The stock market rallied after the inflation data for July came in lower than expected and showed a decline from the 40-year high hit in June. However, market strategists believe the Federal Reserve is unlikely to get distracted from its hawkish interest rate hikes as inflation remains elevated, and the economic data shows resilience.
According to Neel Kashkari, President of Minneapolis Federal Reserve Bank, the Fed is “far, far away from declaring victory” and needs to raise rates much higher, 3.9% by year-end and 4.4% by the end of 2023.
Concerns over the economy sliding into a recession due to the Fed’s persistent rate hikes and the ongoing geopolitical tensions are expected to keep the stock market highly volatile.
Given this backdrop, we think it could be wise to invest in dividend stocks Kronos Worldwide, Inc. (KRO), ARC Document Solutions, Inc. (ARC), and Banco Bilbao Vizcaya Argentaria, S.A. (BBVA) to ensure a stable income stream. These stocks trade at discounts to their peers and are rated Strong Buy in our proprietary rating system.
Kronos Worldwide, Inc. (KRO)
KRO produces and markets titanium dioxide pigments (TiO2) in Europe, North America, the Asia Pacific, and internationally. The company produces TiO2 in two crystalline forms, rutile and anatase, to impart whiteness, brightness, opacity, and durability for various products, including paints, coatings, plastics, paper, fibers, ceramics, and various specialty products, such as inks, foods, and cosmetics.
KRO declared a quarterly dividend of $0.19 on August 3, 2022, payable on September 15, 2022. KRO’s $0.76 annual dividend yields 4.85% at the current share price. Also, it has a four-year average dividend yield of 5.36%. Its dividend payouts have increased at a 4.28% CAGR over the past five years.
During the second quarter ending June 31, 2022, KRO’s revenues increased 18.1% year-over-year to $565.30 million. Its income from operations amounted to $65.20 million, up 48.9% from its year-ago value, while its net income grew 78.6% from its year-ago value to $45.90 million. The company's EPS rose 81.8% from its prior-year quarter to $0.40.
The consensus EPS estimate of $0.31 for the fourth quarter ending September 2022 represents a 10.7% year-over-year growth. Analysts expect revenue to increase 14.9% year-over-year to $574.00 million for the third quarter ending September 2022. The stock has gained 19.6% over the past year to close its last trading session at $15.67.
In terms of forward P/E Non-GAAP, KRO’s 10.52x is 17.7% lower than the industry average of 12.77x. Its forward EV/Sales of 0.83x is 43.4% lower than the industry average of 1.47x. In addition, the company’s forward Price/Sales of 0.80x is 33.4% lower than the industry average of 1.21x.
KRO’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which 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 Value and a B for Stability and Quality. Within the A-rated Chemicals industry, it is ranked #4 of 89 stocks.
Click here to see additional POWR Ratings for Growth, Sentiment, and Momentum for KRO.
ARC Document Solutions, Inc. (ARC)
ARC, a digital printing company, provides digital printing and document-related services in the United States. It provides managed print services that place, manage, and optimize print and imaging equipment in customers' offices, job sites, and other facilities; and cloud-based document management software and other digital hosting services.
For the second quarter ending June 30, 2022, ARC’s net sales increased 8.4% year-over-year to $74.56 million. Its income from operations came in at $5.56 million, up 32.9% from its prior-year quarter, while its net income grew 26.7% year-over-year to $3.26 million. The company's EPS increased 33.3% from the year-ago value to $0.08.
ARC’s $0.20 annual dividend translates to a 6.43% yield at the current price level. The stock has gained 17.8% over the past year and 23.9% over the past month to close its last trading session at $3.11.
In terms of trailing-12-month P/E, ARC’s 12.45x is 38.1% lower than the industry average of 20.11x. Its trailing-12-month EV/Sales of 0.69x is 62.1% lower than the industry average of 1.83x. In addition, the company’s trailing-12-month Price/Sales of 0.46x is 67.5% lower than the industry average of 1.41x.
ARC's strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The stock also has an A grade for Quality and Value and a B for Stability. Within the B-rated Outsourcing - Business Services industry, it is ranked #2 of 42 stocks.
In total, we rate ARC on eight different levels. Beyond what we've stated above, we have also given ARC grades for Growth, Sentiment, and Momentum. Get all the ARC ratings here.
Banco Bilbao Vizcaya Argentaria, S.A. (BBVA)
Headquartered in Bilbao, Spain, BBVA provides retail banking, wholesale banking, and asset management services. It offers current accounts; and demand, savings, overnight, time, term, and subordinated deposits. The company also provides loan products, deals in securities, and manages pension and investment funds.
BBVA paid a semiannual dividend of $0.25 on April 25, 2022. BBVA’s $0.25 annual dividend yields 10.18% at the current share price. Also, it has a four-year average dividend yield of 5.05%.
In the second quarter ended June 30, 2022, BBVA’s non-interest income increased 22.9% year-over-year to €8.55 billion ($8.72 billion). Its operating income grew 14% from its year-ago value to €6.46 billion ($6.59 billion), while its adjusted net profit came in at €3.20 billion ($3.27 billion), up 37.6% from its prior-year quarter. The company’s adjusted EPS rose 50.2% year-over-year to €0.48.
Analysts expect revenue to increase 2.4% year-over-year to $24.17 billion for fiscal 2023. BBVA’s shares have surged 18.9% over the past year to close the last trading session at $4.90.
In terms of forward P/E, BBVA’s 5.22x compared to the industry average of 8.55x. Its Price/Sales of 1.22x compares to the industry average of 1.24x. In addition, the company’s Price/Book of 0.61x is lower than the industry average of 0.64x.
It is no surprise that BBVA has an overall A rating, which equates to Strong Buy in our POWR Ratings system. BBVA also has a B grade for Stability, Sentiment, and Value. Within the B-rated Foreign Banks industry, it is ranked #1 of 96 stocks.
Click here to see additional POWR Ratings for Momentum, Quality, and Growth for BBVA.
KRO shares were trading at $15.53 per share on Tuesday afternoon, down $0.14 (-0.89%). Year-to-date, KRO has gained 5.85%, versus a -8.86% 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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