Market participants closely track corporate earnings for clues regarding the severity of the potential recession triggered by the high inflation and consequent interest rate increases. The rising odds of an economic downturn, an unexpected decline in global business activity, and a sudden rise in weekly jobless claims are expected to keep the market highly volatile in the upcoming weeks.
Although the corporate earnings reports have been impressive, with 68% of companies beating consensus estimates as of July 22, the persisting macroeconomic headwinds are expected to keep the market sentiment bearish. Therefore, it could be wise to bank on quality dividend-paying stocks to generate a steady income stream.
Impressive dividend payouts and higher-than-industry profitability of The Coca-Cola Company (KO), Keurig Dr Pepper Inc. (KDP), Ennis, Inc. (EBF), Constellation Brands, Inc. (STZ), and Casey's General Stores, Inc. (CASY) make them reliable picks in a volatile market.
The Coca-Cola Company (KO)
KO owns or licenses, and markets beverage concentrates, finished sparkling soft-drinks brands, energy drinks, dairy, and syrups to fountain retailers such as restaurants and convenience stores. It operates through independent bottling partners, distributors, wholesalers, retailers, and bottling and distribution operators.
KO will pay a $0.44 per share quarterly cash dividend on October 3, 2022. The stock pays a $1.76 per share dividend annually, translating to a 2.81% yield. The company’s dividend has grown at a 3.6% rate over the past five years. KO has delivered 59 consecutive years of dividend growth.
For the fiscal 2022 second quarter ended July 1, 2022, KO’s net operating revenues increased 11.6% year-over-year to $11.30 billion. The company’s non-GAAP gross profit came in at $6.67 billion, representing a 7.2% rise from the year-ago period. Its non-GAAP operating income came in at $3.47 billion for the quarter, representing an 8% rise from the prior-year period.
While its non-GAAP net income increased 4.4% year-over-year to $3.06 billion, its non-GAAP EPS rose 2.9% to $0.70. As of July 1, 2022, the company had $8.98 billion in cash and cash equivalents.
The consensus EPS estimate of $2.46 for fiscal 2022 ending December 31, 2022, indicates a 46.8% year-over-year improvement. It surpassed Street EPS estimates in each of the trailing four quarters, which is impressive.
Analysts expect KO’s revenue to be $41.84 billion for the same fiscal year, representing an 8.2% rise from the prior-year period. Its EPS is expected to grow at a 6% rate per annum over the next five years.
Its 33.2% trailing-12-month EBITDA margin is 173.6% higher than the 12.1% industry average. The company’s trailing-12-month levered free cash flow margin of 17.5% is 414.5% higher than the industry average of 3.4%. The stock has gained 16.1% over the past nine months and 3% over the past week to close the last trading session at $63.21.
KO’s POWR Ratings reflect this promising outlook. It has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has a B grade for Stability, Sentiment, and Quality. Click here to see the additional ratings for KO’s Value, Growth, and Momentum. KO is ranked #17 of 36 stocks in the A-rated Beverages industry.
Keurig Dr Pepper Inc. (KDP)
KDP manufactures flavored (non-cola) carbonated soft drinks (CSDs) and non-carbonated beverages (NCBs), including water, ready-to-drink tea and coffee, juice, juice drinks, mixers, and specialty coffee, and is a producer of single-serve brewing systems worldwide.
It distributes its products to retailers, bottlers and distributors, restaurants, hotel chains, office coffee distributors, and end-use consumers.
KDP will pay a $0.19 quarterly cash dividend on July 15, 2022. The stock pays a $0.75 per share dividend annually, translating to a 2.02% yield. KDP has increased its dividends for two consecutive years.
On June 23, 2022, KDP announced the acquisition of the global rights to the non-alcoholic, ready-to-drink cocktail brand Atypique from Station Agro-Biotech, a Quebec, Canada-based producer and distributor of innovative products in the brewing, spirits, and agri-food sectors.
