While the stock market has had a strong start to the year, macroeconomic concerns will likely keep it under pressure in the short term. With significant volatility anticipated, I think dividend-paying stocks Gilead Sciences, Inc. (GILD), CVS Health Corporation (CVS), and Altria Group, Inc. (MO) could be worth buying now to ensure a steady income stream.
The Federal Reserve is expected to approve a 0.25 percentage point interest rate increase at its policy meeting this week amid the banking sector turbulence.
According to “Dr. Doom” economist Nouriel Roubini, the American banking sector is in danger, and the Fed can’t win no matter what it does with interest rates.
“It's an extremely dangerous moment because there's now significant stress in some parts of the US banking system at a time when inflation is still too high."
Also, he added, increasing interest rates may produce additional instability, but lowering rates may cause inflation to spiral out of control, resulting in a stagflationary crisis.
Amid the rising recession concerns, investors’ interest in dividend stocks is evident from the SPDR S&P Dividend ETF’s (SDY) 5.7% returns over the past nine months.
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 22, 2023, Kite, a GILD company, acquired Tmunity Therapeutics, a clinical-stage biotech startup focused on next-generation CAR T-therapies and technology.
This acquisition should strengthen Kite's current in-house cell therapy research capabilities by delivering pipeline assets, platform capabilities, and a unique partnership with the University of Pennsylvania.
On February 3, 2023, According to GILD, the FDA authorized Trodelvy to treat metastatic breast cancer in adult patients who have received endocrine-based therapy and at least two additional systemic medicines.
GILD also stated last month that the European Medicines Agency (EMA) approved Trodelvy's Marketing Authorization Application (MAA) to treat adult patients with previously treated HR+/HER2-metastatic breast cancer. This is likely to expand patient access to Trodelvy across the EU.
GILD has paid dividends for seven consecutive years. Over the last three years, GILD’s dividend payouts have grown at a 4.6% CAGR. While GILD’s four-year average dividend yield is 4%, the company’s annual dividend of $3 yields 3.78% at the current price level.
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 adjusted operating income increased 79.1% from the year-ago value to $2.70 billion. 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.
Street expects GILD’s revenue to increase 2.1% year-over-year to $27.27 billion in 2024. Its EPS is expected to grow 5.7% year-over-year to $7.22 in 2024. It surpassed EPS estimates in all four trailing quarters. GILD’s shares have gained 35.8% over the past nine months to close the last trading session at $79.46.
GILD’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.
GILD has an A grade for Growth and Value and a B for Sentiment and Quality. Within the Biotech industry, it is ranked first among 385 stocks. Click here for the additional POWR Ratings for Stability and Momentum for GILD.
CVS Health Corporation (CVS)
CVS provides health services in the United States. The company operates through three segments: Health Care Benefits; Pharmacy Services; and Retail/LTC. It operates retail locations, online retail pharmacy websites, LTC pharmacies, and onsite pharmacies.
On February 8, 2023, CVS agreed to acquire Oak Street Health, Inc. (OSH) for approximately $10.6 billion. With this acquisition, the company is expected to significantly develop its care delivery strategy for consumers by reducing medical expenses and improving health outcomes.
Over the last three years, CVS’ dividend payouts have grown at a 4.1% CAGR. While CVS’ four-year average dividend yield is 2.74%, the company’s annual dividend of $2.42 yields 3.23% at the current price level.
For the fiscal fourth quarter that ended December 31, 2022, CVS’ total revenue increased 9.5% year-over-year to $83.85 billion. The company’s operating income came in at $3.62 billion, up 62.3% year-over-year. Its attributable net income rose 76.3% from the year-ago value to $2.30 billion. Also, its EPS increased 78.6% year-over-year to $1.75.
Analysts expect CVS’ revenue to increase 3.7% year-over-year to $334.45 billion in 2023. Its EPS is expected to increase marginally year-over-year to $8.84 in 2023. It surpassed EPS estimates in each of the four trailing quarters. CVS’s stock has gained marginally intraday to close the last trading session at $74.98.
CVS’ robust prospects are reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary rating system. It has a B for Value, Sentiment, and Stability.
Within the B-rated Medical – Drug Stores industry, it is ranked first among four stocks. To access CVS’ ratings for Growth, Momentum, and Quality, click here.
Altria Group, Inc. (MO)
MO and its subsidiaries manufacture and distribute smokeable and oral tobacco products in the United States. The corporation sells cigarettes, primarily under the Marlboro brand. It sells tobacco products to wholesalers and major retail businesses.
On March 6, 2023, MO signed a definitive agreement to acquire NJOY Holdings, Inc. for $2.75 billion in cash payable at closure. The acquisition agreements include an additional $500 million in cash payments contingent on regulatory outcomes for specific NJOY goods.
As a result of this agreement, MO's strengthened smoke-free portfolio will include full global ownership of products and technologies across the three major smoke-free categories, as well as a joint venture with JT Group to commercialize heated tobacco stick products.
MO has paid dividends for 53 consecutive years. Over the last three years, MO’s dividend payouts have grown at a 3.9% CAGR. While MO’s four-year average dividend yield is 7.51%, the company’s annual dividend of $3.76 yields 8.16% at the current price level.
In the fourth quarter that ended December 31, 2022, MO’s operating revenue came in at $2.82 billion, up 3.1% year-over-year. Its adjusted net earnings attributable to MO increased 6% from the prior-year quarter to $2.11 billion. In addition, its adjusted EPS came in at $1.18, representing an increase of 8.3% year-over-year.
MO’s revenue is expected to increase marginally year-over-year to $21.01 billion in 2023. Its EPS is estimated to grow 4.5% year-over-year to $5.06 in 2023. It surpassed EPS estimates in three of four trailing quarters. Over the past six months, the stock has gained 7.3% to close the last trading session at $46.07.
MO has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Quality. It is ranked #5 out of 9 stocks in the A-rated Tobacco industry.
We have also rated MO for Value, Growth, Stability, Sentiment, and Momentum. Get all MO ratings here.
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GILD shares were trading at $79.30 per share on Tuesday morning, down $0.16 (-0.20%). Year-to-date, GILD has declined -6.75%, versus a 4.07% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
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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