The Federal Reserve’s aggressive interest rate hikes to fight the multi-decade high inflation raise concerns over a potential recession. Though impressive corporate profits restored investors’ confidence to some extent, a cooling job market and a modest decline in industrial production raise concerns. For the week ended July 16, initial jobless claims came in at 251,000, up 7,000 from the week before.
Since several factors indicate a potential economic slowdown and the market may remain under tremendous pressure in the upcoming months, it could be wise to invest in stocks that are relatively stable compared to the border market and pay dividends.
The low beta and dividend payouts of The Procter & Gamble Company (PG), AbbVie Inc. (ABBV), Abbott Laboratories (ABT), Caterpillar Inc. (CAT), and UnitedHealth Group Incorporated (UNH) should help cushion your portfolio with a steady income stream. So, these stocks could be safe investments ahead of the potential recession.
The Procter & Gamble Company (PG)
PG provides branded consumer packaged goods through its beauty; grooming; health care; fabric & home care; and baby, feminine & family care segments to consumers worldwide. Its products are sold through mass merchandisers, e-commerce, grocery stores, membership club stores, drug stores, and department stores. It has a 0.39 beta.
PG will pay a $0.91 quarterly cash dividend on August 15, 2022. The stock pays a $3.65 per share dividend annually, translating to a 2.55% yield. The company’s dividend has grown at a 5.6% rate over the past five years. PG has increased its dividends for 66 consecutive years.
On July 20, 2022, PG and Shopee, a Singapore-based e-commerce platform, launched a new exclusive 360° virtual home shopping experience as part of PG’s Regional Super Brand Day on Shopee. This followed the success of the first Show Me My Home campaign in 2020, which resulted in a 20x sales uplift.
Accessible via the P&G official store on both Shopee's website and app, the virtual home shopping experience includes multi-format touch points, including videos, gamification, and localized content to make online home shopping convenient and engaging. This will help both the companies witness good sales and nurture their partnership in the long run.
For its fiscal 2022 third quarter ended March 31, 2022, PG’s net sales increased 7% year-over-year to $19.38 billion. The company’s operating income was $4.02 billion for the quarter, indicating a 6.3% year-over-year improvement.
Its net earnings came in at $3.37 billion, up 3.6% from the prior-year period. PG’s EPS increased 5.6% year-over-year to $1.33. As of March 31, 2022, the company had $8.53 billion in cash and cash equivalents.
Analysts expect an EPS estimate of $5.83 for fiscal 2022 ending June 30, 2022, indicating a rise of 35.1% from the prior-year period. It surpassed Street EPS estimates in each of the trailing four quarters, which is impressive.
The consensus revenue estimate of $80.02 billion for the same fiscal year represents a 5.1% year-over-year improvement. Its EPS is expected to grow at a 4.6% per annum rate over the next five years.
Its 48.5% trailing-12-month gross profit margin is 46.7% higher than the 33.1% industry average. The company’s trailing-12-month EBITDA margin of 27% is 122% higher than the industry average of 12.1%. Over the past week, the stock has gained 1.7% to close the last trading session at $143.99.
PG’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 and Quality. Click here to see the additional ratings for PG’s Value, Growth, Momentum, and Sentiment. PG is ranked #3 of 60 stocks in the C-rated Consumer Goods industry.
AbbVie Inc. (ABBV)
ABBV develops, manufactures, and sells a range of pharmaceutical products worldwide. Its products are focused on treating diseases related to immunology, oncology, virology, neuroscience, eye care, women’s health, gastroenterology, and other serious health conditions. It has a 0.75 beta.
ABBV will pay a $1.41 quarterly cash dividend on August 15, 2022. The stock pays a $5.64 per share dividend annually, translating to a 3.80% yield. The company’s dividend has grown at a 17.5% rate over the past five years. ABBV has increased its dividends for nine consecutive years.
Based on the results of three Phase 3 studies, on July 26, 2022, the European Commission (EC) approved ABBV’s RINVOQ for the treatment of adult patients with active ulcerative colitis, a chronic, immune-mediated inflammatory bowel disease (IBD) that can lead to substantial burden and often disability among patients.
This should help RINVOQ witness widespread market recognition and gain high demand in the coming months.
