Inflation and a rocky stock market have been wearing on consumers’ sentiments. Therefore, in order to dial down the risk profile of your portfolio to protect your retirement portfolio from unrecoverable losses, investing in fundamentally sound dividend-paying stocks like Oracle Corporation (ORCL), CVS Health Corporation (CVS), and Humana Inc. (HUM) could be wise.
Over the past year, prices went up while stock markets and savings account balances went down, leaving consumers and investors dizzy and their wallets hurting. Despite the Fed’s aggressive capacity to counter inflation, it is still well above its 2% target. The Consumer Price Index (CPI) increased 0.4% in February, putting the annual inflation rate at 6%.
Last week, the Fed delivered a 25-basis-point increase in interest rates and indicated that the central bank’s rate-hiking campaign could be paused soon. Following this, yields slumped in the bond market, with the yield on the 10-year Treasury falling to 3.52% from 3.61%.
Tom Graff, head of investments at Baltimore-based Facet, said, “The bond market is screaming rate cuts because it thinks the banking crisis will result in bringing down inflation, and it is extremely concerned about what’s going on in banks.”
Following the banking crisis and the ensuing strict lending standards, some experts think that this could help reduce inflationary pressures. However, other experts anticipate that a severe slowdown could send the economy into recession.
Amid this, one could opt for an investment that gives a steady income stream. Thus, investors nearing retirement could check out stocks with strong fundamentals, such as ORCL, CVS, and HUM. These companies also offer dividends, thereby adding cash flow to your plan.
Oracle Corporation (ORCL)
ORCL provides products and services that address all aspects of corporate IT environments, including applications, platforms, and infrastructure worldwide. The company operates through cloud services and license support; cloud license; hardware; and services segments.
Recently, ORCL extended its collaboration with NVIDIA Corporation (NVDA) to include running NVIDIA AI Foundations and DGX Cloud on the new Oracle Cloud Infrastructure (OCI) Supercluster.
Clay Magouyrk, OCI’s executive vice president, said, “OCI is the first platform to offer an AI supercomputer at scale to thousands of customers across every industry. This is a critical capability as more and more organizations require computing resources for their unique AI use cases. To support this demand, we continue to expand our work with NVIDIA.”
On March 16, JVCKENWOOD Corporation, a Japanese video, audio, and telecommunications manufacturer, implemented Oracle Fusion Cloud Enterprise Resource Planning (ERP), including Oracle Fusion Cloud Enterprise Performance Management (EPM), to help standardize and centralize operational processes for improved efficiency and productivity.
With a strong track record for providing market-leading solutions, ORCL has garnered strong demand for its offerings over its peers.
In the same month, the company declared its quarterly dividend of $0.40 per share of outstanding common stock, reflecting a 25% increase over the last quarter, payable on April 24, 2023. ORCL’s four-year average dividend yield is 1.59%, and its current dividend of $1.28 translates to a 1.82% yield on the current price level.
Its dividends have grown at a 10.1% CAGR over the past three years and an 11% CAGR over the past five years. Also, it has a record of eight years of consecutive dividend growth.
The stock’s trailing-12-month net income margin of 17.46% is 545.9% higher than the 2.70% industry average. Likewise, its trailing-12-month ROTA of 6.36% is 847.7% higher than the industry average of 0.67%.
In the fiscal third quarter that ended February 28, 2023, ORCL’s total revenue increased 17.9% year-over-year to $12.40 billion. The company’s non-GAAP operating income grew 5.3% year-over-year to $14.75 billion, while its adjusted net income increased marginally from the year-ago value to $9.52 billion. Also, its non-GAAP EPS came in at $3.45, up 2.4% year-over-year.
Analysts expect ORCL’s revenue for the quarter ending May 2023 to increase 15.9% year-over-year to $13.73 billion. Its EPS for the current quarter is expected to increase by 2.7% from the year-ago period to $1.58. Moreover, it surpassed the consensus EPS and revenue estimates in three of the trailing four quarters.
Over the past six months, the stock has gained 44.4% to close the last trading session at $90.14.
ORCL POWR Ratings reflect its solid prospects. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Stability and Sentiment. In the Software - Application industry, it is ranked #30 of 133 stocks. Click here to see the additional ratings of ORCL (Growth, Value, Momentum, and Quality).
CVS Health Corporation (CVS)
CVS is a health service provider operating through four segments: Health Care Benefits; Pharmacy Services; Retail/LTC; and Corporate/Other. Its offerings include health & wellness services, health plans, pharmacy services, and prescription drug coverage.
