Since the beginning of the year, the stock market has been volatile on concerns over multi-year-high inflation and expectations of aggressive central bank interest rate increases. Furthermore, the war between Russia and Ukraine and a possible fourth COVID-19 wave in China are raising concerns over deepening supply chain disruptions, adding fuel to the market’s volatility.
The sanctions and reverse sanctions against Russia are creating chaos in the markets because they are likely disrupting an already troubled supply chain. Amid this environment, betting on blue-chip stocks that offer high dividend yields could be one of the best strategies to generate stable returns and a portfolio income stream. Investors’ interest in blue-chip stocks is evident in the Fidelity Blue Chip Value ETF’s (FBCV) 3.1% returns over the past week.
We think prominent blue-chip stocks International Business Machines Corporation (IBM), Altria Group, Inc. (MO), Southern Copper Corporation (SCCO), Dow Inc. (DOW), and W.P. Carey Inc. (WPC), which are each currently trading at discounts to their peers and offer high dividend yields, could be ideal investments now.
International Business Machines Corporation (IBM)
With a $113.87 billion market cap, IBM in Armonk, N.Y., provides integrated solutions and services worldwide. The company operates through six segments—Cloud & Cognitive Software; Global Business Services; Global Technology Services; Systems; Global Financing; and Other. It offers application, technology consulting and support, process design and operations, cloud, digital workplace, network services, business resiliency, strategy, and design solutions.
IBM paid a quarterly cash dividend of $1.64 per share on March 10, 2022. The stock pays a $6.56 per share dividend annually, translating to a 5.22% yield. The company’s dividend has grown at a 3.7% rate over the past five years. IBM has paid dividends for 32 consecutive years.
On March 9, 2022, The Egyptian Ministry of Finance announced its collaboration with IBM’s IBM Consulting and SAP SE (SAP), a Germany-based enterprise application software company, to help automate the Egyptian tax system as part of the government’s digital transformation strategy. IBM Consulting and SAP will provide an integrated solution based on the SAP Tax and Revenue Management for the Public Sector package. Also, the IBM Cloud Pak for Business Automation will integrate AI into the Ministry’s processes and provide taxpayers, tax officers, and collectors with a more automated and high-accuracy taxation journey. This should nurture IBM’s relationship with the government in the long run.
For its fiscal year 2021 fourth quarter, ended Dec. 31, 2021, IBM’s total revenue increased 6.5% year-over-year to $16.70 billion. The company’s non-GAAP gross profit came in at $9.68 billion, indicating a 2.9% year-over-year improvement. Its non-GAAP income from continuing operations was $3.04 billion, representing an 80% rise from the prior-year period. IBM’s net income came in at $2.33 billion for the quarter, up 72% from the year-ago period. Its non-GAAP EPS increased 78.2% year-over-year to $3.35. As of Dec. 31, 2021, the company had $6.65 billion in cash and cash equivalents.
Analysts expect the company’s EPS to reach $9.86 for its fiscal year 2022, ending Dec. 31, 2022, representing a 24.3% rise from the prior-year period. It surpassed the Street’s EPS estimates in each of the trailing four quarters, which is impressive. The $60.75 billion consensus revenue estimate for the same fiscal year indicates a 5.9% year-over-year improvement. The company’s EPS is expected to grow at a 16.5% rate per annum over the next five years.
Over the past three months, the stock has gained 0.9% in price and closed yesterday’s trading session at $127.04.
IBM’s 13.81x forward EV/EBIT is 13.5% lower than the 15.96x industry average. In terms of non-GAAP forward PEG, IBM is currently trading at 0.76x, which is 48.4% lower than the 1.47x industry average.
IBM’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has a B grade for Value and Quality. Click here to see the additional ratings for IBM’s Growth, Stability, Sentiment, and Momentum.
IBM is ranked #17 of 77 stocks in the Technology - Services industry.
