Amid heightened recessionary fears, stocks that offer high and stable dividends are considered a safe haven for investors. Hence, I think quality stocks from top industries Albertsons Companies, Inc. (ACI), Hess Midstream LP (HESM), and ICF International, Inc. (ICFI) that pay reliable dividends, might be ideal buys now.
The Labor Department reported Friday that payrolls grew by 236,000 for the month, compared to the Dow Jones estimate for 238,000 and below the upwardly revised 326,000 in February. Moreover, the unemployment rate ticked lower to 3.5%, the lowest monthly gain since December 2020.
Julia Pollak, the chief economist for ZipRecruiter, said that the recent labor market report had reassured the Fed, and they are not expected to have any concerns when making their next decision. “Everything is moving in the right direction, I have never seen a report align with expectations as much today’s over the last two years.”
However, the New York Fed’s calculation through the end of March shows that the spread between 3-month and 10-year Treasuries indicates a 58% probability of a recession in the next 12 months.
Furthermore, JPMorgan Chase CEO Jamie Dimon said recently that the banking crisis caused by the recent collapse of Silicon Valley Bank and Signature Bank has increased the odds of a US recession. Dimon said he isn’t sure if the US economy is through the thick of the current banking crisis just yet.
Take a look at the stocks mentioned above:
Albertsons Companies, Inc. (ACI)
ACI engages in the operation of food and drug stores in the United States. The company’s food and drug retail stores offer grocery products, general merchandise, health and beauty care products, pharmacy, fuel, and other items and services.
On April 7, ACI announced that it has partnered with global financial services technology leader FIS, which represents supplemental health benefits administrators, including Fresh Connect, PayForward, and WEX Inc (WEX), that utilize its technology payment platform.
Additionally, Albertsons Cos. Is also entering into a partnership to accept benefit cards from Soda Health, which works to improve health equity by tailoring benefits based on individual needs.
ACI’s forward EV/Sales of 0.30x is 82.3% lower than the industry average of 1.70x. Its forward Price/Sales multiple of 0.15 is 86.1% lower than the industry average of 1.11.
ACI pays $0.48 annually as dividends. This translates to a yield of 2.28% at the current price. The company has a 4-year average dividend yield of 7.10%.
ACI’s net sales and other revenue increased 8.5% year-over-year to $18.15 billion in the third quarter, which ended December 3, 2022. The company’s non-GAAP net income increased 6.3% year-over-year to $505.10 million, while non-GAAP net income per class A common share rose 10.1% year-over-year to $0.87.
Analysts expect ACI’s revenue for the fiscal fourth quarter that ended February 2023 to be $18.20 billion, indicating a 4.7% year-over-year growth. The company’s EPS is expected to be $0.68 for the same quarter. Additionally, it has topped consensus revenue estimates in each of the trailing four quarters, which is impressive.
The stock has gained 11% over the past six months to close the last trading session at $21.05.
ACI’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.
ACI also has a B grade for Value, Sentiment, and Quality. It is ranked #6 of 39 stocks in the A-rated Grocery/Big Box Retailers industry.
To access additional ratings for ACI’s Growth, Stability, and Momentum, click here.
Hess Midstream LP (HESM)
HESM owns, develops, operates, and acquires midstream assets. The company operates through three segments: Gathering; Processing and Storage; and Terminaling and Export.
On March 28, HESM announced the execution of a definitive agreement providing for the approximately $100 million repurchase of Class B units by its subsidiary, HESM, from affiliates of Hess Corporation and Global Infrastructure Partners, Hess Midstream’s sponsors.
Jonathan Stein, Chief Financial Officer of HESM, said, “The unit repurchase transaction is expected to provide immediate accretion to our shareholders. Following this unit repurchase, we expect to continue to have more than $1 billion of financial flexibility through 2025 that can be used to support our return of capital framework, including potential additional and ongoing unit repurchases.”
HESM’s forward EV/EBITDA of 4.32x is 16% lower than the industry average of 5.13x. Its forward Price/Sales multiple of 0.98 is 22.2% lower than the industry average of 1.26.
HESM pays a $2.28 per share dividend annually, translating to a 7.75% yield on the current market price. Its dividend payments have grown at a CAGR of 11.4% and 28.8% over the past three and five years. The company has a four-year average dividend yield of 8%.
During the fiscal year that ended December 31, 2022, HESM’s total revenues increased 5.9% year-over-year to $1.28 billion. Adjusted EBITDA grew 8.2% year-over-year to $982.90 million, while its net income increased marginally year-over-year to $620.60 million.
HESM’s EPS is expected to rise 5.3% year-over-year to $0.52 for the fiscal first quarter that ended March 2023. The company’s revenue for the same quarter is expected to be $302.61 million. Additionally, it has topped consensus revenue estimates in three of the trailing four quarters.
Shares of HESM have gained 8.7% over the past six months to close the last trading session at $29.38.
HESM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
The stock has a B grade for Momentum, Quality, and Value. Within the A-rated MLPs - Gas industry, it is ranked #2 out of the two stocks.
Beyond what is stated above, we’ve also rated HESM for Growth, Stability, and Sentiment. Get all HESM ratings here.
ICF International, Inc. (ICFI)
ICFI provides management, marketing, technology, and policy consulting and implementation services to government and commercial clients in the United States and internationally.
ICFI’s forward EV/Sales of 1.42x is 8.6% lower than the industry average of 1.55x. Its forward Price/Sales multiple of 1.03 is 16.4% lower than the industry average of 1.23.
On February 28, 2023, ICFI declared a quarterly cash dividend of $0.14 per share, payable on April 13. The company pays a $0.56 dividend annually, which translates to a yield of 0.51% at the current price level. It has a four-year average dividend yield of 0.66%.
ICFI’s revenue rose 22.6% year-over-year to $475.61 million in the fourth quarter that ended December 31, 2022. The company’s adjusted EBITDA increased 45.1% year-over-year to $55.21 million, while its non-GAAP EPS increased 31.1% year-over-year to $1.56.
Street expects ICFI’s revenue for the fiscal first quarter ended March 2023 to be $473.96 million, indicating a 14.6% year-over-year growth. The company’s EPS is expected to increase 6.7% year-over-year to $1.40 for the same quarter. Additionally, it has topped consensus revenue and EPS estimates in three of the trailing four quarters.
The stock has gained 15.6% over the past nine months to close the last trading session at $108.94.
ICFI’s robust prospects are reflected in its POWR Ratings. The stock has an overall B rating, equating to a Buy in our proprietary rating system.
ICFI has a B grade for Growth and Sentiment. It is ranked #2 among four stocks in the A-rated Outsourcing - Management Services industry.
Click here for the additional POWR Ratings for ICFI (Value, Momentum, and Stability).
What To Do Next?
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What gives these stocks the right stuff to become big winners, even in this brutal stock market?
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ACI shares were trading at $21.16 per share on Monday morning, up $0.11 (+0.52%). Year-to-date, ACI has gained 2.61%, versus a 6.88% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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