The Fed’s aggressive interest rate hikes to combat the high inflation and the increasing possibility of a recession dampened consumer confidence last month. However, a healing job market, a rebound in consumer sentiment, falling oil prices, and better-than-expected corporate profits have restored investors’ optimism slightly this month.
Since the macroeconomic headwinds are not expected to be eased soon, investors could consider investing in quality dividend-paying stocks to generate a steady income stream. However, it is important to ensure the performance stability of the stocks to ride out the uncertainties.
Dividend-paying stocks Franchise Group, Inc. (FRG), Philip Morris International Inc. (PM), and The Coca-Cola Company (KO), possessing wide market reach, strong profit margins, and impressive dividend payout histories, are capable of surviving the market volatility and delivering stable returns. So, these stocks could be wise additions to your portfolio now.
Franchise Group, Inc. (FRG)
FRG owns and operates franchised and franchisable businesses and uses its operating expertise to drive cost efficiencies and grow its brands.
It owns brands in various retail industries, including American Freight, Buddy's Home Furnishings, The Vitamin Shoppe, Pet Supplies Plus, Sylvan Learning, and Badcock Home Furniture.
FRG paid a $0.63 per share quarterly cash dividend on July 15, 2022. The stock pays a $2.50 per share dividend annually, translating to a 7.38% yield. Its dividend has grown at a 28.6% rate over the past five years. FRG has delivered three consecutive years of dividend growth.
On July 1, 2022, FRG completed the acquisition of Kohl’s Corporation (KSS), operator of Kohl’s department store retail chain, for $60.00 per share in cash. The significant increase in free cash flow generation is expected to further FRG’s objective of increasing dividends and other capital returns to shareholders while also enabling it to accelerate continued organic and inorganic investments.
For its fiscal 2022 first quarter ended March 26, 2022, FRG’s total revenues increased 82.7% year-over-year to $1.14 billion. The company’s income from operations came in at $130.37 million, indicating a 146.1% year-over-year improvement.
Its non-GAAP net income came in at $53.05 million, up 41.1% from the prior-year period. The company’s EPS came in at $1.29, representing a 43.3% rise from the year-ago period. As of March 26, 2022, the company had $149.60 million in cash and cash equivalents.
Analysts expect an EPS estimate of $5 for fiscal 2022 ending December 31, 2022, indicating a rise of 25.3% from the prior-year period. It surpassed Street EPS estimates in each of the trailing four quarters.
The consensus revenue estimate of $4.45 billion for the same fiscal year represents a 36.6% year-over-year improvement. Its EPS is expected to grow at a rate of 15% per annum over the next five years.
FRG’s 36.9% trailing-12-month ROE is 115.1% higher than the 17.2% industry average. The company’s trailing-12-month ROA of 9.4% is 66.7% higher than the industry average of 5.6%. The stock has gained 8.6% over the past week to close the last trading session at $34.47.
FRG’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
It has a B grade for Growth, Value, and Sentiment. Click here to see the additional ratings for FRG’s Quality, Momentum, and Stability. FRG is ranked #5 of 60 stocks in the Consumer Goods industry.
Philip Morris International Inc. (PM)
PM manufactures and sells cigarettes, other nicotine-containing products, smoke-free products, and related electronic devices and accessories. The company offers IQOS smoke-free products, including heated tobacco and nicotine-containing vapor products, and also develops a pipeline of inhaled therapeutics and respiratory drug delivery.
Its popular brands include Marlboro, Parliament, Bond Street, Chesterfield, L&M, Lark, and Philip Morris.
PM paid a $1.25 per share quarterly cash dividend on July 15, 2022. The stock pays a $5 per share dividend annually, translating to a 5.47% yield. Its dividend has grown at a 3.8% rate over the past five years. PM has delivered 13 consecutive years of dividend growth.
On May 11, 2022, PM agreed to acquire Swedish multinational tobacco company Swedish Match AB (SWMA) for $16 billion. This acquisition will help PM gain access to SWMA’s market-leading brands in the Smokefree, Cigars, and Lights product segments and benefit from its vast distribution network in the US. As of June 30, 2022, the company had $5.04 billion in cash and cash equivalents.
The company’s EPS is expected to grow at a 2.3% rate per annum over the next five years. Its 39.5% trailing-12-month ROTC is 514.7% higher than the 6.4% industry average.
The company’s trailing-12-month ROA margin of 21.6% is 356.2% higher than the industry average of 4.7%. The stock has lost marginally over the past week to close the last trading session at $89.83.
PM’s POWR Ratings reflect this promising outlook. The stock has an overall B grade, equating to Buy in our proprietary rating system.
It has an A grade for Quality and a B grade for Stability. Click here to see the additional ratings for PM’s Growth, Sentiment, Value, and Momentum. PM is ranked #4 of 10 stocks in the A-rated Tobacco industry.
The Coca-Cola Company (KO)
KO owns or licenses, and markets beverage concentrates, finished sparkling soft-drinks brands, energy drinks, dairy, and syrups to fountain retailers such as restaurants and convenience stores.
It operates through independent bottling partners, distributors, wholesalers, retailers, and bottling and distribution operators.
KO will pay a $0.44 per share quarterly cash dividend on October 3, 2022. The stock pays a $1.76 per share dividend annually, translating to a 2.81% yield. Its dividend has grown at a 3.6% rate over the past five years. KO has delivered 59 consecutive years of dividend growth.
For the fiscal 2022 first quarter ended April 1, 2022, KO’s net operating revenues increased 16.4% year-over-year to $10.50 billion. The company’s non-GAAP gross profit came in at $6.27 billion, representing a 14.8% rise from the year-ago period. Its non-GAAP operating income came in at $3.30 billion for the quarter, representing an 18.2% rise from the prior-year period.
While its non-GAAP net income increased 16.6% year-over-year to $2.80 billion, its non-GAAP EPS rose 16.4% to $0.64. As of April 1, 2022, the company had $7.68 billion in cash and cash equivalents.
The consensus EPS estimate of $2.46 for fiscal 2022 ending December 31, 2022, indicates a 46.8% year-over-year improvement. It surpassed Street EPS estimates in each of the trailing four quarters, which is impressive.
Analysts expect KO’s revenue to be $41.75 billion for the same fiscal year, representing an 8% rise from the prior-year period. Its EPS is expected to grow at a 6% rate per annum over the next five years.
KO’s 45.6% trailing-12-month ROE is 233.6% higher than the 13.7% industry average. The company’s trailing-12-month ROA margin of 11% is 131.2% higher than the industry average of 4.7%. The stock has lost 1.6% over the past week to close the last trading session at $61.50.
KO’s POWR Ratings reflect its solid prospects. The stock has an overall B grade, which equates to Buy in our proprietary rating system. It also has a B grade for Stability and Quality.
In addition to the POWR Ratings grades we have just highlighted, one can see KO’s Value, Sentiment, Momentum, and Growth ratings here. KO is ranked #16 of 35 stocks in the A-rated Beverages industry.
FRG shares were trading at $34.00 per share on Thursday afternoon, down $0.47 (-1.36%). Year-to-date, FRG has declined -32.71%, versus a -15.61% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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