As per the minutes released recently from the central bank’s December meeting, the Fed officials are committed to fighting inflation and expect higher interest rates until more progress is made. Moreover, the FOMC had already expressed the importance of keeping the restrictive policy in place while inflation holds unacceptably high.
Additionally, the number of Americans filing new claims for jobless benefits dropped to a three-month low last week, signaling continued historic tightness in the labor market. On top of it, layoffs fell 43% in December, and Thursday’s ADP National Employment report showed a higher-than-expected rise in private employment.
The sustained jobs market strength raises the risk that the Fed, engaged in its fastest interest rate-hiking cycle since the 1980s to tame inflation, could boost its target interest rate above the 5.1% projected last month. Thus, raising the chances of a recession.
At such uncertain times, dividend-paying stocks are considered a safe haven as they provide stable returns. Therefore, it could be wise to invest in fundamentally sound dividend stocks KT Corporation (KT), Progress Software Corporation (PRGS), and The Hackett Group, Inc. (HCKT) to navigate a potential recession.
KT Corporation (KT)
Headquartered in Korea, KT is a leading telecommunications service provider. The company operates through four segments: Information and Communications Technologies; Finance; Satellite Broadcasting; and Other.
On September 7, 2022, KT and Hyundai Motor Company (HYMTF) expanded their strategic partnership to lead the future mobility market. Both companies plan to research 6G autonomous driving technology and Advanced Air Mobility communication network based on satellite communication.
Moreover, both parties agreed to acquire mutual shares through the treasury stock exchange in order to create synergy in future businesses, enhance the execution and sustainability of mutual cooperation, and strengthen long-term partnerships.
KT pays a $0.75 per share dividend annually, which translates to a 5.45% yield on the current share price. Its four-year dividend yield is 4.66%. The company’s dividend payouts have grown at a CAGR of 16.7% over the past three years and 16.6% over the past five years.
KT’s operating revenue increased 4.2% year-over-year to ₩6.48 trillion ($5.09 billion) in the third quarter of the fiscal year 2022. Its EBITDA increased 6.4% year-over-year to ₩1.36 trillion ($1.07 billion), while its operating income increased 18.4% year-over-year to ₩452.9 billion ($355.71 million).
Analysts expect KT’s revenue for the fiscal year ended December 2022 to increase 31.2% year-over-year to $20.20 billion, while its revenue is expected to come in at $1.88 in the same year.
The stock has gained 6% over the past three months to close the last trading session at $13.33.
KT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
It also has an A grade for Value and Stability. The stock is ranked #5 of 47 in the A-rated Telecom – Foreign industry. Click here to access additional ratings for KT’s Momentum, Sentiment, Quality, and Growth.
Progress Software Corporation (PRGS)
PRGS develops, deploys, and manages business applications. The company offers OpenEdge, Sitefinity, and Corticon.
On January 3, 2023, PRGS announced it had entered into a definitive agreement to acquire MarkLogic, a leader in managing complex data and metadata, and a Vector Capital portfolio company.
MarkLogic is expected to enhance PRGS’ commitment to delivering the best products to develop, deploy and manage high-impact applications by providing a unified enterprise-grade semantic data platform that empowers customers to derive value from complex data.
It pays an annual dividend of $0.70 that yields 1.36% on the prevailing price. Its four-year average yield is 1.55%. The company has grown its dividends at CAGRs of 3.6% and 6.3% over the past three and five years.
PRGS’ revenue rose 2.6% year-over-year to $151.22 million in the fiscal third quarter that ended August 31, 2022. Its maintenance and services revenue came in at $103.60 million, up 8.5% year-over-year.
Moreover, its cash and cash equivalents came in at $224.86 million for the period ended August 31, 2022, compared to $157.37 million for the period ended November 30, 2021.
Its revenue is expected to increase 9.9% year-over-year to $613 million in the fiscal year that ended November 2022. Its EPS is expected to increase 5.9% year-over-year to $4.10 for the same year. It surpassed EPS estimates in all four trailing quarters.
The stock has gained 11.4% over the past year to close the last trading session at $51.56. It has gained 2.2% in the past five days.
PRGS has an overall A rating, equating to a Strong Buy in our proprietary rating system. It also has an A grade for Quality and a B for Value. PRGS is ranked #2 among the 138 stocks in the Software - Application industry
Click here for the additional POWR Ratings for PRGS for Growth, Momentum, Stability, and Sentiment.
The Hackett Group, Inc. (HCKT)
HCKT operates as a strategic advisory and technology consulting firm. It offers best practice accelerators that provide web-based access to best practices, customized software configuration tools and best practice process flows, and advisor inquiry for fact-based advice on proven approaches and methods.
On December 13, 2022, HCKT announced the final results of its modified “Dutch auction” tender offer, accepting to purchase a total of 4,889,315 shares of its common stock at a purchase price of $23.50 per share for an aggregate cost of approximately $114.90 million, excluding fees and expenses relating to the offer.
The stock has a four-year average of 2.17%. Its annual dividend of $0.44 yields 2.13% on the current market price. HCKT has increased its dividend at a CAGR of 7.9% over the past three years and a CAGR of 9.5% over the past five years. It has been paying dividends for the past nine years.
HCKT’s total revenue increased marginally year-over-year to $72.03 million in the third quarter ended September 30, 2022. Its operating income increased 23.1% year-over-year to $14.03 million.
The company’s adjusted net income and adjusted net income per share came in at $11.84 million and $0.37, respectively, representing a 15.5% and 19.4% increase from the prior year’s quarter.
Street expects HCKT’s revenue and EPS to increase 4.6% and 10.9% year-over-year to $291.70 million and $1.45, respectively, for the fiscal year ended December 2022. HCKT has surpassed EPS estimates in each of the trailing four quarters, which is impressive.
Over the past three months, the stock has gained 8.9% to close the last trading session at $20.67. Moreover, it has gained 6.8% over the past six months.
HCKT has an overall B rating, which translates to Buy in our proprietary rating system. It has an A grade for Quality and a B for Sentiment. Within the A-rated Outsourcing – Tech Services industry, HCKT is ranked first among nine stocks.
Beyond what we’ve stated above, we have also given HCKT grades for Growth, Value, Stability, and Momentum. Get all HCKT ratings here.
KT shares rose $0.16 (+1.20%) in premarket trading Friday. Year-to-date, KT has declined -0.07%, versus a 0.29% 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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