Recently, CVS announced the investment of $10 million to build a new 48-unit multi-family supportive housing community in Indianapolis called St. Lucas Lofts. Through its collaborations with CREA, LLC., and nonprofit co-developers Englewood Community Development Corporation (ECDC) and RDOOR Housing Corporation, the company aims to increase permanent supportive housing and reduce homelessness.
On March 16, the company approved a quarterly dividend of $0.605 per share on the common stock, payable to its shareholders on May 1, 2023. Its annual dividend of $2.42 yields 3.29% at the current price level, while its four-year average dividend yield is 2.74%. Its dividend payouts have increased at a 4.1% CAGR over the past three years and a 2.4% CAGR over the past five years.
Moreover, on February 8, CVS entered into an agreement to acquire Oak Street Health, Inc. (OSH) for approximately $10.60 billion. With this acquisition, the company is expected to advance its care delivery strategy for consumers by reducing medical costs and improving health outcomes.
In terms of trailing-12-month EBITDA margin, CVS’ 6.11% is 98.9% higher than the industry average of 3.17%. In addition, its trailing-12-month ROCE and ROTA of 5.68% and 1.82% compare with the negative industry averages of 39.46% and 31.42%, respectively.
CVS’ total revenue for the fiscal fourth quarter that ended December 31, 2022, increased 9.5% year-over-year to $83.85 billion. The company’s operating income grew 62.3% year-over-year to $3.62 billion, while its attributable net income rose 76.3% from the year-ago value to $2.30 billion. Also, its EPS increased 78.6% year-over-year to $1.75.
For the quarter ending March 31, 2023, CVS’ revenue is expected to improve 5.3% year-over-year to $80.87 billion. Its EPS is expected to amount to $2.12 in the same period. The company has a commendable earnings surprise history, surpassing the consensus EPS and revenue estimates in each of the trailing four quarters.
The stock has lost marginally over the past five days to close the last trading day at $73.57.
CVS’ solid prospects are reflected in its POWR Ratings. It has an overall rating of B, translating to Buy in our proprietary rating system.
It has a B grade for Value, Stability, and Sentiment. It is ranked first out of four stocks in the B-rated Medical - Drug Stores industry. To see the other ratings of CVS for Growth, Momentum, and Quality, click here.
Humana Inc. (HUM)
HUM operates as a health and well-being company through three segments: Retail, Group and Specialty, and Healthcare Services. The company offers medical and supplemental benefit plans to individuals. It also provides insured medical and specialty health insurance benefits and pharmacy solutions.
On March 2, HUM and Aledade, a network of independent primary care providers, announced a decade-long agreement to provide value-based primary care from in-network Aledade-enabled clinicians to Humana's Medicare Advantage members. Through this collaboration, both companies aim to deliver personalized value-based health care for patients nationwide.
On February 16, the company declared a quarterly dividend of $0.885 per share, representing an increase of 12.4% from its previous dividend of $0.7875 per share. The dividend is payable to its stockholders on April 28, 2023.
HUM’s four-year average dividend yield is 0.65%, and its forward annual dividend of $3.54 translates to a 0.70% yield. Its dividend has grown at a 12.7% CAGR over the past three years and a 14.5% CAGR over the past five years. The company has a record of six consecutive years of dividend growth.
The stock’s trailing-12-month EBITDA margin of 4.95% is 56% higher than the 3.17% industry average. Also, its trailing-12-month ROCE, ROTC, and ROTA of 17.88%, 9.36%, and 6.52% compare with the negative 39.46%, 21.84%, and 31.42% industry averages, respectively.
In the fourth quarter that ended on December 31, 2022, HUM’s revenue increased 6.6% year-over-year to $22.44 billion. Its non-GAAP pre-tax income increased 58.4% from the year-ago value to $263 million, while its non-GAAP EPS came in at $1.62, representing a 30.6% year-over-year improvement.
The consensus EPS estimate of $9.35 for the fiscal first quarter (ended March 31, 2023) represents a 16.3% improvement year-over-year. The consensus revenue estimate of $26.49 billion for the current quarter represents a 10.5% increase from the same period last year. HUM surpassed the EPS estimates in each of the trailing four quarters, which is excellent.
The stock has gained 16.6% over the past nine months to close the last trading session at $506.99.
It is no surprise that HUM has an overall rating of A, equating to a Strong Buy in our proprietary rating system. It has a B grade for Growth, Value, and Sentiment. Out of ten stocks in the A-rated Medical - Health Insurance industry, it is ranked #4.
In addition to the POWR Ratings stated above, we have also given HUM grades for Momentum, Stability, and Quality. Get all HUM ratings here.
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ORCL shares were trading at $89.85 per share on Tuesday afternoon, down $0.29 (-0.32%). Year-to-date, ORCL has gained 10.33%, versus a 3.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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