After the Federal Reserve raised interest rates to its highest level in 15 years, inflation cooled in the last three months, with December’s CPI increasing 6.5% year-over-year and declining 0.1% sequentially. While this shows that prices are finally coming down, Fed officials have indicated that the central bank would keep raising the interest rate this year until inflation falls to its desired level.
As a result of tight policies, the World Bank stated, “Global growth has slowed to the extent that the global economy is perilously close to falling into recession.” With the stock market expected to remain under pressure, established companies with strong financials could provide safety for investors navigating market volatility.
For investors over 50, fundamentally strong businesses with inelastic demand for their products and also paying solid dividends to generate stable income for their shareholders might be suitable. To that end, it could be wise to add fundamentally strong stocks Johnson & Johnson (JNJ) and The Coca-Cola Company (KO).
Johnson & Johnson (JNJ)
JNJ researches, develops, manufactures, and sells various products in the healthcare field worldwide. It operates under three segments: Consumer Health; Pharmaceutical; and MedTech.
Over the last three years, JNJ’s dividend payouts have grown at a 5.9% CAGR. Its four-year average dividend yield is 2.60%, and its forward annual dividend of $4.52 per share translates to a 2.61% yield on prevailing prices. It is expected to pay a quarterly dividend of $1.13 per share on March 7, 2023.
On December 22, 2022, JNJ announced its acquisition of Abiomed, Inc. (ABMD). JNJ’s CEO, Joaquin Duato, believes that this acquisition marks an important step on the company’s path to accelerating growth in its MedTech business segment and delivering innovative medical technologies to more people worldwide.
JNJ’s reported sales for the third quarter increased 1.9% year-over-year to $23.79 billion. Its net earnings increased 21.6% from the year-ago value to $4.46 billion. The company’s EPS came in at $1.68, representing a 22.6% increase from the prior-year quarter.
JNJ's EPS for the quarter that ended December 31, 2022, is expected to increase 5.1% year-over-year to $2.24. Its revenue for the quarter ending March 31, 2023, is expected to increase 1.5% year-over-year to $23.78 billion.
The company has an impressive earnings surprise history, surpassing the consensus EPS estimates in each trailing four quarters. Over the past three months, the stock has gained 5% to close the last trading session at $173.43.
JNJ’s strong fundamentals are reflected in its POWR Ratings. 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.
In addition, it has an A grade for Stability and a B for Value, Sentiment, and Quality. Within the Medical - Pharmaceuticals industry, it is ranked #3 of 168 stocks. Click here to see the additional POWR Ratings of JNJ for Growth and Momentum.
The Coca-Cola Company (KO)
The global beverage company KO manufactures, markets, and sells various non-alcoholic beverages. The company provides sparkling soft drinks; flavored and enhanced water and sports drinks; juice, dairy, and plant-based beverages; tea and coffee; and energy drinks.
Over the last three years, KO’s dividend payouts have grown at a 3.2% CAGR. Its four-year average dividend yield is 3.06%, and its forward annual dividend of $1.76 per share translates to a 2.87% yield on the current price level. It was expected to pay a quarterly dividend of $0.44 per share on December 15, 2022.
On December 14, 2022, KO teamed up with two legendary names in music sampling, Mark Ronson and Madlib, to launch "Recycled Records." The switch from green to clear plastic is expected to enable the company’s brands to use more recycled plastic in their packaging. This initiative should be sustainably beneficial.
KO’s non-GAAP net operating revenues increased 10% year-over-year to $11.06 billion for the third quarter that ended September 30, 2022. Its non-GAAP gross profit increased 6.5% year-over-year to $6.54 billion.
The company’s non-GAAP net income increased 6.7% year-over-year to $3.01 billion. In addition, its non-GAAP EPS came in at $0.69, representing a 6.2% increase from the prior-year quarter.
KO’s EPS and revenue for fiscal 2022 are expected to increase 7.3% and 10.6% year-over-year to $2.49 and $42.77 billion, respectively. The company has a commendable earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past three months, the stock has gained 10% to close the last trading session at $61.43.
KO’s POWR Ratings reflect its solid prospects. The stock has an overall rating of B, equating to Buy in our proprietary rating system. Within the A-rated Beverages industry, it's ranked #17 of 36 stocks. The company also has a B grade for Stability, Sentiment, and Quality.
To see the additional POWR Ratings of KO for Growth, Value, and Momentum, click here.
JNJ shares were trading at $172.90 per share on Tuesday afternoon, down $0.53 (-0.31%). Year-to-date, JNJ has declined -2.12%, versus a 4.24% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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