At the Jackson Hole symposium, Fed Chair Jerome Powell indicated the central bank’s intention to raise interest rates until inflation reaches its target level. As this has raised recession fears among investors, the market is witnessing sell-offs.
As analysts do not expect the pressure on the stock market to ease anytime soon, investing in relatively stable and dividend-paying stocks could be wise to minimize your portfolio risks.
Johnson & Johnson (JNJ), CVS Health Corporation (CVS), and Summit Financial Group, Inc. (SMMF) appear solid additions to your portfolio on that front. Besides their lower volatility compared to the broader market and dividend payments, these stocks are trading at discounts to their peers.
Johnson & Johnson (JNJ)
JNJ develops, manufactures, sells health care products, and provides related services. It primarily serves the consumer, pharmaceutical, medical devices, and diagnostics markets and distributes its products through retail outlets and distributors, wholesalers, hospitals, and health care professionals for prescription use. It has a 0.59 beta.
JNJ will pay a $1.13 quarterly cash dividend on September 6, 2022. The stock pays a $4.52 per share dividend annually, translating to a 2.8% yield. The company’s dividend has grown at a 6% rate over the past five years. JNJ has increased its dividends for 59 consecutive years.
On August 24, 2022, the U.S. Food and Drug Administration (FDA) granted marketing authorization for the expanded use of JNJ’s Janssen Pharmaceuticals’ IMBRUVICA for treating pediatric patients above one year with chronic graft-versus-host disease (cGVHD).
Earlier, this was approved by the European Commission in an all-oral, fixed-duration (FD) treatment combination with venetoclax (I+V) for adults with chronic lymphocytic leukemia (CLL). IMBRUVICA is the only BTKi with 12 FDA approvals across seven indications, including five hematologic cancers and cGVHD. This approval will help IMBRUVICA gain wide recognition across various markets.
For the fiscal 2022 second quarter ended July 3, 2022, JNJ’s sales increased 3% year-over-year to $24.02 billion. The company’s gross profit came in at $16.10 billion, up 2.4% from the prior-year period. Its adjusted pre-tax earnings came in at $8.17 billion for the quarter, indicating a 5.1% year-over-year improvement.
While its adjusted net earnings increased 4.3% year-over-year to $6.91 billion, its adjusted EPS rose 4.4% to $2.59. As of July 3, 2022, the company had $10.98 billion in cash and cash equivalents.
Analysts expect the company’s EPS to come in at $10.07 for its fiscal 2022 ending December 31, 2022, representing a 2.8% 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 $95.15 billion for the same fiscal year represents a 1.5% year-over-year improvement. Its EPS is expected to grow at a rate of 4.1% per annum over the next five years.
The stock’s 16.01x non-GAAP forward P/E is 15.9% lower than the 19.03x industry average. In terms of forward Price/Sales, JNJ is trading at 4.44x, 6.6% lower than the 4.75x industry average. Over the past nine months, the stock has gained 3.5% to close the last trading session at $161.34.
JNJ’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
It has an A grade for Stability and a B grade for Growth, Value, Sentiment, and Quality. Click here to see the additional ratings for JNJ’s Momentum.
JNJ is ranked #1 of 167 stocks in the Medical - Pharmaceuticals industry.
CVS Health Corporation (CVS)
CVS delivers integrated pharmacy health care services and operates through Health Care Benefits; Pharmacy Services; Retail/LTC; and Corporate segments. The company serves employer groups, individuals, college students, health care providers, governmental units, government-sponsored plans, labor groups, and expatriates. The stock has a 0.74 beta.
CVS will pay a $0.55 quarterly cash dividend on August 1, 2022. The stock pays a $2.20 per share dividend annually, translating to a 2.24% yield. The company’s dividend has grown at a 2.2% rate over the past five years.
On August 4, 2022, CVS announced a 15-year agreement with Constellation Energy Corporation (CEG) to purchase clean, renewable energy equivalent to the energy use of 309 CVS Health locations in Illinois and Ohio. This is in sync with CVS’ goal of sourcing 50% renewable energy by 2040.
CVS’ total revenues for its fiscal 2022 second quarter ended June 30, 2022, increased 11% year-over-year to $80.64 billion. The company had $12.12 billion in cash and cash equivalents as of June 30, 2022.
The consensus EPS estimate of $8.55 for fiscal 2022 ending April 30, 2023, represents a 1.8% year-over-year improvement. It surpassed Street EPS estimates in each of the trailing four quarters.
Analysts expect the company’s revenue to be $312.31 billion for the same fiscal year, representing a 6.9% rise from the prior-year period. Its EPS is expected to grow at a rate of 5.8% per annum over the next five years.
The stock’s 11.49x non-GAAP forward P/E is 39.6% lower than the 19.03x industry average. In terms of forward Price/Sales, CVS is trading at 0.41x, 91.3% lower than the 4.75x industry average. Over the past nine months, the stock has gained 10.2% to close the last trading session at $98.15.
CVS’ POWR Ratings reflect this promising outlook. It has an overall A rating, which equates to Strong Buy in our proprietary rating system.
The stock has an A grade for Growth and Stability and a B for Value and Sentiment. Click here to see the additional ratings for CVS’ Momentum and Quality.
CVS is ranked #1 of 5 stocks in the B-rated Medical - Drug Stores industry.
Summit Financial Group, Inc. (SMMF)
SMMF operates as a financial holding company for Summit Community Bank, Inc, which provides community banking and other financial services to individuals and businesses. It provides a range of community banking services, commercial, real estate, consumer loans, trust and wealth management services, cash management and insurance services, automobile loans, and recreational vehicle loans.
It offers marketing, investment portfolio management, HR administration, and other financial and administrative services. It has a 0.36 beta.
SMMF will pay a $0.20 quarterly cash dividend on September 30, 2022. The stock pays a $0.80 per share dividend annually, translating to a 2.81% yield. The company’s dividend has grown at an 11.4% rate over the past five years. SMMF has increased its dividends for six consecutive years.
SMMF’s interest income for its fiscal 2022 second quarter ended June 30, 2022, increased 18.7% year-over-year to $35.56 million. The company’s pre-tax income came in at $15.21 million, up 12.8% from the year-ago period.
Its net income came in at $12.01 million for the quarter, indicating a 13.8% rise from the prior-year period. SMMF’s EPS increased 15% year-over-year to $0.92. The company had $49.60 million in cash and cash equivalents as of June 30, 2022.
Analysts expect an EPS of $4.13 for fiscal 2022 ending December 31, 2022, indicating a rise of 17.3% from the prior-year period. It surpassed Street EPS estimates in three of the trailing four quarters.
The consensus revenue estimate of $145.19 million for the same fiscal year represents an 11.6% year-over-year improvement. Its EPS is expected to grow at a rate of 8% per annum over the next five years.
The stock’s 6.91x non-GAAP forward P/E is 30.2% lower than the 9.91x industry average. In terms of forward Price/Sales, SMMF is trading at 2.51x, 10.7% lower than the 2.81x industry average. Over the past nine months, the stock has gained 14.1% to close the last trading session at $28.52.
SMMF’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 Stability and a B for Growth, Value, Momentum, and Sentiment. In addition to the POWR Ratings grades we have just highlighted, one can see SMMF’s Quality ratings here.
SMMF is ranked #2 of 33 stocks in the A-rated Mid-Atlantic Regional Banks industry.
JNJ shares were trading at $165.34 per share on Thursday afternoon, up $4.00 (+2.48%). Year-to-date, JNJ has declined -1.45%, versus a -15.92% 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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