The Fed’s hawkish comments, followed by the strong employment report, did hamper investor sentiments in the recent past. However, amid the still-high inflation and banking failures, the odds of a sooner-than-expected economic slowdown have increased.
Given that the market uncertainties could remain anchored for quite some time, let us take a look at stocks Walmart Inc. (WMT), PepsiCo, Inc. (PEP), and STMicroelectronics N.V. (STM), which could provide stable returns for your retirement portfolio.
The Fed’s determination to fight the stubbornly high inflation had weighed heavily on the stock market last year. Market sentiments were further hampered by Fed Chair Jerome Powell’s testimony and the hotter-than-expected job report. This raised the likelihood of a half-a-point interest rate hike.
On the bright side, with easing inflation this month, investors’ optimism appeared to be on the rise. The market is now predicting a smaller 25-basis-point rate hike.
However, experts believe that the addition of the financial turmoil to an already-burdened economy with high inflation places the Fed in a difficult spot. Consumer prices rose 6% annually, far above the Fed’s target range of 2%.
For instance, Andrew Patterson, senior international economist for Vanguard, believes that the Fed needs to be careful in balancing the risks of price and financial stability.
Moreover, in addition to the Silicon Valley Bank and Signature Bank worries, concerns for Credit Suisse spooked the markets on Wednesday. CBOE Volatility Index was up 10.2%.
Strategists believe that such rapid market movements could trigger an economic contraction sooner. Economists are scaling down their growth forecasts on the assumption there will be a pullback in bank lending.
Therefore, investors can opt for dividend stocks to ensure a steady return and safeguard their portfolio against economic headwinds. Hence, quality stocks WMT, PEP, and STM might be wise long-term portfolio additions now.
Walmart Inc. (WMT)
WMT engages in the operation of retail, wholesale, and other units worldwide. The company operates through three segments: Walmart U.S.; Walmart International; and Sam’s Club.
On January 12, 2023, Walmart Commerce Technologies, one of WMT’s companies, and Walmart GoLocal recently announced a partnership with Salesforce Inc. (CRM) to give retailers access to the tools and services that enable frictionless local pickup and delivery for customers worldwide.
WMT’s trailing-12-month ROCE of 14.60% is 44.4% higher than the 10.12% industry average. Its trailing-12-month ROTC of 8.71% is 40.5% higher than the 6.20% industry average.
WMT’s board of directors approved an annual dividend for the fiscal year 2024 of $2.28 per share, an increase of approximately 2% from the $2.24 per share paid for the previous fiscal year. The annual dividend would be paid in four quarterly installments of $0.57 per share. The first dividend for the year is scheduled to be paid to shareholders on April 3, 2023.
WMT pays a dividend of $2.28 per share annually, which translates to a 1.63% yield on the current price. Its dividends have grown at 1.9% CAGRs over the past three and five years. Its four-year average dividend yield is 1.67%. WMT has increased its dividend in each of the past 49 years.
WMT’s total revenues increased 7.3% year-over-year to $164.05 billion in the fiscal fourth quarter that ended January 31, 2023. Also, its net sales came in at $162.74 billion, up 7.4% year-over-year. Consolidated net income attributed to WMT grew 76.2% from the year-ago value to $6.28 billion, while its adjusted EPS came in at $1.71, representing an 11.8% year-over-year rise.
Street expects WMT’s revenue to increase 5% year-over-year to $147.36 billion for the fiscal first quarter ending April 2023. Its EPS for the same quarter is estimated to be $1.29. It surpassed revenue estimates in each of the four trailing quarters.
Over the past six months, the stock has gained 4.6% to close the last trading session at $139.64. It gained 1.1% intraday.
WMT’s POWR Ratings reflect this promising outlook. It has an overall A rating, equating to a Strong Buy in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Stability and a B for Growth, Value, Sentiment, and Quality. Within the A-rated Grocery/Big Box Retailers industry, it is ranked #3 out of 37 stocks.
Click here for WMT’s additional POWR Ratings (Momentum).
PepsiCo, Inc. (PEP)
PEP is a popular food and beverage company that operates through its seven segments: Frito-Lay North America; Quaker Foods North America; PepsiCo Beverages North America; Latin America; Europe; Africa, Middle East, and South Asia; Asia Pacific, Australia, and New Zealand; and China Region.
On February 1, 2023, PEP increased its quarterly dividend by 7% from the previous-year value to $1.15 per share, payable to the shareholders on March 31, 2023. PEP has paid consecutive quarterly cash dividends since 1965, and 2022 marked the company's 50th consecutive annual dividend increase.
