years, BHP’s dividend payouts have grown at 37.6% CAGR. While BHP’s four-year average dividend yield is 7.84%, its current dividend translates to a 10.01% yield.
BHP’s revenue increased 14.4 % year-over-year to $65.10 billion in the fiscal year ended June 30, 2022. Its operating profit increased 33.7% year-over-year to $34.11 billion, while its underlying EBITDA rose 15.9% year-over-year to $40.63 billion.
Street expects BHP’s revenue to be $54.63 billion for the period ending June 2023. Its EPS is expected to increase 6.7% year-over-year to $5.02 for the same period. Over the past three months, the stock has gained 38% to close the last trading session at $69.38.
BHP’s POWR Ratings reflect its promising prospects. The stock’s overall A rating is a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
BHP has a B grade for Value, Sentiment, and Quality. Within the Industrial – Metals industry, it is ranked first out of 37 stocks. Beyond what is stated above, we’ve also rated BHP for Momentum, Growth, and Stability. Get all BHP ratings here.
Honda Motor Company, 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. Its four segments are Motorcycle Business; Automobile Business; Financial Services Business; and Life Creation and Other Businesses.
On January 13, 2023, HMC and LG Energy Solution entered a JV agreement to produce lithium-ion batteries for electric vehicles. The plant aims to have an annual production capacity of approximately 40GWh. This strategic alliance is expected to generate substantial revenues in the upcoming years.
Over the last three years, HMC’s dividend payouts have grown at a 6.7% CAGR. While HMC’s four-year average dividend yield is 3.92%, its current dividend translates to a 3.92% yield.
HMC’s sales revenue came in at ¥4.26 trillion ($31 billion) for the quarter that ended September 30, 2022, up 25% year-over-year. Its operating profit came in at ¥231.20 billion ($1.69 billion), up 16.2% year-over-year. Moreover, its profit came in at ¥189.20 billion ($1.39 billion), reflecting an increase of 13.6% year-over-year.
HMC’s revenue is expected to increase 392.3% year-over-year to $131.49 billion in 2023. Its EPS is expected to increase by 13.2% per annum for the next five years. Over the past three months, the stock has gained 9.8% to close the last trading session at $24.16.
HMC’s overall A rating equates to a Strong Buy in our POWR Ratings system. It has an A grade for Value and a B for Quality and Stability. The stock is ranked #7 out of 64 stocks in the Auto & Vehicle Manufacturers industry. We’ve also rated HMC for Momentum, Sentiment, and Growth. Get all HMC ratings here.
ARC Document Solutions, Inc. (ARC)
Digital printing company ARC provides digital printing and document-related services in the United States. It provides managed print services, cloud-based document management software, and other digital hosting services.
On November 2, 2022, Suri Suriyakumar, Chairman and CEO, said, “The strategy we put in place during 2019 created opportunities for ARC to grow in virtually any environment, primarily because we made diversity and resilience the keys to our success.”
ARC’s four-year average dividend yield is 2.12%, and its current dividend translates to a 5.73% yield.
ARC’s net sales came in at $73.14 million for the third quarter that ended September 30, 2022, up marginally year-over-year. Its net income increased 18.1% year-over-year to $3.74 million. In addition, its EPS increased 12.5% year-over-year to $0.09.
Over the past three months, the stock has gained 53.7% to close the last trading session at $3.49.
ARC’s strong fundamentals are reflected in its POWR Ratings. It has an overall A rating, equating to a Strong Buy in our POWR Ratings system.
It has an A grade for Value, Sentiment, and Quality. It is ranked first among 42 stocks in the B-rated Outsourcing - Business Services industry. To see ARC’s ratings for Growth, Stability, and Momentum, click here.
BHP shares were trading at $69.06 per share on Tuesday morning, down $0.32 (-0.46%). Year-to-date, BHP has gained 11.30%, versus a 4.68% 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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