The Consumer Price Index (CPI) rose 6.5% in December, down from 7.1% in November and from a peak of 9.1% in June last year. This indicates that inflation is cooling significantly. However, even though inflation decreased in December, Fed policymakers have signaled a slower pace of rate increases but no relaxation.
At the upcoming meeting of the Federal Reserve, Susan Collins, the president of the Boston branch, favored raising interest rates by 0.25 percentage points. In agreement with this comment, Philadelphia Fed President Patrick Harker stated that rate increases “going forward” should be 25 basis points.
As long as the inflation remains well above the Fed's 2% target, consecutive interest rate hikes could potentially send the economy into a recession this year. Jamie Dimon, CEO of JPMorgan Chase & Co. (JPM), has warned that continued rate hikes “might derail the economy” and cause a recession.
The constant ups and downs in the market have conditioned investors to be more cautious of potential rallies and turned Wall Street bearish. 17 Wall Street strategists’ estimates indicate that the average S&P 500 price target for the end of the year is only 4,009.
Since market volatility is unlikely to abate anytime soon, investing in reliable dividend stocks could act as a defensive layer for one's portfolio since they ensure a stable income stream.
Hence, fundamentally sound dividend stocks BHP Group Limited (BHP), Cal-Maine Foods, Inc. (CALM), Spok Holdings, Inc. (SPOK), and ARC Document Solutions, Inc. (ARC) could be wise additions to your portfolio this week.
BHP Group Limited (BHP)
BHP is a global resources company with its headquarters in Melbourne, Australia, operating through the Copper; Iron Ore; and Coal segments. The business engages in mining, smelting, nickel refining, and potash development. It also offers towing, freight, marketing and trading, accounting, and administration services.
On December 12, 2022, BHP engaged in an agreement with I-Pulse Inc. and I-ROX SAS to identify and develop uses of pulsed-power technology across various mining industry sectors. I-Pulse and I-ROX should aid BHP by broadening its portfolio of options and potentially boosting the competitiveness of its current operations.
For the fiscal year ended June 30, 2022, BHP’s revenue increased 14.4% year-over-year to $65.10 billion, while its profit from operations grew 33.7% from the year-ago value to $34.11 billion. Its underlying EBITDA came in at $40.63 billion, up 15.9% year-over-year.
In addition, the company’s underlying attributable profit and earnings per ordinary share came in at $23.82 billion and $4.71, increasing 39.5% and 39.4% year-over-year, respectively.
BHP pays a $7 per share dividend annually, which translates to a 10.10% yield on the current price level. Its four-year average dividend yield is 7.84%, and its dividend payouts have grown at a 37.6% CAGR over the past three years.
Analysts expect BHP’s EPS to increase 5.8% year-over-year to $4.98 for the current fiscal year ending June 2023. Also, the consensus EPS estimate of $5.05 for the next fiscal year indicates an increase of 1.5% year-over-year. Shares of BHP have gained 37.8% over the past six months to close the last trading session at $69.28.
BHP’s POWR Ratings reflect its promising outlook. 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.
The stock has a B grade for Quality, Value, and Sentiment. It has topped the 37-stock Industrial - Metals industry. To see additional POWR Ratings for Growth, Stability, and Momentum for BHP, click here.
Cal-Maine Foods, Inc. (CALM)
CALM produces, grades, packages, and sells shell eggs. It sells specialized shell eggs, including brown, cage-free, organic, and nutritionally enhanced eggs. CALM sells its goods to food service distributors, club shops, independent supermarkets, and national and local grocery store chains.
In terms of its forward P/E, CALM is trading at 3.75x, 82% lower than the industry average of 20.84x. The stock’s forward EV/EBITDA multiple of 2.16 is 81.5% lower than the industry average of 11.63.
For the fiscal 2023 second quarter ended November 26, 2022, CALM’s net sales increased 110% year-over-year to $801.70 million, and its gross profit grew 626.6% from the year-ago value to $317.85 million. The company’s operating income stood at $259.87 million as compared to a loss of $2.07 million in the previous year’s quarter.
Furthermore, CALM’s net income increased considerably from the year-ago value to $198.29 million, while its EPS came in at $4.07, representing a significant increase year-over-year.
