A relatively resilient economy, along with stubbornly high inflation and weaker credit market conditions, lays out a difficult path ahead for the Fed. Amid an uncertain macro environment, investing in fundamentally sound, dividend-paying stocks Amgen Inc. (AMGN), Kimberly-Clark Corporation (KMB), and OneMain Holdings, Inc. (OMF) could be wise for stable returns.
Inflation remained stubbornly high in April. The Commerce Department reported that the core Personal Consumption Expenditures (PCE) price index rose 0.4% for the month, surpassing the 0.3% Dow Jones estimate.
On an annual basis, the gauge increased by 4.7%, exceeding expectations by 0.1 percentage point. The current levels remain significantly above the Federal Reserve’s 2% inflation target.
Despite the high-interest rate environment and elevated inflation, April’s spending figures reveal that consumers have persisted in their expenditures, mainly supported by a personal income increase. Consumer spending increased by 0.8%, while personal income accelerated by 0.4%.
Recent economic data showing persistent inflation alongside robust consumer spending could tempt the central bank to raise the federal funds rate further next month when a pause was on the table earlier.
Considering this macroeconomic backdrop, it could be wise to invest in dividend stocks as a defensive strategy for one’s portfolio. Therefore, fundamentally sound, dividend-paying stocks AMGN, KMB, and OMF could be ideal investments now.
Let’s take a closer look at the fundamentals of these stocks:
Amgen Inc. (AMGN)
AMGN develops, manufactures, and delivers human therapeutics, focusing on inflammation, oncology/hematology, bone health, cardiovascular disease, nephrology, and neuroscience. Its products include Enbrel for plaque psoriasis, Neulasta to reduce infection risk in cancer patients with low white blood cell counts, and more.
On May 9, AMGN and TScan Therapeutics, Inc. joined forces to uncover antigens recognized by T cells in Crohn's disease patients. Through TScan Therapeutics’ target discovery platform, AMGN is expected to gain access to a top-notch method for identifying new drug targets.
This collaboration has the potential to yield groundbreaking therapeutics, strengthening AMGN’s competitive advantage in meeting unmet medical needs.
AMGN has raised its dividends for 11 consecutive years. It pays an $8.52 per share dividend annually, which translates to a 3.93% yield on the current price level. Its dividend payments have grown at a 10.1% CAGR over the past three years, and its four-year average dividend yield is 2.91%.
For the first quarter that ended March 31, 2023, AMGN’s product sales increased 2% year-over-year to $5.85 billion. Its income before income taxes rose 105.5% year-over-year to $3.44 billion. Also, the company’s net income and EPS increased 92.5% and 97% from the year-ago values to $2.84 billion and $5.28, respectively.
The consensus revenue estimate of $28.14 billion for the fiscal year (ending December 2023) reflects a 6.9% year-over-year improvement. Likewise, the consensus EPS estimate of $18.21 for the current year indicates a 2.9% rise year-over-year.
Moreover, the stock surpassed the consensus revenue and EPS estimates in three of the trailing four quarters, which is impressive.
The stock marginally gained intraday to close the last trading session at $218.53.
AMGN’s strong fundamentals are apparent in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
AMGN has an A grade for Quality and a B for Value and Stability. It is ranked #12 out of 378 stocks within the Biotech industry.
In addition to the POWR Ratings I’ve just highlighted, you can see AMGN’s ratings for Growth, Sentiment, and Momentum here.
Kimberly-Clark Corporation (KMB)
KMB manufactures and markets personal care and consumer tissue products globally. It operates through three segments, Personal Care; Consumer Tissue; and K-C Professional. The company sells household products directly to retail outlets as well as through distributors and e-commerce channels.
On April 20, KMB announced a regular quarterly dividend of $1.18 per share. The dividend will be paid on July 5, 2023, to shareholders recorded as of June 9, 2023.
KMB has a record of increasing dividends for 50 consecutive years. It pays a $4.72 per share dividend annually, translating to a 3.46% yield on the current share price. Its dividend payments have grown at a 3.9% CAGR over the past three years, and its four-year average dividend yield is 3.26%.
For the first quarter that ended March 31, 2023, KMB’s net sales increased 2% year over year to $5.20 billion, while its gross profit grew 13.6% year-over-year to $1.73 billion. The company’s net income came in at $575 million, up 7.5% from the year-ago value, and its EPS rose 7.7% year-over-year to $1.67.
Analysts expect KMB’s revenue to increase 2.4% year-over-year to $20.66 billion for the fiscal year ending December 2023. The company’s EPS for the ongoing year is expected to grow 11.1% year-over-year to $6.25. Also, the company surpassed its consensus revenue and EPS estimates in three of the trailing four quarters.
Shares of KMB have gained 8% over the past three months to close the last trading session at $133.57.
KMB’s robust outlook is apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system.
KMB has a B grade for Quality, Stability, and Value. It has ranked #4 out of 51 stocks within the B-rated Consumer Goods industry.
Click here to access additional KMB ratings for Growth, Sentiment, and Momentum.
OneMain Holdings, Inc. (OMF)
OMF is a financial service holding company engaged in consumer finance and insurance business. It originates, underwrites, and services secured and unsecured personal loans; and offers credit cards and insurance products.
On May 2, OMF announced a partnership with FinMkt, a provider of embedded SaaS lending and payments solutions, to expand its presence in home improvement financing.
The collaboration would allow OMF to leverage FinMkt’s technology, resulting in a streamlined loan experience at the point of sale. With this partnership, the company could offer customers personalized credit solutions, enhancing its competitive edge and boosting its profitability and growth.
OMF pays a $4.00 per share dividend annually, translating to a 10.53% yield on the current price level. Its dividend payments have grown at a 53.4% CAGR over the past three years, and its four-year average dividend yield is 14.87%. The company has raised its dividends for three consecutive years.
For the fiscal first quarter that ended March 31, 2023, OMF’s other revenues grew 9.3% year-over-year to $177 million. As of March 31, 2023, the company’s total assets stood at $22.44 billion, compared to $21.82 billion as of March 31, 2022. Also, its cash inflows from operating activities increased by 1.8% year-over-year to $562 million.
The consensus revenue estimate of $4.42 billion for the fiscal year (ending December 2024) reflects a 3.9% year-over-year improvement. Likewise, the consensus EPS estimate of $7.65 for the same period indicates a 24.4% rise year-over-year. The stock has gained 16.6% year-to-date to close the last trading session at $38.57.
OMF’s solid fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
OMF has a B grade for Growth and Quality. It is ranked #6 within the 48-stock Consumer Financial Services industry.
Click here to access additional OMF ratings (Value, Stability, Momentum, and Sentiment).
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AMGN shares were trading at $220.01 per share on Wednesday afternoon, up $1.48 (+0.68%). Year-to-date, AMGN has declined -14.70%, versus a 9.40% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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