The Fed’s persistent interest rate hikes to combat the surging inflation and increasing odds of a possible recession have led to immense volatility in the stock market. Nevertheless, an improving job market, a rebound in consumer sentiment, and better-than-expected corporate earnings have restored investors' confidence in the market, helping benchmark indexes witness occasional rallies lately.
However, the macroeconomic headwinds are not expected to ease anytime soon, and investors might witness a continued bear market, given that the Fed will raise interest rates by an expected 75 basis points next week. Therefore, it could be wise to invest in dividend-paying stocks to generate a steady income stream.
United Microelectronics Corporation (UMC), Icahn Enterprises L.P. (IEP), and Cognizant Technology Solutions Corporation (CTSH) could help cushion one’s portfolio as they pay attractive dividends.
United Microelectronics Corporation (UMC)
Headquartered in Hsinchu City, Taiwan, UMC functions as a semiconductor wafer foundry in Taiwan, Singapore, China, Hong Kong, Japan, the United States, Europe, and internationally. The company provides services for circuit design, mask tooling, wafer fabrication, and assembly and testing.
UMC declared a quarterly dividend of $0.29 on July 8, 2022, payable on August 20, 2022. UMC’s $0.29 annual dividend yields 4.1% at the current share price. Also, it has a four-year average dividend yield of 3.79%. Its dividend payouts have increased at a 26% CAGR over the past five years.
In April, DENSO Corporation, a leading mobility supplier, and United Semiconductor Japan Co., Ltd. (USJC), a subsidiary of UMC, announced that the companies have agreed to collaborate on the production of power semiconductors at USJC’s 300mm fab to serve the rising demand in the automotive market.
For the first quarter of 2022, UMC's operating revenues increased 34.7% year-over-year to NT$63.42 billion. Its operating income grew 193% from its year-ago value to NT$22.33 billion, while its net income grew 89.9% year-over-year to NT$19.81 billion. The company's EPS increased 89.4% from its year-ago value to $1.61.
Analysts expect UMC’s revenue to increase 27.3% year-over-year to $2.32 billion for the second quarter ending June 2022. The consensus EPS estimate of $0.33 represents an 85.2% improvement year-over-year for the second quarter ending June 2022.
Moreover, it has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in all of the trailing four quarters. The stock has lost 8.4% over the past month.
UMC's POWR Ratings reflect this promising outlook. The company's overall A rating translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock also has an A grade for Quality and a B for Growth and Value. Within the B-rated Semiconductor & Wireless Chip industry, it is ranked #1 of 94 stocks.
Click here to see additional POWR Ratings for Value, Quality, and Momentum for Sentiment, Momentum, and Stability.
Icahn Enterprises L.P. (IEP)
IEP operates in investment, energy, automotive, food packaging, real estate, home fashion, and pharma businesses in the United States and Internationally. Its Investment segment invests its proprietary capital through various private investment funds.
IEP paid a quarterly dividend of $2.00 on June 29, 2022. IEP’s $8.00 annual dividend yields 15.8% at the current share price. Also, it has a four-year average dividend yield of 13.31%. Its dividend payouts have increased at a 5.9% CAGR over the past five years.
IEP’s net sales increased 33.8% year-over-year to $2.97 billion for the first quarter ending March 31, 2022. Its net income improved 99.4% from its prior-year quarter to $323.00 million. Its EPS amounted to $1.06, up 63.1% from its year-ago value. Its cash and cash equivalent stood at $2.16 billion.
The consensus EPS estimate of $0.68 for fiscal 2023 represents a 58.1% improvement year-over-year. Analysts expect IEP’s revenue to increase 13.7% year-over-year to $2.63 billion for the fourth quarter ending December 2022. The stock has gained 2.1% over the past month.
IEP’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has an A grade for Momentum and a B for Growth Sentiment. Within the Private Equity industry, it is ranked #1 of 35 stocks.
In total, we rate IEP on eight different levels. Beyond what we've stated above, we have also given IEP grades for Stability, Quality, and Value. Get all the IEP ratings here.
Cognizant Technology Solutions Corporation (CTSH)
CTSH is a professional services company that provides consulting, technology, and outsourcing services internationally. The company has four operating segments: Financial Services; Healthcare; Products and Resources; and Communications, Media, and Technology. It also offers customer experience enhancement, robotic process automation, analytics, and AI services.
CTSH paid a quarterly dividend of $0.27 on May 5, 2022. CTSH’s $1.08 annual dividend yields 1.59% at the current share price. Also, it has a four-year average dividend yield of 1.24%. Its dividend payouts have increased at a 46.7% CAGR over the past five years.
Recently, CTSH announced that it signed a new multi-year agreement with Organon (OGN), a global women's health company, to aid the company's delivery of healthcare products and crucial medicinal supply chain management.
Under the agreement, CTSH will help scale Organon's healthcare business by delivering full-stack industrial technology support for the company's global pharmaceutical manufacturing sites in the United Kingdom, Netherlands, Belgium, and Indonesia.
This month, CTSH announced that it extended its relationship with Zurich Beteiligungs-AG, the German subsidiary of global insurance leader Zurich Insurance Group (Zurich), to help Zurich Germany deliver more digital services offerings to its clients and partners.
Through this multi-year agreement, CTSH will work closely with Zurich Germany to simplify, modernize, manage and maintain the insurer's enterprise application landscape in the General Insurance domain. ,
In the second quarter ended, March 31, 2022, CTSH’s revenue increased 9.7% year-over-year to $4.83 billion. Its income from operations grew 8.2% from its year-ago value to $724.00 million, while the net income increased 11.5% from its prior period to $563.00 million. The company's EPS rose 12.6% year-over-year to $1.07.
Analysts expect CTSH's revenue to increase 7.3% year-over-year to $4.92 billion for the second quarter ending June 2022. The company's EPS is expected to grow 10.5% year-over-year to $1.09 in the second quarter ending June 2022.
Moreover, it has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in all of the trailing four quarters. The company's shares have gained 1.8% over the past year and 3.1% over the past nine months.
CTSH's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has an A grade for Quality and a B for Value. Within the A-rated Outsourcing - Tech Services industry, it is ranked #3 of 11 stocks.
In total, we rate CTSH on eight different levels. Beyond what we've stated above, we have also given CTSH grades for Growth, Momentum, Stability, and Sentiment. Get all CTSH ratings here.
UMC shares were trading at $7.09 per share on Friday afternoon, down $0.21 (-2.88%). Year-to-date, UMC has declined -39.40%, versus a -16.25% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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