The Fed is expected to keep raising interest rates as inflation remains well above its 2% target. Regional Presidents James Bullard of St. Louis believes more aggressive near-term policy should be implemented to curb the inflationary pressures.
Amid this, the likelihood of a recession cannot be ruled out. So, fundamentally robust dividend stocks, Johnson & Johnson (JNJ), Gilead Sciences, Inc. (GILD), Stellantis N.V. (STLA), and Cardinal Health, Inc. (CAH), which have the potential to withstand market downturns, could be the best additions to your portfolio this month.
The minutes from the latest policy committee meeting concluded that members believe “ongoing” rate hikes will be necessary. Jeffrey Roach, the chief economist at LPL Financial in Charlotte, North Carolina, said, “Clearly, tighter monetary policy has yet to fully impact consumers and shows that the Fed has more work to do in slowing down aggregate demand.”
According to Bankrate’s survey of economists, the U.S. economy has a 64% chance of contracting in 2023. In the rest of this article, I will discuss the stocks mentioned above in detail.
Johnson & Johnson (JNJ)
JNJ and its subsidiaries research, develop, manufacture, and sell various products in the healthcare field worldwide. The company operates through three segments: Consumer Health; Pharmaceutical; and Medical Devices.
JNJ’s gross profit margin of 67.36% is 20.9% higher than the 55.70% industry average, while its EBITDA margin of 34.46% is 824.9% higher than the industry average of 3.73%.
JNJ has paid dividends for 60 consecutive years. Over the last three years, JNJ’s dividend payouts have grown at a 6% CAGR. While JNJ’s four-year average dividend yield is 2.60%, its current dividend translates to a 2.90% yield.
JNJ’s consumer health segment revenue came in at $3.77 billion for the fiscal year 2022 fourth quarter, up marginally year-over-year. Moreover, its adjusted net earnings came in at $6.22 billion, representing a 9.5% year-over-year increase. Its EPS increased 10.3% year-over-year to $2.35.
JNJ’s revenue is expected to increase 3.1% year-over-year to $97.85 billion in 2023. Its EPS is expected to grow 3.6% year-over-year to $10.52 in 2023. It surpassed EPS estimates in all four trailing quarters. JNJ’s shares have lost marginally intraday to close the last trading session at $155.97.
JNJ’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
JNJ has an A grade for Stability and a B for Value, Sentiment, and Quality. Within the Medical – Pharmaceuticals industry, it is ranked #6 out of 173 stocks. Click here for the additional POWR Ratings for Growth, and Momentum for JNJ.
Gilead Sciences, Inc. (GILD)
Biopharmaceutical company GILD discovers, develops, and commercializes medicines in the areas of unmet medical need in the United States, Europe, and internationally for over three decades.
On February 3, 2023, According to GILD, the FDA approved Trodelvy for the treatment of metastatic breast cancer in adult patients who have received endocrine-based therapy and at least two additional systemic drugs.
GILD also reported last month that the European Medicines Agency (EMA) accepted Trodelvy’s Marketing Authorization Application (MAA) to treat adult patients with previously treated HR+/HER2-metastatic breast cancer. This is expected to increase patient access to Trodelvy across the EU.
GILD’s trailing-12-month EBIT margin of 40.23% is higher than the negative 0.86% industry average, while its trailing-12-month gross profit margin of 79.26% is 42.3% higher than the industry average of 55.70%.
GILD has paid dividends for seven consecutive years. Over the last three years, GILD’s dividend payouts have grown at a 5% CAGR. While GILD’s four-year average dividend yield is 4%, its current dividend translates to a 3.72% yield.
GILD’s total revenues came in at $7.39 billion for the fourth quarter that ended December 31, 2022, up 2% year-over-year. Its non-GAAP net income attributable to GILD and non-GAAP EPS came in at $2.11 billion and $1.67, up 143.2% and 142%, respectively.
Analysts expect GILD’s revenue to increase 2% year-over-year to $27.24 billion in 2024. Its EPS is expected to grow 5.3% year-over-year to $7.18 in 2024. It surpassed EPS estimates in all four trailing quarters. GILD’s shares have gained 33.1% over the past year to close the last trading session at $80.66.
It’s no surprise that GILD has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has an A grade for Growth and Value and a B for Sentiment and Quality. It is ranked first among 404 stocks in the Biotech industry.