PEP pays a dividend of $4.60 per share annually. This translates to a 2.60% yield on the current price. Its dividends have grown at 6.4% and 7.4% CAGRs over the past three and five years, respectively. Its four-year average dividend yield is 2.75%.
On December 5, 2022, PEP announced a new packaging goal to double down the scale of reusable packing models from 10% to 20% by 2030. This ambition is driven by disruptive innovation that aligns with the company’s sustainable packaging vision.
The stock’s trailing-12-month gross profit margin of 53.30% is 68.6% higher than the industry average of 31.61%. PEP’s trailing-12-month EBIT margin of 14.18% is 85.7% higher than the industry average of 7.64%.
PEP’s net revenue came in at $28 billion for the fiscal fourth quarter that ended December 31, 2022, up 10.9% year-over-year. Its non-GAAP gross profit increased 11.5% year-over-year to $14.71 billion. Also, its non-GAAP operating profit came in at $2.93 billion, up 6.9% year-over-year.
Non-GAAP net income attributable to PEP increased 8.5% year-over-year to $2.31 billion. Non-GAAP net income attributable to PEP per common share grew 9.2% year-over-year to $1.67.
For the fiscal first quarter ending March 2023, analysts expect PEP’s revenue to increase 6.7% year-over-year to $17.28 billion. Its EPS is estimated to grow 7.7% year-over-year to $1.39. PEP surpassed EPS and revenue estimates in all four trailing quarters, which is impressive.
Over the past six months, the stock has gained 6.5% to close the last trading session at $176.63. Moreover, it has gained 1.8% intraday.
PEP’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, equating to Buy in our proprietary rating system.
PEP has a B grade for Stability and Sentiment. In the A-rated Beverages industry, it is ranked #19 out of 36 stocks.
Click here for the additional POWR Ratings for Growth, Sentiment, Momentum, and Value for PEP.
STMicroelectronics N.V. (STM)
STM is a semiconductor company headquartered in Geneva, Switzerland. The company develops, manufactures, and markets a range of semiconductor products. It has three segments: Automotive and Discrete Group (ADG); Analog, MEMS, and Sensors Group (AMS); and Microcontrollers and Digital ICs Group (MDG).
On March 13, STM announced the details of the common share repurchase program approved by a shareholder resolution and the supervisory board. A total of 140,714 ordinary shares at the weighted average purchase price per share of €45.79 and for an overall price of €6.44 million ($6.86 million) were acquired between March 6, 2023, to March 10, 2023.
This program demonstrates the company’s confidence in its prospects and is expected to increase the intrinsic value of the holdings of existing shareholders.
For the first quarter of 2023, STM’s board of directors announced the payment of the quarterly cash dividend of $0.06 to the shareholders on March 28, 2023. STM pays a dividend of $0.24 per share annually. This translates to a 0.51% yield on the current price. Its four-year average dividend yield is 0.76%.
STM’s trailing-12-month ROCE of 36.16% is 642.1% higher than the 4.87% industry average. Its trailing-12-month ROTC of 20.01% is 527.6% higher than the 3.19% industry average.
For the fiscal fourth quarter that ended December 31, 2022, STM’s net revenues increased 24.4% year-over-year to $4.42 billion, while its operating income increased 45.4% year-over-year to $1.29 billion.
During the same quarter, the company’s net income attributable to parent company stockholders increased 66.4% year-over-year to $1.25 billion. Earnings per share attributable to parent company stockholders stood at $1.32 per share, up 61% year-over-year.
STM’s revenue and EPS for the first quarter ending March 2023 are expected to increase 18.3% and 27.5% year-over-year to $4.20 billion and $1.01, respectively. Additionally, it surpassed EPS and revenue estimates in each of the trailing four quarters.
The stock has gained 21.8% over the past year to close the last trading session at $47.34. It has gained 32.5% over the past six months.
It is no surprise that STM has an overall A rating, equating to a Strong Buy in our POWR Ratings system.
STM has a B grade for Value, Momentum, Sentiment, and Quality. It is ranked second within the B-rated 91-stock Semiconductor & Wireless Chip industry.
To access the additional POWR Ratings for Growth and Stability for STM, click here.
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WMT shares were trading at $138.54 per share on Thursday morning, down $1.10 (-0.79%). Year-to-date, WMT has declined -2.29%, versus a 3.00% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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