Despite the sky-high inflation and the Fed’s aggressive monetary policy stance, the Dow Jones Industrial Average(^DJI) has gained 6.6% over the past six months.
Despite recessionary fears, the U.S. economy grew much faster than expected in the third quarter as it posted its first period of positive growth, with GDP rising at an annualized rate of 2.9%. Although many have projected the economy will probably slip into a recession next year, Bank of America CEO Brian Moynihan believes it will be a “mild” one.
The central bank had begun raising borrowing costs aggressively since March this year to tame stubbornly high inflation. While the Federal Reserve is poised to continue its cycle of raising interest rates, investors are hoping for a smaller rate hike, which could boost the market.
Amid uncertainties, fundamentally strong Dow stocks The Procter & Gamble Company (PG) and Cisco Systems, Inc. (CSCO) might be ideal investments.
The Procter & Gamble Company (PG)
PG is engaged in offering consumers worldwide branded consumer packaged goods. It operates through five segments, Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family Care. The company primarily sells its goods through mass merchandisers, supermarkets, and other establishments in about 180 countries and territories.
On September 16, Downy®, a leading brand of fabric softener by PG, announced the launch of Downy Rinse & Refresh. It is a brand-new deep-cleaning fabric rinse that eliminates odor-causing residues 3X better than detergent alone. The new launch is expected to boost the company’s revenue stream.
It pays a $3.65 per share dividend annually, which translates to a 2.42% yield on the current price. Its four-year average dividend yield is 2.47%. Its dividend payments have grown at a CAGR of 6.9% over the past three years. PG has raised its dividends for 66 consecutive years.
For the fiscal 2023 first quarter ended September 30, 2022, PG’s healthcare sales grew 3% year-over-year to $2.76 billion, while its net sales increased 1% year-over-year to $20.61 billion. The company’s organic sales rose 7% year-over-year.
Analysts expect the company’s EPS and revenue for the fiscal year ending June 2024 to increase 7.3% and 3.6% year-over-year to $6.26 and $82.79 billion, respectively. Additionally, PG has surpassed its consensus EPS in three of the trailing four quarters, which is impressive.
Over the past month, PG has gained 7.1% to close the last trading session at $150.92. The stock has a 24-monthly beta of 0.61.
PG’s POWR Ratings reflect its strong outlook. 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, each weighted to an optimal degree.
The stock has an A grade for Stability and a B for Sentiment and Quality. PG is ranked #7 out of the 59 stocks in the Consumer Goods industry,
To see additional POWR Ratings for Growth, Value, and Momentum for PG, click here.
Cisco Systems, Inc. (CSCO)
CSCO designs, manufactures, and sells Internet Protocol-based networking and other communications and information technology products. In addition, it provides infrastructure platforms, including networking technologies of switching, routing, wireless, and data center products.
On November 29, 2022, the company launched new AppDynamics Cloud capabilities that allow organizations to achieve observability over cloud-native applications correlated to business context across the entire IT estate.
The new capabilities will initially support cloud-native applications and digital services running on AWS as both companies continue to empower organizations on their journey to full-stack observability.
On December 7, CSCO declared a quarterly cash dividend of $0.38 per common share to be paid on January 25, 2023.
Its annual dividend of $1.52 per share translates to a 3.14% yield on the current share price. Its four-year dividend yield is 2.98%. The company’s dividend payouts have grown at a CAGR of 3.1% over the past three years and 6% over the past five years. The company has 11 years of consecutive dividend growth history.
CSCO’s total revenue increased 5.7% year-over-year to $13.63 billion for the fiscal first quarter ended October 29, 2022. The company’s operating income grew 3% year-over-year to $3.54 billion, while its non-GAAP net income came in at $3.55 billion, representing a 2.1% year-over-year increase. Also, its non-GAAP EPS came in at $0.86, up 4.9% year-over-year.
The consensus EPS estimate of $0.86 for the second fiscal quarter ending January 2023 represents a 1.8% improvement year-over-year. The consensus revenue estimate of $13.41 billion for the same quarter represents a 5.4% increase from the same quarter last year. The company has an excellent earnings surprise history, as it surpassed the consensus EPS estimates in each of the trailing four quarters.
It has gained 8.3% over the past three months to close the last trading session at $48.46. CSCO has a 24-monthly beta of 0.82.
CSCO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system.
The stock has an A grade for Quality and a B for Stability. Within the Technology – Communication/Networking industry, it is ranked #3 out of 48 stocks.
Click here to see the other ratings of CSCO for Growth, Value, Momentum, and Sentiment.
PG shares were trading at $151.93 per share on Monday afternoon, up $1.01 (+0.67%). Year-to-date, PG has declined -4.82%, versus a -15.71% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
2 Dow Stocks to Buy and Watch in December 2022 StockNews.com
