Inflation cooled for the sixth straight month in December. The Consumer Price Index (CPI) rose 6.5% year-over-year, down from 7.1% in November and significantly below a 9.1% peak in June last year.
Consistent easing of inflation could allow the Federal Reserve to slow down the pace of interest rate hikes even further next month. Patrick Harker of the Philadelphia Fed believes that 25-basis-points hikes would be appropriate going forward.
Jan Hatzius, chairman of Goldman Sachs Research and the firm’s top economist, wrote in the team’s macro outlook 2023, “There are strong reasons to expect positive growth in coming quarters.”
Moreover, the economy could most likely experience a soft landing this year and narrowly escape a recession, with Goldman Sachs’ economists predicting a 35% probability of a recession over this year below the median of 65% forecasted in a Wall Street Journal survey.
With improving investor sentiment, the Nasdaq Composite Index gained 2.2% over the past month, compared to the 0.4% gains of the Dow Jones Industrial Average Index and the 1.5% gains of the S&P 500 Index.
Given this backdrop, fundamentally sound and dividend-paying Nasdaq stocks Broadcom Inc. (AVGO), PepsiCo, Inc. (PEP), and Cisco Systems, Inc. (CSCO) could be wise additions to your portfolio to buy and hold forever.
Broadcom Inc. (AVGO)
AVGO designs and sells diverse semiconductor devices globally, focusing on complex digital and mixed signal complementary metal oxide semiconductor-based devices and analog III-V-based products. It operates in two segments, Semiconductor Solutions; and Infrastructure Software.
On December 15, 2022, AVGO announced the launch of a new solution that would allow organizations to store mainframe data anywhere, including the cloud. Broadcom’s CA 1 Flexible Storage solution provides safe and affordable mainframe data storage choices for hybrid IT environments. The new solution might boost the company’s revenue.
On October 25, AVGO announced that its ValueOps product, Rally Software®, had obtained Government Risk and Authorization Management Program (FedRAMP) authorization for use by federal agencies and departments procuring cloud services. FedRAMP could empower agencies to embrace current cloud technology and help speed the adoption of secure cloud solutions, which should benefit AVGO.
For the fourth quarter of fiscal 2022 (ended October 30, 2022), AVGO’s non-GAAP net revenue increased 20.6% year-over-year to $8.93 billion, and its non-GAAP gross margin grew 20.7% from the prior year’s quarter to $6.67 billion. The company’s adjusted EBITDA rose 25.8% from the year-ago value to $5.72 billion.
In addition, AVGO’s adjusted net income increased 29.8% year-over-year to $4.54 billion, and its adjusted EPS came in at $10.45, a 33.8% increase year-over-year.
The company has increased its dividends for 11 consecutive years. It pays an $18.40 per share dividend annually, which translates to a 3.27% yield on the current price level. AVGO’s dividend payouts have grown at a 28.6% CAGR over the past five years, and its four-year average dividend yield is 3.23%.
For the fiscal year ending October 2023, analysts expect AVGO’s revenue to increase 5.9% year-over-year to $35.17 billion. The company’s EPS for the same year is expected to grow 8.7% from the previous year to $40.90. Moreover, AVGO surpassed its consensus EPS in all four trailing quarters, which is impressive.
Shares of AVGO have gained 10.7% over the past six months to close the last trading session at $563.22.
AVGO’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which equates to 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 a Quality grade of A and a Sentiment grade of B. In the 92-stock B-rated Semiconductor & Wireless Chip industry, it ranks #8.
Beyond what we stated above, we also have AVGO’s ratings for Stability, Value, Growth, and Momentum. Get all AVGO ratings here.
PepsiCo, Inc. (PEP)
PEP is a global manufacturer and distributor of various beverages and convenience foods. Its segments include 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 January 13, 2023, PEP introduced a new and improved Pepsi Zero Sugar. The company has been promoting its product by allowing customers to redeem up to 10 million free Pepsi Zero Sugars, beginning with the NFL Playoffs and continuing through the Super Bowl. These initiatives might strategically benefit PEP.