The agreement includes a multi-year collaboration to fuel accelerated growth for Atypique, leveraging Station Agro-Biotech's R&D expertise in the category and KDP's robust sales and distribution network in the fast-growing non-alcoholic market in Canada.
KDP’s total revenue for its fiscal 2021 first quarter ended March 31, 2022, increased 6.8% year-over-year to $3.08 billion. The company’s adjusted gross profit came in at $1.62 billion, up 0.8% from the prior-year period.
Its adjusted net income came in at $474 million for the quarter, representing a 0.7% year-over-year improvement. KDP’s adjusted EPS remains unchanged from the year-ago period at $0.33. The company had $592 million in cash and equivalents as of March 31, 2022.
Analysts expect the company’s EPS to come in at $1.69 for its fiscal 2022 ending December 31, 2022, representing a 9.8% rise from the prior-year period. It surpassed Street EPS estimates in three of the trailing four quarters.
The consensus revenue estimate of $13.69 billion for the same fiscal year represents a 7.9% year-over-year improvement. Its EPS is expected to grow at a rate of 7.1% per annum over the next five years.
Its 29.4% trailing-12-month EBITDA margin is 133.2% higher than the 12.6% industry average. The company’s trailing-12-month levered free cash flow margin of 17.3% is 408.5% higher than the industry average of 3.4%. The stock has gained 7.2% over the past nine months and 2.2% over the past week to close the last trading session at $37.07.
KDP’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, equating to Buy in our proprietary rating system.
It has an A grade for Quality and a B for Stability. In addition to the POWR Ratings grades we have just highlighted, one can see KDP’s Momentum, Growth, Value, and Sentiment ratings here. KDP is ranked #18 in the Beverages industry.
Ennis, Inc. (EBF)
EBT manufactures, designs, and sells business forms and other printed business products through independent distributors. Its products include printed and electronic media, integrated forms and labels, presentation products, flex-o-graphic printing, secure and negotiable documents, specialty packaging, direct mail, advertising specialties, envelopes, and other custom products.
EBF will pay a $0.25 quarterly cash dividend on August 8, 2022. The stock pays a $1 per share dividend annually, translating to a 4.66% yield. The company’s dividend has grown at a 6.6% rate over the past five years. EBF has increased its dividends for two consecutive years.
EBF’s revenues for its fiscal 2023 first quarter ended May 31, 2022, increased 11.1% year-over-year to $107.67 million. The company’s gross profit came in at $34 million, representing a 16.5% year-over-year improvement. Its operating income came in at $16.32 million for the quarter, up 54.7% from the prior-year period.
While its net earnings increased 59.2% year-over-year to $11.63 million, its EPS grew 60.7% to $0.45. The company had $91.22 million in cash as of May 31, 2022.
The consensus EPS estimate of $1.58 for fiscal 2023 ending February 28, 2023, indicates a 42.3% year-over-year improvement. Analysts expect KO’s revenue to be $419.97 million for the same fiscal year, representing a 5% rise from the prior-year period. Its EPS is expected to grow at a 5% rate per annum over the next five years.
Its 16.5% trailing-12-month EBITDA margin is 27.7% higher than the 12.9% industry average. The company’s trailing-12-month levered free cash flow margin of 8.5% is 160.6% higher than the industry average of 3.3%. The stock has gained 13.2% over the past nine months and no change over the past week to close the last trading session at $21.44.
EBF’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.
It has an A grade for Sentiment and Quality and a B for Stability. Click here to see the additional ratings for EBF’s Growth, Momentum, and Value.
EBF is ranked #1 of 60 stocks in the Consumer Goods industry.
Constellation Brands, Inc. (STZ)
STZ designs, manufactures, and sells construction, mining, forestry machinery, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. It also offers related equipment parts, financing, and insurance and distributes them through dealers.
STZ will pay a $0.80 quarterly cash dividend on August 24, 2022. The stock pays a $3.20 per share dividend annually, translating to a 1.33% yield. The company’s dividend has grown at a 12.4% rate over the past five years. STZ has increased its dividends for six consecutive years.