Beyond what is stated above, we’ve also rated GILD for Stability and Momentum. Get all GILD ratings here.
Stellantis N.V. (STLA)
Headquartered in Hoofddorp, Netherlands, STLA designs, engineers, manufactures, distributes, and sells vehicles, components, and production systems. The company’s brand portfolio includes Abarth, Alfa Romeo, Chrysler, Dodge, Fiat, Fiat Professional, Jeep, Lancia, Ram, Peugeot, Citroen, DS Automobiles, Opel and Vauxhall, and Maserati.
On February 15, 2023, STLA announced that it is expanding its software development and engineering network to eight hubs by opening a new operation in Poland, working with GlobalLogic Inc., a provider of digital engineering services, to attract talent and quickly build the Poland software hub.
STLA can now boost its potential to innovate and supply customizable open automotive platforms thanks to the firms’ new relationship phase.
STLA’s trailing-12-month EBIT margin of 11.68% is 49% higher than the 7.84% industry average, while its trailing-12-month EBITDA margin of 14.21% is 26% higher than the industry average of 11.28%.
Over the last three years, STLA’s dividend payouts have grown at a 17.3% CAGR. While STLA’s four-year average dividend yield is 10.69%, its current dividend translates to an 8.10% yield.
STLA’s net revenues increased 18% year-over-year to €179.59 billion ($189.46 billion) for the fiscal year that ended December 31, 2022. Its operating income rose 25.3% from the prior-year period to €23.32 billion ($24.60 billion). Its net profit came in at €16.78 billion ($8.96 billion), up 29.5% year-over-year.
The consensus revenue estimate of $199.49 billion for the fiscal year 2024 indicates a 3.3% increase year-over-year. Its EPS is expected to grow by 3.5% per annum for the next five years. Over the past six months, the stock has gained 24.9% to close the last trading session at $17.57.
STLA’s robust prospects are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system. It has an A grade for Value and Sentiment and a B for Stability. Within the Auto & Vehicle Manufacturers industry, it is ranked #8 out of 61 stocks. To access STLA’s ratings for Growth, Momentum, and Quality, click here.
Cardinal Health, Inc. (CAH)
CAH is an integrated healthcare service and solutions provider. It offers customized solutions for healthcare organizations like hospitals, pharmacies, ambulatory surgery facilities, clinical laboratories, and patients receiving care at home. The company operates through two segments: Pharmaceutical and Medical.
On February 16, 2023, CAH and RxLive established a partnership with Outcomes to promote data sharing and bridge communication gaps among hospitals, physicians, and pharmacies.
Also, in January, CAH entered a strategic partnership with Palantir Technologies Inc. (PLTR), a leading builder of operating systems for the modern enterprise.
CAH aims to reshape the pharmaceutical supply chain with innovative procedures, products, and solutions to improve access to critical pharmaceuticals and streamline pharmacy inventory management using PLTR’s platform.
CAH’s trailing-12-month asset turnover ratio of 4.33x is substantially higher than the 0.34x industry average. Its trailing-12-month ROTC of 20.32% is higher than the negative 22.11% industry average.
CAH has paid dividends for 28 consecutive years. Over the last three years, CAH’s dividend payouts have grown at a 1% CAGR. While CAH’s four-year average dividend yield is 3.60%, its current dividend translates to a 2.56% yield.
CAH’s revenues came in at $51.47 billion for the second quarter that ended December 31, 2022, up 13.2% year-over-year. Moreover, its gross margin was $1.66 billion, indicating a marginal increase year-over-year.
The company’s total current assets came in at $34.60 billion for the period ended December 31, 2022, compared to $32.94 billion for the period ended June 30, 2022.
Street expects CAH’s revenue to increase 12% year-over-year to $203.06 billion in 2023. Its EPS is expected to grow 7.9% year-over-year to $5.46 in 2023. The stock has gained 47.8% over the past year to close the last trading session at $77.57.
CAH’s overall A rating equates to a Strong Buy in our POWR Ratings system. It has a B grade for Growth, Value, and Sentiment. It is ranked #2 out of 77 stocks in the Medical – Services industry.
Get CAH ratings for Stability, Momentum, and Quality here.
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JNJ shares were trading at $155.78 per share on Monday morning, down $0.19 (-0.12%). Year-to-date, JNJ has declined -11.18%, versus a 4.30% rise in the benchmark S&P 500 index during the same period.
About the Author: RashmiKumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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