Altria Group, Inc. (MO)
With a market capitalization of $93.19 billion, MO in Richmond, Va., manufactures and sells smokable products, oral tobacco products, and wine. The company’s popular brands are Marlboro cigarettes, Black & Mild cigars, and moist smokeless tobacco products under the Copenhagen, Skoal, Red Seal, and Husky brands. It provides finance leasing services, primarily in transportation, power generation, real estate, and manufacturing equipment industries. The products are sold mainly to wholesalers, including distributors, and large retail organizations, such as chain stores.
MO will pay a $0.90 per share quarterly cash dividend on April 29, 2022. The stock pays a $3.60 per share dividend annually, translating into a 6.98% yield. Its dividend has grown at an 8.4% rate over the past five years. MO has paid dividends for 52 consecutive years.
For its fiscal year 2021 fourth quarter, ended Dec. 31, 2021, MO’s net revenues were $6.23 billion. The company’s gross profit increased 5.4% year-over-year to $3.32 billion. Its adjusted EBIT came in at $2.68 billion, indicating a 9.2% increase from the year-ago period. MO’s adjusted net earnings were $1.99 billion, up 8.3% from the prior-year period. And its adjusted EPS increased 10.1% year-over-year to $1.09. As of Dec. 31, 2021, the company had $4.54 billion in cash and cash equivalents.
The $4.84 consensus EPS estimate for its fiscal year 2022, ending Dec.31, 2022, represents a 5% year-over-year improvement. It surpassed the consensus EPS estimates in three of the trailing four quarters. MO’s EPS is expected to grow at a 5.4% rate per annum over the next five years.
MO stock has gained 8.3% in price over the past three months and ended yesterday’s trading session at $51.28.
In terms of forward EV/EBIT, MO is currently trading at 9.69x, which is 39.5% lower than the 16.03x industry average. In terms of non-GAAP forward PEG, MO is currently trading at 1.99x, which is 26.7% lower than the 2.72x industry average.
MO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has an A grade for Quality and a B grade for Growth. Click here to see the additional ratings for MO (Momentum, Stability, Sentiment, and Value).
MO is ranked #4 of 11 stocks in the Tobacco industry.
Southern Copper Corporation (SCCO)
SCCO is an integrated copper producer that owns and operates open pit mines and metallurgical complexes in South America. The Phoenix, Ariz.-based concern obtains several by-products, including molybdenum, silver, zinc, sulfuric acid, and other metals. The company’s segments include the Peruvian operations, the Mexican open-pit copper mines, and the Mexican underground mining operations segment identified as the IMMSA unit. It has a $58.98 billion market cap.
SSCO paid a quarterly cash dividend of $1 per share on March 2, 2022. The stock pays a $4 per share dividend annually, translating to a 5.85% yield. The company’s dividend has grown at a 73.4% rate over the past five years. SCCO has paid dividends for 25 consecutive years.
For its fiscal year 2021 fourth quarter, ended Dec. 31, 2021, SCCO’s net sales increased 20.1% year-over-year to $2.82 billion. The company’s operating income came in at $1.53 billion, representing a 43.5% rise from the prior-year period. Its net income was $833 million, up 41.1% from the prior-year period. SCCO’s EPS came in at $1.08, indicating a 42.1% rise from the year-ago period. The company had $3 billion in cash and cash equivalents as of Dec. 31, 2021.
SCCO surpassed the Street’s EPS estimates in three of the trailing four quarters. Analysts expect the company’s EPS to grow at a 21.3% rate per annum over the next five years. Over the past three months, the stock has gained 20.8% to close yesterday’s trading session at $70.47.
The company has a 10.26x forward EV/EBIT, which is 6.6% lower than the 10.99x industry average. In terms of trailing-12-month EV/EBITDA, SCCO is currently trading at 8.29x, which is 1.8% lower than the 8.43x industry average.
SCCO’s POWR Ratings reflect its solid prospects. It has an overall B rating, which equates to Buy in our proprietary rating system.
The stock has an A grade for Quality, and a B for Stability. In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for SCCO’s Momentum, Growth, Sentiment, and Value here.
SCCO is ranked #10 of 36 stocks in the Industrial - Metals industry.