ABBV’s net revenues for its fiscal 2022 first quarter ended March 31, 2022, increased 4.1% year-over-year to $13.54 billion. The company’s operating earnings came in at $4.72 billion, indicating a 15% year-over-year improvement.
Its adjusted net income came in at $5.64 billion for the quarter, representing a 9.3% rise from the prior-year period. ABBV’s adjusted EPS increased 9.3% year-over-year to $3.16. As of March 31, 2022, it had $6.10 billion in cash and equivalents.
Analysts expect the company’s EPS to hit $13.94 for its fiscal 2022 ending December 31, 2022, representing a 9.8% rise from the prior-year period. It surpassed Street EPS estimates in each of the trailing four quarters, which is impressive.
The consensus revenue estimate of $59.61 billion for the same fiscal year represents a 6.2% year-over-year improvement. Its EPS is expected to grow at a rate of 0.3% per annum over the next five years.
ABBV’s 69.8% trailing-12-month gross profit margin is 26.8% higher than the 55% industry average. The company’s trailing-12-month EBITDA margin of 50.5% is 1078.9% higher than the industry average of 4.3%. Over the past week, the stock has gained 1.7% to close the last trading session at $150.22.
ABBV’s POWR Ratings reflect its solid prospects. The stock has an overall A rating, equating to Strong Buy in our proprietary rating system.
It has an A grade for Quality and a B for Growth and Value. In addition to the POWR Ratings grades we have just highlighted, one can see ABBV’s Momentum, Stability, and Sentiment ratings here. ABBV is ranked #8 of 169 stocks in the Medical - Pharmaceuticals industry.
Abbott Laboratories (ABT)
ABT discovers, develops, and sells healthcare products focused on cardiovascular, diabetes care, diagnostics, neuromodulation, nutrition, and medicine worldwide. Its products are sold directly to wholesalers, distributors, government agencies, health care facilities, pharmacies, and independent retailers. It has a 0.74 beta.
ABT will pay a $0.47 quarterly cash dividend on August 15, 2022. The stock pays a $1.88 per share dividend annually, translating to a 1.72% yield. The company’s dividend has grown at a 12% rate over the past five years. ABT has increased its dividends for 50 consecutive years.
On July 12, 2022, the U.S. Food and Drug Administration (FDA) granted Breakthrough Device Designation to investigate the use of ABT’s deep brain stimulation (DBS) system, personalized, adjustable therapy that implants thin wires into targeted areas of the brain, in treatment-resistant depression (TRD), a form of major depressive disorder (MDD).
While ABT’s DBS system has been used to help control symptoms for people with movement disorders, such as Parkinson's disease and essential tremor, evidence suggests that implanting electrodes in parts that regulate mood could help reduce symptoms of TRD. This should help ABT gain widespread recognition across the industry.
ABT’s net sales for its fiscal 2022 second quarter ended June 30, 2022, increased 10.1% year-over-year to $11.26 billion. The company’s adjusted gross profit came in at $6.38 billion, representing a 9.6% year-over-year improvement. Its adjusted pre-tax income came in at $2.97 billion for the quarter, up 20.4% from the prior-year period.
While its adjusted net earnings increased 20.8% year-over-year to $2.54 billion, its adjusted EPS grew 22.2% to $1.43.
The company surpassed Street EPS estimates in each of the trailing four quarters, which is impressive. Its EPS is expected to grow at 11% per annum over the next five years.
ABT’s 57.9% trailing-12-month gross profit margin is 5.2% higher than the 55% industry average. The company’s trailing-12-month EBITDA margin of 30.4% is 609.4% higher than the industry average of 4.3%. Over the past week, the stock has gained 0.3% to close the last trading session at $108.50.
ABT’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has a B grade for Stability, Sentiment, and Quality. Click here to see the additional ratings for ABT’s Growth, Momentum, and Value. ABT is ranked #5 of 146 stocks in the Medical - Devices & Equipment industry.
Caterpillar Inc. (CAT)
CAT 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. It has a 0.99 beta.
CAT will pay a $1.20 quarterly cash dividend on August 19, 2022. The stock pays a $4.80 per share dividend annually, translating to a 2.69% yield. The company’s dividend has grown at an 8% rate over the past five years. CAT has increased its dividends for 19 consecutive years.
