After raising the interest rates by 75 basis points last month, Fed Governor Christopher Waller expects another 75 basis points hike or more considerable rate hike this month. Meanwhile, the treasury yields curve remains inverted, with investors keeping an eye on the Fed’s likely policy move in the next week.
Inflation has been soaring at rates not seen in four decades, which has weighed on consumer sentiment. According to a survey by the University of Michigan, consumer sentiment fell to its lowest level ever in June. Also, the threat of more aggressive monetary policy tightening to rein in inflation has led to concerns of a potential economic slump.
Amid rising odds of a recession and the consequent market volatility, it could be wise to invest in shares of Microsoft Corporation (MSFT), Texas Instruments Incorporated (TXN), and Accenture plc (ACN) as their impressive dividend payments can help generate a steady income stream.
Microsoft Corporation (MSFT)
Microsoft is a leading tech company that develops and supports a range of software products, services, devices, and solutions. It operates through three segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. Its offerings range from Skype, Microsoft Teams, and Office 365 Security and Compliance for Business to Xbox hardware, video games, Xbox content, and services in gaming.
On July 14, 2022, Twelve and Alaska Air Group Inc. (ALK) collaborated with MSFT to advance sustainable aviation fuel derived from recaptured CO2 and renewable energy. This collaboration might accelerate decarbonization within the aviation industry by using low carbon fuels produced by renewable electricity, like Twelve's E-Jet.
On June 16, 2022, MSFT launched Microsoft Viva Sales, a new seller experience application that enriches any CRM system and delivers AI-powered intelligence to sellers in Microsoft 365 and Microsoft Teams. With AI-driven recommendations and insights, Viva Sales seamlessly lets salespersons personalize their customer engagements toward faster deal closure. This should gain broad reach among sellers amid the growing demand for hybrid working structures.
MSFT’s four-year average dividend yield is 1.11%, and its forward annual dividend of $2.48 translates to a 0.97% yield. The company has increased its dividend for 18 consecutive years. Its dividends have grown at a 10.4% CAGR over the past three years.
In the third quarter ended March 31, 2022, MSFT’s revenue increased 18.4% year-over-year to $49.36 billion. Its operating income increased 19.5% from the year-ago value to $20.36 billion, while its net income grew 8.2% year-over-year to $16.73 billion. The company’s EPS came in at $2.22, representing a 9.4% year-over-year improvement.
Analysts expect MSFT’s EPS and revenues to increase 5.6% and 13.5% year-over-year to $2.29 and $52.38 billion in the fiscal fourth quarter (ended June 2022). It surpassed the consensus EPS estimates in each of the trailing four quarters, which is excellent.
Shares of MSFT have gained marginally over the past month to close Friday’s trading session at $256.72.
MSFT POWR Ratings reflect these solid prospects. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has a B grade for Stability, Sentiment, and Quality. In the Software - Business industry, it is ranked #12 of 55 stocks. Click here to see the other ratings of MSFT for Growth, Value, and Momentum.
Texas Instruments Incorporated (TXN)
TXN designs, manufactures, and sells semiconductors to electronics designers and manufacturers worldwide. It operates in two segments: Analog and Embedded Processing.
On May 18, 2022, the company began constructing its new 300-mm semiconductor wafer fabrication plants in Sherman, Texas. This facility is expected to expand the internal manufacturing capacity of TXN in the long term.
TXN’s four-year average dividend yield is 2.49%, and its current dividend translates to a 2.87% yield. Its dividends have grown at 15.1% and 18.9% CAGRs over the past three and five years, respectively. The company has increased its dividend for 16 consecutive years.
TXN’s revenue increased 14% year-over-year to $4.91 billion in the fiscal first quarter ended March 31, 2022. Its operating profit grew 32% from the year-ago value to $2.56 billion. Net income came in at $2.20 billion, indicating an improvement of 26% year-over-year. Its EPS increased 26% from its year-ago value to $2.35.
For the quarter ended June 30, 2022, TXN’s EPS is expected to increase 2% year-over-year to $2.15, while its revenue is expected to increase marginally year-over-year to $4.64 billion. It has surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past month, the stock has gained 3% to close the last trading session at $160.54.
TXN’s POWR Ratings reflect its bright prospects. The stock has an overall B rating, equating to Buy in our proprietary rating system.
It has an A grade for Quality and is ranked #35 out of 95 stocks in the B-rated Semiconductor & Wireless Chip industry. To see TXN ratings for Growth, Value, Momentum, Stability, and Sentiment, click here.
Accenture plc (ACN)
Based in Dublin, Ireland, ACN is a global outsourcing company providing strategy, consulting, interactive, and technology and operations services. It offers its professional services and specialized skills through four segments: Communications, Media, and Technology; Financial Services; Health and Public Service; Products and Resources.
On July 13, 2022, ACN announced acquiring The Stable to bolster its commerce transformation expertise in North America. This acquisition is expected to enhance ACN Song’s global commerce transformation expertise and its ability to rapidly build and operate data-driven digital commerce ecosystems to maximize sales performance.
ACN’s four-year average dividend yield is 1.38%, and its current dividend translates to a 1.43% yield. Its dividend has grown at 9.9% CAGR over the past five years. The company has increased its dividend for 11 consecutive years.
In the third quarter ended May 31, 2022, ACN’s revenue increased 22% year-over-year to $16.16 billion. Its operating income grew 22.9% from the year-ago value to $2.60 billion. Its net income attributable to ACN increased 15.3% from the year-ago value to $1.79 billion, while its EPS came in at $2.79, representing a 16.3% year-over-year increase.
For the quarter ending August 31, 2022, ACN’s EPS and revenue are expected to increase 17.3% and 15.2% year-over-year to $2.58 and $15.46 billion, respectively. Also, it has surpassed the EPS estimates in each of the trailing four quarters.
ACN has lost 3.4% over the past month to close the last trading session at $271.52.
The company’s strong fundamentals are reflected in its POWR Ratings. ACN has an overall B rating, equating to Buy in our proprietary rating system. It has an A grade for Quality and a B grade for Stability. Among the 11 stocks in the A-rated Outsourcing - Tech Services industry, it is ranked #5.
Beyond what we’ve stated above, we have also given ACN grades for Growth, Value, Momentum, and Sentiment. Get all the ACN ratings here.
MSFT shares were trading at $253.56 per share on Monday afternoon, down $3.16 (-1.23%). Year-to-date, MSFT has declined -24.28%, versus a -19.19% 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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