CALM pays a $1.73 per share dividend annually, which translates to a 3.19% yield on the current price level. The company’s dividend payouts have grown at a 60.1% CAGR over the past three years, and its four-year average dividend yield is 0.72%.
The consensus EPS estimate of $14.42 for the current fiscal (ending May 2023) indicates a 430.1% year-over-year improvement. Likewise, the consensus revenue estimate of $3.01 billion for the same year reflects a growth of 69.5% from the previous year. The stock has gained 35.6% over the past year to close the last trading session at $54.10.
CALM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system.
The stock has an A grade for Quality and Growth and a B for Value. Within the Food Makers industry, it ranks #19 of 83 stocks.
Beyond what we stated above, we also have CALM’s ratings for Stability, Sentiment, and Momentum. Get all CALM ratings here.
Spok Holdings, Inc. (SPOK)
SPOK is a healthcare communication firm that focuses on providing a portfolio of unified clinical communication and collaboration solutions. The company serves businesses, management personnel, medical personnel, real estate brokers, manufacturing organizations, specialty trade organizations, and government agencies.
In October 2022, the company improved its financial outlook for the full-year 2022. It expects total revenue to be in the range of $131.50-$136 million, up from the previous guidance of $130-$136 million. Its adjusted operating expenses are expected to come between $123 million and $125 million, compared to prior guidance of $123.30-$126.10 million.
For the fiscal 2022 third quarter ended September 30, SPOK’s operating income stood at $3.54 million compared to an operating loss of $3.56 million in the previous year’s quarter. The company’s adjusted EBITDA was $4.66 million, compared to a $2.50 million loss a year ago.
Also, the company reported net income and earnings per share of $2.92 million and $0.15 compared to a loss and loss per share of $2.49 million and $0.13, respectively, in the prior year’s quarter.
SPOK pays a $1.25 per share dividend annually, which translates to a 15.06% yield on the current price level. Its dividend payouts have grown at a 35.7% CAGR over the past three years, and its four-year average dividend yield is 6.35%.
The consensus EPS estimate of $0.84 for the fiscal year ending December 2023 indicates a 64.7% year-over-year improvement. Shares of SPOK have gained 28.9% over the past six months to close the last trading session at $8.30.
SPOK’s POWR Ratings reflect its solid prospects. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
The stock has an A grade for Growth and Sentiment and a B for Quality and Value. Within the Telecom - Domestic industry, it has topped among 19 stocks.
In addition to the POWR Ratings stated above, we also have SPOK’s ratings for Momentum and Stability. Get all SPOK ratings here.
ARC Document Solutions, Inc. (ARC)
ARC is a digital printing company that offers digital printing and document-related services. It also provides cloud-based document management software, other digital hosting services, and managed print services.
ARC’s trailing-12-month gross profit margin of 33.20% is 14.3% higher than the industry average of 29.06%. Its trailing-12-month levered FCF margin of 9.77% is 187.1% higher than the 3.40% industry average.
For the fiscal 2022 third quarter ended September 30, 2022, ARC’s net sales increased 1% year-over-year to $73.14 million, while its gross profit grew 4.3% year-over-year to $24.82 million. Its income from operations rose 16.2% from the year-ago value to $5.72 million.
In addition, adjusted net income attributable to ARC came in at $3.70 million, a 15.4% increase year-over-year, and its adjusted EPS stood at $0.09, up 12.5% from the year-ago quarter.
On December 8, 2022, ARC’s board of directors declared a quarterly cash dividend of $0.05 per share, payable on February 28, 2023, to shareholders of record on January 31, 2023. ARC pays a $0.20 per share dividend annually, which translates to a 5.63% yield on prevailing prices. Its four-year average dividend yield is 2.09%.
The stock has gained 21.8% over the past month and 38.7% over the past six months to close the last trading session at $3.55.
It’s no surprise that ARC has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The stock has an A grade for Quality, Sentiment, and Value.
Within the Outsourcing - Business Services industry, it has topped 41 stocks. Click here to see additional ratings of ARC for Stability, Growth, and Momentum.
BHP shares were trading at $68.14 per share on Tuesday morning, down $1.14 (-1.65%). Year-to-date, BHP has gained 9.81%, versus a 4.37% 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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