The major market indexes have been under tremendous pressure lately due to skyrocketing inflation and the possibility of further aggressive interest rate hikes, which could lead to the economy slipping into a recession. The Dow Jones Industrial Average (DJIA) is down 15.3% year-to-date.
The central bank’s three interest rate hikes so far this year have failed to bring prices down, as the Consumer Price Index increased 9.1% from a year ago in June, above the 8.8% Dow Jones estimate. Inflation has been soaring at rates not seen in four decades.
Amid this backdrop, investing in high-yield dividend stocks could help cushion one’s portfolio against market risks by generating a steady income stream. Thus, we think it could be wise to add the highest dividend-paying Dow stocks The Goldman Sachs Group, Inc. (GS), Merck & Co., Inc. (MRK), Coca-Cola Company (KO), The Home Depot, Inc. (HD), and McDonald's Corporation (MCD) to your watchlist.
The Goldman Sachs Group, Inc. (GS)
GS provides various financial services for corporations, financial institutions, governments, and individuals worldwide. It operates through four segments: Investment Banking, Global Markets; Asset Management; and Consumer & Wealth Management.
On April 11, 2022, GS acquired NN Investment Partners from NN Group N.V. for €1.7 billion ($1.71 billion). This acquisition strengthens Goldman Sachs Asset Management’s position and adds new capabilities for accelerating growth in the European market.
GS’ four-year average dividend yield is 1.84%, and its current dividend translates to a 2.76% yield. Its dividends have grown at 35% and 24.3% CAGRs over the past three and five years, respectively. The company paid a $2 per share quarterly dividend on June 29, 2022.
For its fiscal first quarter ended March 31, 2022, GS’ total net interest income increased 23.3% year-over-year to $1.83 billion. Also, its investment management revenues increased 14.9% from its year-ago value to $2.06 billion. Its total assets came in at $1.59 trillion, up 8.5% from the value of $1.46 trillion on December 31, 2021.
Analysts expect GS’ EPS for fiscal 2023 (ending December 2023) to increase 9.6% year-over-year to $37.68. Its revenue for the next year is expected to increase 4.3% year-over-year to $48.27 billion. It surpassed Street EPS estimates in three of the trailing four quarters. Over the past month, the stock has gained marginally to close the last trading session at $290.15.
GS’ POWR Ratings reflect solid prospects. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Momentum. It is ranked #20 out of 24 stocks in the Investment Brokerage industry. Click here to see the additional ratings of GS for Growth, Value, Stability, Sentiment, and Quality.
Merck & Co., Inc. (MRK)
MRK is a global provider of health solutions through its prescription medicines, vaccines, biological therapies, and animal health products. The company operates through two segments: Pharmaceutical; and Animal Health. It offers its products to drug wholesalers, retailers, hospitals, government agencies, and other health care providers.
On July 13, 2022, MRK and Orion Corporation collaborated on the development and commercialization of ODM-208, an investigational steroid synthesis inhibitor for the treatment of metastatic castration-resistant prostate cancer. This collaboration strengthens and complements the company’s oncology pipeline.
MRK’s four-year average dividend yield is 2.93%, and its forward annual dividend of $2.76 translates to a 2.94% yield. The company has increased its dividend for 12 consecutive years. Its dividend has grown at a 10.2% CAGR over the past three years and an 8.8% CAGR over the past five years.
During the first quarter ended March 31, 2022, MRK’s net sales increased 49.6% year-over-year to $15.90 billion. The company’s non-GAAP net income from continuing operations increased 84.2% year-over-year to $5.43 billion, while its non-GAAP EPS grew 84.5% from the prior-year quarter to $2.14.
Analysts expect MRK’s revenues to increase 22.2% year-over-year to $13.93 billion in the fiscal second quarter (ended June 2022). Its EPS is expected to increase 28.9% to $1.69 in the about-to-be-reported quarter. MRK surpassed the consensus EPS estimates in three of the trailing four quarters.
Shares of MRK have gained 22.3% year-to-date to close the last trading day at $93.77.
MRK’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system. MRK also has an A grade for Growth and a B grade for Value, Stability, Sentiment, and Quality. The stock is ranked first out of 169 stocks in the Medical - Pharmaceuticals industry.
In addition to the POWR Ratings I have just highlighted, click here to see MRK’s rating for Momentum.
The Coca-Cola Company (KO)
KO is a beverage company that manufactures, markets, and sells various non-alcoholic beverages globally. It sells its products under brands: Coca-Cola, Sprite, Fanta, Diet Coke, Coca-Cola Zero Sugar, Thumbs Up, Aquarius, fairlife, Minute Maid Pulpy, and Simply, among various others.
