The December CPI moderated for the sixth consecutive time as prices rose 6.5% year-over-year. Post CPI report, a 25-basis-point rate hike is expected at the Fed’s February meeting, and this slowdown in the rate hikes could bode well for the stock market.
However, rate hikes could continue throughout 2023, although at a reduced pace, until the inflation rate drops below 2%. This could tip the economy into a recession. Although the market expects rates to peak at 4.9% mid-year, JPMorgan Asset Management's chief investment officer Bob Michele has predicted them to ultimately reach 6%, which could result in at least a mild recession.
To safeguard portfolios against economic volatilities, investors could opt for dividend stocks that ensure consistent returns. Over the past three months, SPDR S&P Dividend ETF’s (SDY) 8% gains outpaced the S&P 500’s increase of 5.8%.
Hence, fundamentally strong dividend stocks PepsiCo, Inc. (PEP), Medifast, Inc. (MED), and Genie Energy Ltd. (GNE) might be wise buy-and-hold options for your portfolio.
PepsiCo, Inc. (PEP)
PEP is a popular food and beverage company that operates through its seven segments: Frito-Lay North America; Quaker Foods North America; PepsiCo Beverages North America; Latin America; Europe; Africa, Middle East, and South Asia; Asia Pacific, Australia and New Zealand; and China Region.
On December 5, 2022, PEP announced a new packaging goal intended to double down the scale of reusable packing models from 10% to 20% by 2030. This ambition is driven by disruptive innovation that aligns with the company’s sustainable packaging vision.
On November 17, the company increased its quarterly dividend by 7% from the prior-year value to $1.15 per share, paid on January 6, 2023. PEP has paid consecutive quarterly dividends since 1965, and 2022 marked the company's 50th consecutive annual dividend increase.
Its annual dividend of $4.60 yields 2.72% on prevailing prices. The company’s dividend payouts have increased at a 6.1% CAGR over the past three years and a 7.4% CAGR over the five years. GNE’s four-year average dividend yield is 2.77%.
PEP’s net revenue came in at $21.97 billion for the third quarter that ended September 3, 2022, up 8.8% year-over-year. Its non-GAAP gross profit increased 8.4% year-over-year to $11.73 billion.
Also, its non-GAAP operating profit came in at $3.60 billion, up 10.9% year-over-year. Non-GAAP net income attributable to PEP per common share grew 10.1% year-over-year to $1.97.
For the fiscal first quarter ending March 2023, analysts expect PEP’s revenue to increase 3.6% year-over-year to $16.78 billion. Its EPS is estimated to grow 7.8% year-over-year to $1.39. PEP surpassed EPS and revenue estimates in all four trailing quarters, which is impressive.
Over the past six months, the stock has gained marginally to close the last trading session at $170.69. Moreover, it has gained 1% intraday.
It’s no surprise that PEP’s POWR Ratings reflect a promising outlook. It 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.
PEP has an A grade for Quality and a B for Growth, Stability, and Sentiment. In the A-rated Beverages industry, it is ranked #7 out of 36 stocks.
Click here for the additional POWR Ratings for Momentum and Value for PEP.
Medifast, Inc. (MED)
MED manufactures and distributes weight loss, weight management, healthy living products, and other consumable health and nutritional products in the United States and the Asia-Pacific. It markets its products through point-of-sale transactions over e-commerce platforms.
In September 2022, MED announced the launch of its "Healthy Habits for All" curriculum through a partnership with WeAreTeachers, a popular resource hub for educators. This could bolster the company’s customer reach.
In terms of forward non-GAAP P/E, MED is trading at 8.69x, which is 53.9% lower than the 18.85x industry average. The stock’s forward EV/EBIT multiple of 6.09 is 61.6% lower than the industry average of 15.85, while its forward EV/EBITDA multiple of 5.55 is 52% lower than the industry average of 11.55.
MED’s board of directors declared a $1.64 quarterly dividend payable to its stockholders on February 7, 2023. MED pays a $6.56 per share dividend annually, which translates to a 5.48% yield on the current share price. Its four-year dividend yield is 3.03%. The company’s dividend payouts have grown at a CAGR of 24.7% over the past three years and 35.4% over the past five years.
MED’s net revenue came in at $390.40 million for the third quarter that ended September 30, 2022. Its gross profit stood at $282.85 million. Also, its non-GAAP income from operations came in at $49.24 million, and non-GAAP earnings per share stood at $3.32 for the same quarter.
Moreover, its total current liabilities came in at $154.26 million on September 30, 2022, compared to $169.83 million on December 31, 2021.
Analysts expect MED’s revenue and EPS for the fiscal year ending December 2023 to increase 0.6% and 1.6% year-over-year to $1.60 billion and $13.26, respectively. MED surpassed EPS and revenue estimates in all four trailing quarters, which is impressive.
The stock has lost marginally over the past three months to close the last trading session at $113.37.
It is no surprise that MED has an overall B rating, which equates to Buy in our POWR Ratings system.
It also has an A grade for Value and Quality. The stock is ranked #3 of 9 in the B-rated Medical - Consumer Goods industry.
Click here to get additional ratings for MED (Growth, Momentum, Stability, and Sentiment).
Genie Energy Ltd. (GNE)
GNE and its subsidiaries supply electricity and natural gas to residential and small business customers internationally. It has three operational segments: Genie Retail Energy (GRE); GRE International; and Genie Renewables.
On December 6, 2022, GNE’s Genie Solar subsidiary received notice to proceed with constructing its first company-owned community solar generation project. Given the environmental benefit and the economics driving community solar development, GNE looks forward to expanding to additional sites in the coming months.
In addition, the company expects a notice to proceed with the second project in upstate New York in early 2023.
On November 30, the company acquired a portfolio of residential and small commercial customer contracts from Mega Energy. This acquisition is backed by its strong cash flows and should enable GNE to expand its footprint across seven states of retail supply markets.
The company paid a dividend of $0.075 per share on November 21, 2022. Its current annual dividend of $0.30 yields 2.88% on prevailing prices. GNE’s four-year average dividend yield is 2.95%.
For the fiscal third quarter (ended September 30, 2022), GNE’s gross profit increased 24.7% year-over-year to $43.14 million. The company’s income from operations rose 34.8% year-over-year to $23.54 million, while its adjusted EBITDA increased 35.4% from the year-ago value to $24.50 million.
Also, its net income attributable to GNE common stockholders came in at $18.31 million compared to a net loss of $2.66 million in the prior-year period. In addition, its earnings per share attributable to GNE common shareholder stood at $0.70 compared to a net loss per share of $0.10 in the same quarter the prior year.
The stock has gained 11.6% over the past six months to close the last trading session at $10.42. Moreover, it has gained 15.9% over the past three months.
GNE’s strong fundamentals 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 a B for Growth and Momentum. Within the Utilities – Domestic industry, it is ranked first out of 66 stocks.
To see GNE’s ratings for Stability, Sentiment, and Quality, click here.
PEP shares fell $0.49 (-0.29%) in premarket trading Wednesday. Year-to-date, PEP has declined -5.52%, versus a 4.65% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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