The Fed has been battling inflation, taking the benchmark interest rate to the highest level since the early 1980s. While the inflation in October came in cooler than expected, the Fed might need to keep raising rates to achieve its 2% target.
On the bright side, Federal Reserve Vice Chair Lael Brainard indicated recently that the central bank could soon slow the pace of its interest rate increases. Brainard confirmed that a slowdown, if not a stop, is looming.
On the other hand, inflation expectations for the year ahead rose to 5.9%, according to the New York Fed’s monthly Survey of Consumer Expectations. Moreover, the three-year expectations accelerated to 3.1%, while the five-year outlook rose to 2.4%, rising from 2.9% and 2.2%, respectively.
Since the prospects of the economy still remain uncertain, fundamentally strong dividend-paying stocks Microsoft Corporation (MSFT), The Mosaic Company (MOS), and Bluegreen Vacations Holding Corporation (BVH) might be solid buys now.
Microsoft Corporation (MSFT)
MSFT is a tech giant that develops, licenses, and supports software, services, devices, and solutions worldwide. The company operates in three segments: Productivity and Business Processes; Intelligent Cloud; and More Personal Computing.
On November 14, MSFT announced the launch of the Microsoft Supply Chain Platform. The company also announced the preview of the Microsoft Supply Chain Center. The platform can enable organizations to gain deeper insights and minimize the carbon impact on their organization and supply chain.
On October 20, MSFT announced a landmark expansion of their partnership to accelerate UBS Group AG’s (UBS) public cloud footprint over the next five years. The partnership furthers UBS’s “cloud-first” strategy and the modernization of its global technology estate.
On September 20, MSFT declared a quarterly dividend of $0.68 per share, payable to shareholders on December 8, reflecting a 10% increase over the previous quarter’s dividend.
Its annual dividend of $2.72 yields 1.13% at its current share price. Its dividend payouts have increased at a 10.5% CAGR over the past three years and a 9.7% CAGR over the past five years. The company has a history of 17 years of consecutive dividend growth.
MSFT’s total revenue increased 10.6% year-over-year to $50.12 billion in the fiscal first quarter that ended September 30. Its operating income grew 6.3% from the year-ago value to $21.52 billion. The company’s net income and net earnings per common share amounted to $17.56 billion and $2.35, respectively.
The consensus EPS estimate of $2.36 for the fiscal third quarter ending March 2023 indicates a 6.1% improvement year-over-year. Its consensus revenue of $52.85 billion for the same quarter represents a rise of 7.1% year-over-year. MSFT has topped consensus EPS estimates in three of the trailing four quarters, which is impressive.
The stock has gained 5.6% over the past five days to close its last trading session at $241.55.
MSFT’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
MSFT is rated an A grade in Quality and a B in Stability. Within the Software – Business industry, it is ranked #9 out of 53 stocks.
To see additional POWR Ratings for Growth, Value, Momentum, and Sentiment for MSFT, click here.
The Mosaic Company (MOS)
MOS produces and markets concentrated phosphate and potash crop nutrients in North America and other countries. The company operates through its Phosphates; Potash; and Mosaic Fertilizantes segments.
On October 19, MOS declared a quarterly dividend of $0.15 per share on its common stock, payable to shareholders on December 15, 2022.
Its annual dividend of $0.60 yields 1.14% on its current share price. Its dividend payouts have increased at a 48.1% CAGR over the past three years. The company has had three consecutive years of dividend growth.
For the third quarter that ended September 30, MOS’ net sales increased 56.5% year-over-year to $5.35 billion, while its operating earnings increased 64.6% year-over-year to $1.15 billion. Its adjusted EBITDA grew 74% year-over-year to $1.69 billion. The company’s adjusted net income per share attributable to MOS rose 138.5% year-over-year to $3.22.
MOS’ revenue is expected to increase 55.3% year-over-year to $19.20 billion, while its EPS is estimated to grow 136.7% year-over-year to $11.93 in the current fiscal year ending December 2022.
The stock has gained 42.1% over the past year and 35.2% year-to-date to close the last trading session at $53.12. It has gained 13.4% over the past month.
It is no surprise that MOS has an overall rating of B, equating to a Buy in our POWR Ratings system. The stock has a B for Growth, Value, and Quality. In the 30-stock Agriculture industry, MOS is ranked #6.
Beyond what we’ve stated above, we have also given MOS grades for Momentum, Stability, and Sentiment. Get all MOS ratings here.
Bluegreen Vacations Holding Corporation (BVH)
BVH, a vacation ownership company, markets and sells vacation ownership interests (VOI) and manages resorts in leisure and urban destinations. The company also provides mortgage, title, reservation, construction design, and financing services.
On October 12, BVH announced its acquisition of a 320-room resort and spa in Panama City Beach, Florida, and two buildings in the Streamside at Vail Resort enclave in Vail, Colorado. These expansionary initiatives should be beneficial for the company.
On October 29, BVH declared a quarterly cash dividend of $0.15 per share on its Class A and Class B Common Stock, payable on November 21, 2022.
BVH’s $0.60 annual dividend yields 2.8% at its current share price. Its dividend payouts have increased at 32.8% CAGR over the past three years and 32.2% CAGR over the past five years.
During the third quarter that ended September 30, 2022, BVH’s total revenue increased 16.9% year-over-year to $250.84 million. Its EBITDA rose 4.1% year-over-year to $45.75 million. Moreover, the company’s net income grew 1.2% year-over-year to $27.65 million, while its earnings per share improved 12.3% year-over-year to $1.19.
Analysts expect BVH’s EPS to rise 15.8% year-over-year to $3.33 in the current fiscal year ending December. Its revenue is expected to increase 19% year-over-year to $901.13 million.
The stock gained 19.3% over the past month to close the last trading session at $20.85.
As expected, BVH has an overall B rating, equating to Buy in our POWR Ratings system. It has an A grade for Value and a B grade for Sentiment and Quality. BVH is ranked on top of the 21 stocks in the B-rated Travel – Hotels/Resorts industry.
Click here to see the other ratings of BVH for Growth, Momentum, and Stability.
MSFT shares were trading at $244.66 per share on Tuesday morning, up $3.11 (+1.29%). Year-to-date, MSFT has declined -26.78%, versus a -14.76% 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.
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