The Fed announced its fourth consecutive 75-bps rate hike, taking the target range to 3.75%-4%, the highest level since January 2008. The series of consecutive rate hikes this year has led to a massive selloff in the market.
The Bureau of Labor Statistics reported 261,000 workers were added to non-farm payrolls in October, with the unemployment rate rising to 3.7%, suggesting that the tightness in the labor market has eased.
With the job market showing signs of cooling, a policy change might come. Economists hope to see the pace of rate hikes slowing down.
Amid this backdrop, dividend-paying stocks Johnson & Johnson (JNJ) and Comcast Corporation (CMCSA) might be the best additions to one’s portfolio.
Johnson & Johnson (JNJ)
JNJ researches, develops, manufactures, and sells various products in the healthcare field worldwide. The company operates through the broad segments of Consumer Health; Pharmaceuticals; and MedTech.
On November 1, JNJ announced that it had entered into a definitive agreement with Abiomed, Inc. (ABMD) to acquire all outstanding ABMD shares through a tender offer for an enterprise value of approximately $16.60 billion. The agreement is expected to broaden JNJ’s MedTech segment’s position as a cardiovascular innovator.
On September 20, JNJ opened its San Francisco Bay Campus, a cutting-edge Research and Development (R&D) center in the Bay Area. The facility connects essential scientific and technical resources and is expected to expand the company’s presence in the area.
On July 18, JNJ declared a quarterly dividend of $1.13 per common share, which was payable to shareholders on September 6. Its annual dividend of $4.52 yields 2.65% on the current share prices.
The company’s dividend payouts have increased at a 5.8% CAGR over the past three years and a 6% CAGR over the past five years. The company has a record of 59 years of consecutive dividend growth.
JNJ’s gross profit increased 1.8% year-over-year to $47.91 billion in the fiscal third quarter that ended September 30, 2022. Its sales to customers grew 3.3% from the year-ago value to $71.24 billion, while its net earnings improved 21.6% year-over-year to $4.46 billion. The company’s net earnings per common share rose 22.6% from its year-ago value to $1.68.
The consensus EPS estimate of $10.04 for the fiscal year ending December 2022 indicates a 2.5% improvement year-over-year. Its revenue is expected to increase 1.4% year-over-year to $95.04 billion for the same year. Additionally, JNJ has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 4.6% over the past month to close its last trading session at $170.72.
JNJ’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.
JNJ is rated an A in Stability and a B in Quality. Within the Medical - Pharmaceuticals industry, it is ranked #9 out of 163 stocks.
To see additional POWR Ratings for Momentum, Growth, Value, and Sentiment for JNJ, click here.
Comcast Corporation (CMCSA)
CMCSA is a global media and technology company. It operates through three segments: Cable Communications; Media; Studios; Theme Parks; and Sky. The company also owns the Philadelphia Flyers and the Wells Fargo Center arena in Philadelphia, Pennsylvania, and provides streaming services, such as Peacock.
On November 2, CMCSA and Charter Communications, Inc. (CHTR) announced that their streaming platform joint venture would operate and conduct business as Xumo. The joint venture and its new branding might bolster the company’s revenue stream.
On October 24, CMCSA announced that it had begun construction to expand service to hundreds of homes in the City of Sumas to bring the entire suite of Xfinity and Comcast Business services to the citizens and businesses in the rural community of Whatcom County. This might add to the company’s existing revenue stream.
On October 27, CMCSA declared a quarterly dividend of $0.27 a share on the company’s common stock, payable on January 25, 2023. Its annual dividend of $1.08 yields 3.55 % on prevailing prices.
The company’s dividend payouts have increased at an 8.9% CAGR over the past three years and an 11.7% CAGR over the past five years. The company increased its dividend for five consecutive years.
For the fiscal third quarter ended June 30, 2022, CMCSA’s adjusted EBITDA increased 5.9% year-over-year to $9.48 billion. Its free cash flow improved 4.7% year-over-year to $3.39 billion. The company’s adjusted net income rose 4.5% year-over-year to $4.22 billion, while its adjusted EPS grew 10.3% year-over-year to $0.96.
Analysts expect CMCSA’s revenue to increase 4.3% year-over-year to $121.43 billion in the current fiscal year (ending December 2022). Likewise, its EPS is expected to grow 11.4% year-over-year to $3.60 for the same year. Additionally, the company has an impressive earnings history, surpassing the consensus EPS estimates in each of the four trailing quarters.
The stock declined marginally over the past month to close the last trading session at $30.38.
CMCSA’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, which equates to a Buy in our proprietary rating system.
CMCSA has a B grade for Quality and is ranked first among the nine stocks in the Entertainment – TV & Internet Providers industry.
Beyond what we’ve stated above, we have also given CMCSA grades for Growth, Value, Momentum, Stability, and Sentiment. Get all CMCSA ratings here.
JNJ shares were trading at $169.90 per share on Friday afternoon, down $0.82 (-0.48%). Year-to-date, JNJ has gained 1.27%, versus a -20.83% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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