On December 14, 2022, PEP’s Doritos launched Doritos After Dark™, a late-night dining concept serving upgraded, internationally-influenced snacks. With 43% of customers and 49% of Gen Zers claiming that snacking is the most satisfying after dark, this launch should allow the company to expand its customer base and strengthen its revenue stream.
The company’s net revenue grew 8.8% year-over-year to $21.97 billion in the fiscal third quarter that ended September 3, 2022, and its gross profit grew 8% from the prior year’s period to $11.66 billion. The company’s operating profit rose 6.1% year-over-year to $3.35 billion.
In addition, PEP’s net income came in at $2.72 billion, up 21.4% year-over-year, and its EPS increased 21.9% from the year-ago value to $1.95.
PEP pays a $4.60 per share dividend annually, which translates to a 2.71% yield on the current price level. Its dividend payments have grown at a 7.4% CAGR over the past five years, and its four-year average dividend yield is 2.77%. Also, the company has raised its dividends for 50 consecutive years.
The consensus revenue and EPS estimate of $87.99 billion and $7.31 for the current fiscal year (ending December 2023) indicate a 3.4% and 7.6% year-over-year improvement, respectively. Furthermore, PEP surpassed its consensus EPS in all four trailing quarters.
The stock has slumped marginally over the past six months to close the last trading session at $169.63.
PEP’s strong prospects are apparent in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
PEP also has an A grade for Quality and a B for Growth, Stability, and Sentiment. Within the A-rated Beverages industry, it is ranked #7 of 36 stocks.
In addition to the POWR Ratings I’ve just highlighted, you can see PEP ratings for Value and Momentum here.
Cisco Systems, Inc. (CSCO)
CSCO designs and markets a variety of Internet-related technologies. It is integrating its platforms for cloud computing, networking, security, and collaboration. The company operates through three geographical segments: the Americas; Europe, the Middle East, and Africa (EMEA); and Asia Pacific, Japan, and China (APJC).
On December 15, 2022, CSCO teamed with T-Mobile US Inc. (TMUS) to build the world's largest highly scalable and distributed nationwide cloud native converged core gateway. This advancement could support the most cutting-edge 5G applications for customers and organizations, aiding CSCO's growth.
On December 12, CSCO declared working with OTEGLOBE, a network backbone operator throughout South-eastern and Western Europe, to increase the capacity and performance of its network to provide clients faster, more efficient connections through a robust, 800G-ready infrastructure. It is expected to benefit both companies significantly.
For the fiscal 2023 first quarter that ended October 29, 2022, CSCO’s total revenue increased 5.7% year-over-year to $13.63 billion, and its gross margin grew 3.6% from the prior year’s quarter to $8.35 billion. The company’s operating income rose 3% from the year-ago value to $3.54 billion.
In addition, CSCO’s non-GAAP net income stood at $3.55 billion, a 2.1% increase year-over-year, while its non-GAAP EPS stood at $0.86, up 4.9% from the prior year’s period.
CSCO has a record of raising its dividends for 11 consecutive years. It pays a $1.52 per share dividend annually, translating to a 3.27% yield on the current price level. The company’s four-year average dividend yield is 2.98%, and its dividend payouts have grown at a 5.6% CAGR over the past five years.
Analysts expect CSCO’s revenue to increase 5.7% year-over-year to $54.50 billion for the fiscal year ending July 2023. The company’s EPS for the ongoing year is expected to rise 5.6% from the previous year to $3.55. Also, CSCO surpassed its consensus EPS in all four trailing quarters.
Shares of CSCO have gained 5.5% over the past six months to close the last trading session at $46.46.
CSCO’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
The stock has an A grade for Quality and a B for Stability. Within the B-rated Technology - Communication/Networking industry, it has ranked #4 of 48 stocks.
To see additional POWR Ratings for Value, Growth, Momentum, and Sentiment for CSCO, click here.
AVGO shares were trading at $569.53 per share on Friday afternoon, up $6.31 (+1.12%). Year-to-date, AVGO has gained 1.86%, versus a 3.37% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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