Recessionary concerns have surged amid the Fed’s hawkish statements, crushing investor sentiments. With the likelihood soaring of an impending downturn, we look into some quality stocks for the long term, Pfizer Inc. (PFE), The Hershey Company (HSY), and Bluegreen Vacations Holding Corporation (BVH). These stocks could be ideal buy and hold options for the next decade.
A higher-than-anticipated job report, contributing to the upward pressure on wages and prices and robust consumer spending despite sky-high inflation, has raised the odds of progressive rate hikes.
The recently released minutes of the Fed meeting indicated that although inflation showed signs of cooling, it is “well above” the central bank’s 2% target. Hence, further rate hikes are necessary. In addition, the minutes revealed that some members favored a 50-basis-point hike, believing that a larger increase would more quickly bring the target range close to the levels.
Experts anticipate such tenacious rate hikes could tip the economy into a recession. “Bond King” Jeffrey Gundlach warned about an impending recession and advised investors to prepare for it. This could put significant pressure on the stock market in the upcoming months.
Given such a volatile macroeconomic scenario, fundamentally strong dividend-paying stocks PFE, HSY, and BVH might be solid investments now.
Pfizer Inc. (PFE)
PFE discovers, develops, manufactures, distributes, and sells biopharmaceutical products worldwide. It offers medicines and vaccines in various therapeutic areas. The company serves wholesalers, retailers, hospitals, clinics, government agencies, and disease control and prevention centers.
On February 16, PFE announced positive results from the Phase 3 TALAPRO-2 study of TALZENNA, an oral poly ADP-ribose polymerase inhibitor, in combination with XTANDI, demonstrating a statistically significant and clinically meaningful improvement in radiographic progression-free survival.
On February 10, PFE announced that the U.S. Food and Drug Administration (FDA) had approved its supplemental New Drug Application for CIBINQO (abrocitinib), expanding its indication to include adolescents. CIBINQO was previously approved only for treating adults 18 years and older. These developments in the company’s product line should boost revenues in the near future.
On December 12, 2022, PFE’s board of directors declared an increase in the quarterly dividend on the company’s common stock to $0.41, payable to holders of the Common Stock on March 3, 2023. This marks its 337th consecutive quarterly dividend payment.
Its annual dividend of $1.64 yields 3.88% on the current market price, and its four-year average dividend yield is 3.64%. The company’s dividend payouts have increased at a 5.2% CAGR over the past three years and a 5.5% CAGR over the past five years.
In terms of forward non-GAAP P/E, PFE is trading at 11.95x, 39.1% lower than the industry average of 19.61x, while its forward EV/EBITDA of 8.31x is 37.8% lower than the industry average of 13.36x.
During the fiscal fourth quarter that ended December 2022, PFE’s revenues rose 1.9% year-over-year to $24.29 billion. Its income from continuing operations improved 39.7% year-over-year to $5 billion.
Non-GAAP adjusted net income attributable to PFE common shareholders rose 44.2% year-over-year to $6.55 billion, while its non-GAAP adjusted earnings per share grew 44.3% year-over-year to $1.14.
Streets expect PFE’s EPS and revenue for the fiscal year ending December 2023 to be $3.55 and $70.55 billion, respectively. Additionally, PFE topped consensus EPS estimates in each of the trailing four quarters, which is impressive.
The stock declined marginally intraday to close its last trading session at $42.30. It has a five-year beta of 0.57, indicating less volatility than the overall market.
PFE’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
PFE is rated an A in Value and a B in Quality. Within the Medical – Pharmaceuticals industry, it is ranked #20 out of 174 stocks.
Click here to see additional POWR Ratings for Momentum, Growth, Sentiment, and Stability for PFE.
The Hershey Company (HSY)
HSY is a popular snacks company that offers confectionery products and pantry items globally. The company operates through three segments, North America Confectionery; North America Salty Snacks; and International.
On February 15, HSY announced the completion of a one million shares purchase of its common stock from Hershey Trust Company, as Trustee for the Milton Hershey School Trust, for approximately $240 million, or $239.91 per share. Share buybacks are a crucial part of the company’s capital allocation strategy, and its continued flexibility to invest in business should drive future growth.
On January 31, HSY declared quarterly dividends of $1.036 on the common stock and $0.942 on the class B common stock, payable on March 15, 2023. It is the 373rd consecutive regular dividend on the common stock and the 154th consecutive regular dividend on the Class B common stock, reflecting HSY’s strong cash generation ability.
Its annual dividend of $4.14 yields 1.72% on the current market price, and its four-year average yield is 1.96%. The company’s dividend payouts have increased at a 9.7% CAGR over the past three years and a 9.2% CAGR over the past five years.