On July 26, 2022, STZ’s Woodbridge Winery debuted Woodbridge Wine Soda, a first-of-its-kind wine that combines classic sodas and crisp white wine in convenient ready-to-drink cans. This new-to-market wine is expected to gain high demand in the coming months.
For its fiscal 2023 first quarter ended May 31, 2022, STZ’s net sales and revenues increased 16.6% year-over-year to $2.36 billion. The company’s non-GAAP gross profit came in at $1.23 billion, representing an 11.8% year-over-year improvement. Its non-GAAP operating income came in at $792.50 million for the quarter, up 9.6% from the prior-year period.
While its non-GAAP net income increased 10.2% year-over-year to $503.80 million, its non-GAAP EPS grew 14.2% to $2.66. It had $101.80 million in cash and cash equivalents as of May 31, 2022.
The consensus EPS estimate of $10.99 for fiscal 2023 ending February 28, 2023, indicates a 7.7% year-over-year improvement. It surpassed Street EPS estimates in three of the trailing four quarters.
Analysts expect KO’s revenue to be $9.46 billion for the same fiscal year, representing a 7.3% rise from the prior-year period. Its EPS is expected to grow at a 10.8% rate per annum over the next five years.
Its 37.5% trailing-12-month EBITDA margin is 197.3% higher than the 12.6% industry average. The company’s trailing-12-month levered free cash flow margin of 8.6% is 153.1% higher than the industry average of 3.4%. The stock has gained 10.7% over the past nine months and lost marginally over the past week to close the last trading session at $241.50.
STZ’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has an A grade for Growth and a B for Sentiment and Quality. Click here to see the additional ratings for STZ (Stability, Value, and Momentum). STZ is ranked #14 in the Beverages industry.
Casey's General Stores, Inc. (CASY)
CASY operates convenience stores under the Casey’s and Casey’s General Store names that offer a selection of food, beverage products, health and beauty aids, electronic accessories, housewares, automotive products, and pet supplies.
The stores also provide motor fuel for sale on a self-service basis, gasoline, and diesel fuel. It also sells tobacco and nicotine products and runs one liquor store and one grocery store.
CASY will pay a $0.38 quarterly cash dividend on August 15, 2022. The stock pays a $1.52 per share dividend annually, translating to a 0.77% yield. The company’s dividend has grown at a 7.7% rate over the past five years. CASY has increased its dividends for 23 consecutive years.
For its fiscal 2022 fourth quarter ended April 30, 2022, CASY’s total revenues grew 45.4% year-over-year to $3.46 billion. The company’s pre-tax income came in at $72.68 million, indicating a 35.6% rise from the year-ago period.
Its net income came in at $59.78 million, up 43.4% from the prior-year period. CASY’s EPS increased 42.9% year-over-year to $1.60. As of April 30, 2022, the company had $158.88 million in cash and cash equivalents.
The consensus revenue estimate of $17.01 billion for fiscal 2023 ending April 30, 2023, represents a 31.4% rise from the prior-year period. It surpassed Street EPS estimates in each of the trailing four quarters, which is impressive. The company’s EPS is expected to grow at an 8.2% rate per annum over the next five years.
CASY’s 16.3% trailing-12-month ROE is 19.1% higher than the 13.7% industry average. The company’s trailing-12-month ROTC of 8.8% is 35.9% higher than the industry average of 6.5%. The stock has gained 4.4% over the past nine months and 1.1% over the past week to close the last trading session at $196.31.
CASY’s POWR Ratings reflect its solid prospects. It has an overall A rating, which equates to Strong Buy in our proprietary rating system.
The stock has a B grade for Sentiment and Quality. In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for CASY’s Growth, Stability, Value, and Momentum here.
CASY is ranked #9 of 38 stocks in the A-rated Grocery/Big Box Retailers industry.
KO shares were trading at $62.86 per share on Wednesday afternoon, down $0.35 (-0.55%). Year-to-date, KO has gained 7.75%, versus a -14.97% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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