KO’s four-year average dividend yield is 3.12%, and its forward annual dividend of $1.76 translates to a 2.82% yield. The company has increased its dividend for 59 consecutive years. Its dividend has grown at a 3.6% CAGR over the past five years.
During its fiscal 2022 first quarter (ended April 1, 2022), KO’s net revenues increased 16.3% year-over-year to $10.49 billion. Its gross profit rose 16% from its year-ago value to $6.40 billion. Its net income grew 24% from the same period last year to $2.78 billion, while its EPS came in at $0.64, representing a 23% increase year-over-year.
Analysts expect KO’s EPS and revenue to increase 2% and 6.9% year-over-year to $0.66 and $10.74 billion, respectively, in its fiscal third quarter (ending September 2022). It surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 13.4% over the past year and 15% over the past nine months to close yesterday’s trading session at $62.38.
KO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. KO also has a B grade for Stability and Quality. The stock is ranked #17 of 36 stocks in the A-rated Beverages industry. Click here to see the other KO ratings for Growth, Value, Momentum, and Sentiment.
The Home Depot, Inc. (HD)
HD operates as a home improvement retailer. The Home Depot stores offer building materials, home improvement products, lawn and garden products, and decor products and provide installation, home maintenance, and professional service programs to do-it-yourself and professional customers.
On May 3, 2022, HD announced a $150 million venture capital fund to fuel retail and home improvement innovation. "With Home Depot Ventures, we're lending our support and expertise to enable rapid scale of innovation," said Richard McPhail, executive vice president and CFO of HD.
HD’s four-year average dividend yield is 2.18%, and its forward annual dividend of $7.60 translates to a 2.65% yield. The company has increased its dividend for nine consecutive years. Its dividend has grown at a 17.6% CAGR over the past five years.
For the first quarter ended May 1, 2022, HD’s net sales increased 3.8% year-over-year to $38.91 billion. Its gross profit grew 3.2% year-over-year to $13.14 billion, while its net earnings rose 2.1% from the year-ago value to $4.23 billion. The company’s EPS increased 6% from its prior-year quarter to $4.09.
Analysts expect HD’s EPS for the quarter ending July 31, 2022, to increase 8.1% year-over-year to $4.90, while its revenue is expected to increase 5.6% year-over-year to $43.41 billion. It surpassed consensus EPS estimates in each of the trailing four quarters. Shares of HD have gained 1.2% over the past month to close the last trading day at $287.10.
HD’s POWR Ratings reflect its bright prospects. The company has a B grade for Stability and Quality. Within the Home Improvement & Goods industry, it is ranked #25 of 63 stocks. To see additional POWR Ratings for Growth, Value, Momentum, and Sentiment for HD, click here.
McDonald's Corporation (MCD)
MCD operates and franchises McDonald's restaurants owned and operated by independent local business owners. Famous for its hamburgers and cheeseburgers, the company also offers chicken sandwiches and nuggets, wraps, fries, salads, desserts, soft serve cones, soft drinks, coffee, and other beverages.
On May 17, 2022, MCD partnered with Deliveroo to drive delivery growth. This partnership is expected to strengthen the company’s growth in the existing markets and expand the availability of MCD in new markets.
MCD’s four-year average dividend yield is 2.30%, and its forward annual dividend translates to a 2.18% yield. Its dividends have grown at 6.5% and 7.9% CAGRs over the past three and five years, respectively. The company has increased its dividend for 13 consecutive years.
For the first quarter ended March 31, 2022, MCD’s total revenue increased 11% year-over-year to $5.67 billion. Its non-GAAP net income rose 18.6% year-over-year to $1.71 billion, while non-GAAP EPS came in at $2.28, indicating an 18.8% year-over-year increase.
For fiscal 2022 (ending December 2022), MCD’s EPS is expected to increase 6.2% year-over-year to $9.86. Its revenue is expected to increase marginally year-over-year to $23.26 billion in the current year. MCD surpassed Street EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 7% to close the last trading session at $252.67.
MCD’s POWR Ratings reflect its solid prospects. It has an A grade for Quality and a B grade for Stability and Sentiment.
Within the B-rated Restaurants industry, it is ranked #14 out of 44 stocks. Click here to see the other ratings of MCD for Growth, Value, and Momentum.
GS shares were trading at $280.41 per share on Thursday afternoon, down $9.74 (-3.36%). Year-to-date, GS has declined -25.82%, versus a -20.26% 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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