HSY’s trailing-12-month EBIT margin of 21.61% is 184.3% higher than the 7.60% industry average. Its trailing-12-month ROCE of 54.31% is 422.3% higher than the 10.40% industry average.
For the fiscal fourth quarter that ended December 31, 2022, HSY’s net sales came in at $2.65 billion, up 14% year-over-year. Its non-GAAP gross profit grew 14.6% year-over-year to $1.16 billion. In addition, its non-GAAP net income came in at $417.11 million, up 18.6% year-over-year, while its non-GAAP EPS increased 19.5% year-over-year to $2.02.
Analysts expect HSY’s revenue to increase 8.5% year-over-year to $2.89 billion in the fiscal first quarter of 2023. Its EPS is expected to increase 5.7% year-over-year to $2.67. It surpassed EPS and revenue estimates in all four trailing quarters.
The stock has gained 18.7% over the past year to close the last trading session at $240.47. It has gained 3.4% over the past six months.
It is no surprise that HSY has an overall rating of B, which equates to Buy in our POWR Ratings system.
HSY has an A grade for Quality and B for Sentiment. In the B-rated Food Makers industry, it is ranked #25 of 82 stocks.
Click here for the additional POWR Ratings for HSY (Growth, Value, Momentum, and Stability).
Bluegreen Vacations Holding Corporation (BVH)
BVH is a vacation ownership company. It markets and sells vacation ownership interests (VOI) and manages resorts in leisure and urban settings. The company provides resort management, mortgage, reservation, building design, and development services. It also offers financing to qualifying VOI purchasers.
Recently, BVH extended its multi-year agreement with NASCAR®, under which BVH will remain the official vacation ownership provider of NASCAR® for another six years.
Ray Lopez, BVH’s Chief Operating Officer and Chief Financial Officer, said, “We’re seeing an increasing demand for unique experiences among Bluegreen owners and this agreement with NASCAR® allows us to offer an opportunity to experience NASCAR® in the heart of the action.”
On February 20, BVH announced that its board of directors had declared a quarterly dividend of $0.20 per share on its Class A and Class B Common Stock, payable to all shareholders on March 20, 2023. The dividend reflects an increase from the prior quarterly dividend of $0.15 per share.
Its annual dividend yields 2.43% on the current price, and its four-year average yield is 0.78%. The company’s dividend payouts have increased at a 30.5% CAGR over the past three years and 30% CAGR over the past five years.
On October 12, 2022, BVH announced the acquisition of two buildings in the Streamside at Vail Resort enclave in Vail, Colorado, as well as a 320-room resort and spa in Panama City Beach, Florida. The company also announced the commencement of construction of a new resort in Pigeon Forge, Tennessee. The addition of new resorts should boost the company’s growth and profitability.
In terms of forward non-GAAP P/E, BVH is trading at 9.24x, 37.5% lower than the industry average of 14.78x, while its forward EV/EBIT of 8.13x is 41.9% lower than the industry average of 13.99x.
BVH’s total revenue grew 16.9% year-over-year to $250.84 million in the fiscal third quarter that ended September 30, 2022, while its adjusted EBITDA attributable to shareholders came in at $41.85 million. Furthermore, the company’s net income and earnings per share increased by 1.2% and 12.3% from the year-ago values to $27.65 million and $1.19, respectively.
Analysts expect BVH’s revenue to increase marginally year-over-year to $196.91 million for the fiscal first quarter ending March 2023. The company’s EPS for the same quarter is expected to come in at $0.65.
Also, the company’s revenue and EPS for the fiscal year ending December 2023 are expected to grow 4.4% and 8.3% year-over-year to $939.24 million and $3.74, respectively. It surpassed its consensus revenue estimates in three out of the four trailing quarters.
Shares of BVH have gained 17.5% over the past year and 41.8% over the past six months to close the last trading session at $32.90.
BVH’s POWR Ratings reflect its promising prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
BVH has an A grade for Value and Sentiment and a B for Quality. It has topped the B-rated 22-stock Travel – Hotels/Resorts industry.
To see additional POWR Ratings for Growth, Stability, and Momentum for BVH, click here.
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?
First, because they are all low-priced companies with the most upside potential in today’s volatile markets.
But even more important is that they are all top Buy rated stocks according to our coveted POWR Ratings system, and they excel in key areas of growth, sentiment and momentum.
Click below now to see these 3 exciting stocks that could double or more in the year ahead.
PFE shares were unchanged in premarket trading Friday. Year-to-date, PFE has declined -16.69%, versus a 4.77% 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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