Inflation eased for the seventh consecutive month in January on an annualized basis. The Consumer Price Index rose 0.5% over the month and 6.4% year-over-year. The sequential rise in inflation follows the hotter-than-expected jobs data in January.
After raising the benchmark interest rates eight times since last year, inflation has shown signs of cooling. Fed Chair Jerome Powell believes that the “disinflationary process” has begun.
However, with inflation rising on a sequential basis in January and the jobs market remaining tight, the Fed could be forced to raise its benchmark rates higher than it had previously projected. This could push the economy into a recession.
Given the macroeconomic uncertainties, investors could consider buying dividend-paying stocks to ensure a steady income stream. Investors’ interest in dividend stocks is evident from the SPDR S&P Dividend ETF’s (SDY) 3.8% returns over the past year.
We think investors should add cash-rich dividend-paying stocks Pfizer Inc. (PFE), BHP Group Limited (BHP), and CrossAmerica Partners LP (CAPL) to their portfolios now.
Pfizer Inc. (PFE)
PFE discovers, develops, manufactures, markets, distributes, and sells biopharmaceutical products worldwide. It offers medicines and vaccines in various therapeutic areas, including cardiovascular metabolic and women’s health, biosimilars, sterile injectable and anti-infective medicines, and oral COVID-19 treatment.
Over the last three years, PFE’s dividend payouts have grown at a 5.2% CAGR. Its four-year average dividend yield is 3.63%, and its forward annual dividend of $1.64 per share translates to a 3.79% yield. It is expected to pay a quarterly dividend of $0.41 per share on March 3, 2023.
PFE’s 31.27% trailing-12-month net income margin compares to the negative 5.61% industry average. Its 65.90% trailing-12-month gross profit margin is 18.8% higher than the industry average of 55.48%. Furthermore, the stock’s 0.53x trailing-12-month asset turnover ratio is 57.9% higher than the industry average of 0.34x.
On February 10, 2023, PFE announced that the U.S. Food and Drug Administration (FDA) had approved its supplemental New Drug Application (sNDA) for CIBINQO (abrocitinib), expanding its indication to include adolescents (12 to <18 years). In mid-January, the US FDA gave the nod to CIBINQO to treat patients with moderate-to-severe atopic dermatitis (eczema).
For the fiscal fourth quarter, PFE’s revenues increased by 1.9% to $24.29 billion. The company’s adjusted income increased 44.2% year-over-year to $6.55 billion. Its adjusted EPS came in at $1.14, representing a 44.3% increase from the prior-year quarter.
PFE’s EPS for fiscal 2024 is expected to increase 11.4% year-over-year to $3.96. It has an impressive earnings surprise history, as it surpassed consensus EPS estimates in each of the trailing four quarters. The stock has fallen 9.5% over the past month to close the last trading session at $43.32.
PFE’s POWR Ratings reflect its strong fundamentals. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the Medical - Pharmaceuticals industry, it is ranked #26 out of 173 stocks. The stock has an A grade for Value and a B for Quality. Click here to see the additional POWR Ratings of PFE for Growth, Momentum, Stability, and Sentiment.
BHP Group Limited (BHP)
Headquartered in Melbourne, Australia, BHP operates as a resources company worldwide. The company operates through Copper, Iron Ore, and Coal segments.
Over the last three years, BHP’s dividend payouts have grown at a 37.6% CAGR. Its four-year average dividend yield is 7.85%, and its forward annual dividend of $7 per share translates to a 10.48% yield. It paid a quarterly dividend of $3.50 per share on September 22, 2022.
BHP’s 47.24% trailing-12-month net income margin is 479.5% higher than the 8.15% industry average. Likewise, its trailing-12-month EBIT margin is 50.36%, compares to the 12.74% industry average. Furthermore, the stock’s 31.22% trailing-12-month levered FCF margin is 505.5% higher than the 5.16% industry average.
On December 12, 2022, I-Pulse Inc. (I-Pulse) and I-ROX SAS (I-ROX) announced a comprehensive collaboration arrangement with BHP to identify and develop applications of pulsed-power technology across multiple aspects of the mining industry.
BHP’s CEO, Mike Henry, said, “The collaboration with I-Pulse and I-ROX will contribute to our growing portfolio of options with potential to both improve the competitiveness of and help decarbonize our current business and also to unlock new growth opportunities beyond those available today. We are excited by the opportunity to work more closely with I-Pulse and I-ROX and bring our own expertise to the relationship to together develop these solutions.”
BHP’s revenue for the fiscal year ended June 30, 2022, increased 14.4% year-over-year to $65.10 billion. The company’s underlying EBITDA from continuing operations increased 15.9% year-over-year to $40.63 billion.
Its net operating cash flow from total operations increased 18% from the prior-year period to $32.17 billion. Its EPS from continuing operations came in at 421.20 cents, representing a 25% increase from the prior-year period.
Analysts expect BHP’s EPS for fiscal 2023 to increase 6.7% year-over-year to $5.02. The stock has gained 22% over the past six months to close the last trading session at $66.80.
It is no surprise that BHP has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It is ranked first out of 37 stocks in the Industrial - Metals industry. It has an A grade for Quality and a B for Value and Stability.
Beyond what we stated above, we have also given BHP grades for Growth, Momentum, and Sentiment. Get all BHP ratings here.
CrossAmerica Partners LP (CAPL)
CAPL engages in the wholesale distribution of motor fuels, operation of convenience stores, and ownership and leasing of real estate used in the retail distribution of motor fuels worldwide. It operates in two segments, Wholesale and Retail.
CAPL’s four-year average dividend yield is 11.97%, and its forward annual dividend of $2.10 per share translates to a 9.60% yield. It paid a quarterly dividend of $0.53 per share on February 10, 2023.
CAPL’s 96.83% trailing-12-month Return on Common Equity is 360% higher than the 21.05% industry average. Likewise, the stock’s 3.68x trailing-12-month asset turnover ratio is 470.3% higher than the 0.64x industry average.
For the fiscal third quarter that ended September 30, 2022, CAPL’s operating revenues increased 29.4% year-over-year to $1.27 billion. The company’s net income increased 211.7% year-over-year to $27.59 million. In addition, its adjusted EBITDA increased 73.2% year-over-year to $62.17 million, while its EPS came in at $0.71, representing a 208.7% increase from the prior-year quarter.
CAPL’s EPS and revenue for fiscal 2022 are expected to increase 140.4% and 27.6% year-over-year to $1.37 and $4.57 billion, respectively. It also topped the consensus EPS estimates in three of the trailing four quarters. Over the past nine months, the stock has gained 11.5% to close the last trading session at $21.93.
CAPL’s solid prospects are reflected in its POWR ratings. The company has an overall rating of A, which equates to a Strong Buy. It is ranked #2 out of 31 stocks in the A-rated MLPs - Oil & Gas industry. In addition, it has an A grade for Momentum and a B for Stability and Sentiment.
To see the other ratings of CAPL for Growth, Value, and Quality, click here.
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PFE shares were trading at $42.82 per share on Thursday morning, down $0.50 (-1.15%). Year-to-date, PFE has declined -15.67%, versus a 7.55% 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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