On May 31, 2022, CAT announced a three-year project with non-profit energy services provider District Energy in St. Paul, Minnesota, to demonstrate a hydrogen-fueled combined heat and power (CHP) system and evaluate additional hydrogen fuel options for an existing energy-efficient engine. This project is partially funded by the U.S. Department of Energy and backed by the National Renewable Energy Laboratory.
The electricity and heat produced from CAT’s CHP systems get integrated into District Energy St. Paul’s electrical and thermal infrastructure, which later distributes chilled water and hot water to various buildings in downtown and adjacent areas. This should reduce exhaust emissions and help companies gain more significant projects in the future.
For its fiscal 2022 first quarter ended March 31, 2022, CAT’s total sales and revenues increased 14.3% year-over-year to $13.59 billion. While its adjusted net income remains unchanged at $1.55 billion, its adjusted EPS grew marginally to $2.88. It had $6.53 billion in cash and cash equivalents as of March 31, 2022.
Analysts expect CAT’s EPS to be $12.46 for fiscal 2022 ending December 31, 2022, representing a 15.3% rise from the prior-year period. It surpassed Street EPS estimates in each of the trailing four quarters.
The consensus revenue estimate of $2.66 billion for the same fiscal year indicates a 19% year-over-year improvement. Its EPS is expected to grow at 11.8% per annum over the next five years.
CAT’s 19.9% trailing-12-month EBITDA margin is 52.9% higher than the 13% industry average. The company’s trailing-12-month ROE of 38.6% is 170.3% higher than the industry average of 14.3%. The stock has gained 1% over the past week to close the last trading session at $181.81.
CAT’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 a B grade for Sentiment. Click here to see the additional ratings for CAT (Stability, Value, Growth, Quality, and Momentum). CAT is ranked #26 of 79 stocks in the B-rated Industrial - Machinery industry.
UnitedHealth Group Incorporated (UNH)
UNH is a diversified health care and insurance company that offers a broad spectrum of products and services through UnitedHealthcare and Optum platforms. It provides employers with products and resources to plan and administer employee benefit programs. It has a 0.77 beta.
UNH paid a $1.65 quarterly cash dividend on June 28, 2022. The stock pays a $6.60 per share dividend annually, translating to a 1.27% yield. The company’s dividend has grown at an 18% rate over the past five years. UNH has increased its dividends for 13 consecutive years.
On June 22, 2022, UNH’s Optum launched a comprehensive laboratory benefit management solution that helps health plans better manage lab test utilization. This new solution allows health plans to streamline decisions and automate processes to reduce unnecessary testing for their members and increase cost savings. UNH might witness rising enrollment for their health plans in the future.
For its fiscal 2022 second quarter ended June 30, 2022, UNH’s revenues grew 12.6% year-over-year to $80.33 billion. The company’s earnings from operations came in at $7.13 billion, indicating a 19.3% rise from the year-ago period.
Its adjusted net earnings came in at $5.29 billion, up 17.7% from the prior-year period. UNH’s adjusted EPS increased 18.5% year-over-year to $5.57. As of June 30, 2022, the company had $24.61 billion in cash and cash equivalents.
The consensus EPS estimate of $21.76 for fiscal 2022 ending December 31, 2022, represents a 14.4% rise from the prior-year period. It surpassed Street EPS estimates in each of the trailing four quarters, which is impressive.
Analysts expect UNH’s revenue to be $321.47 billion for the same fiscal year, indicating an 11.8% year-over-year improvement. The company’s EPS is expected to grow at a 14.4% rate per annum over the next five years.
UNH’s 9% trailing-12-month EBITDA is 110.1% higher than the 4.3% industry average. The stock has gained 2% over the past week to close the last trading session at $529.47.
UNH’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 an A grade for Sentiment and a B for Growth, Stability, and Quality.
In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for UNH’s Value and Momentum here. UNH is ranked #2 of 11 stocks in the A-rated Medical - Health Insurance industry.
PG shares were trading at $143.91 per share on Tuesday afternoon, down $0.08 (-0.06%). Year-to-date, PG has declined -10.48%, versus a -17.20% 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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