Click here to check out our Industrial Sector Report for 2022
Dow Inc. (DOW)
Midland, Mich.-based DOW offers a range of science-based products and solutions for consumer care, infrastructure, and packaging markets worldwide. The company operates through the Packaging & Specialty Plastics; Industrial Intermediates & Infrastructure; and Performance Materials and Coatings segments. It is also in the property and casualty insurance and reinsurance business. It has a $44.30 billion market cap.
DOW paid a $0.70 per share quarterly cash dividend on Feb. 28, 2022. The company pays a $2.80 dividend annually, representing a 4.76% yield. Its dividend has grown at a 44.3% rate over the past five years. DOW has paid dividends for 112 consecutive years.
On Feb. 22, 2022, DOW, Sartorius AG, a German-based pharmaceutical and lab equipment supplier, and Südpack Medica, a producer of high-tech films and packaging materials for food, non-food, medical, and pharmaceutical applications, announced their collaboration to manufacture bioprocessing bags, which are essential for the safe production and transportation of coronavirus vaccines worldwide. Made from multilayer films, sterile bioreactor bags with a two-liter capacity can help achieve outstanding speed, quality, and flexibility in the vaccine development process as well as in commercial manufacturing operations.
For its fiscal 2021 fourth quarter, ended Dec. 31, 2021, DOW’s net sales increased 34.2% year-over-year to $14.36 billion. The company’s non-GAAP pre-tax income came in at $2.12 billion for the quarter, indicating a 147.4% gain over the prior-year period. DOW’s non-GAAP net income was $1.61 billion, representing a 165.6% rise from the prior-year period. Its non-GAAP EPS increased 165.4% year-over-year to $2.15. DOW had $2.99 billion in cash and cash equivalents as of Dec. 31, 2021.
The $55.20 billion consensus revenue estimate for its fiscal year 2022, ending Dec. 31, 2022, indicates a marginal year-over-year improvement. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Dow’s EPS is expected to grow at a 56.8% rate per annum over the next five years.
Over the past three months, the stock has gained 9.2% in price and ended yesterday’s trading session at $59.64.
DOW’s 8.04x forward EV/EBIT is 26.9% lower than the 10.99x industry average. In terms of non-GAAP forward PEG, DOW is currently trading at 0.41x, which is 65.8% lower than the 1.19x industry average.
DOW’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has an A grade for Value. Click here to see the additional ratings for DOW (Quality, Growth, Sentiment, Stability, and Momentum).
DOW is ranked #14 of 88 stocks in the A-rated Chemicals industry.
W.P. Carey Inc. (WPC)
With a market capitalization of $15.13 billion, New York City’s WPC is an internally managed real estate investment trust (REIT) with a diversified portfolio of approximately 1,266 properties, net-leased to approximately 356 tenants. The company has invested in high-quality single-tenant industrial, warehouse, office, retail, and self-storage properties subject to long-term net leases with built-in rent escalators.
WPC will pay a $1.06 per share quarterly cash dividend on April 14, 2022. The stock pays a $4.23 per share dividend annually, translating into a 5.33% yield. Its dividend has grown at a 1.4% rate over the past five years. WPC has paid dividends for 23 consecutive years.
On Feb. 28, 2022, WPC agreed to acquire Corporate Property Associates 18 – Global Incorporated (CPA:18), a non-traded REIT, for approximately $2.7 billion. The transaction will be immediately accretive to its Real Estate AFFO per share, thus helping WPC offset the loss of over half of the earnings contribution from income earned for managing CPA:18. This acquisition adds a well-diversified and high-quality net lease portfolio that enhances certain portfolio metrics.
WPC’s total revenues for its fiscal year 2021 fourth quarter, ended Dec. 31, 2021, increased 22% year-over-year to $374.88 million. The company’s revenue from the real estate business came in at $370.32 million, representing a 22.5% year-over-year improvement. As of Dec. 31, 2021, the company had $165.43 million in cash and cash equivalents.
Analysts expect WPC’s revenue to grow 5.5% year-over-year to $1.40 billion for its fiscal 2022, ending Dec. 31, 2022. WPC stock has declined 1% in price over the past three months and closed yesterday’s trading session at $79.35.
In terms of trailing-12-month EV/EBIT, WPC is currently trading at 34.68x, which is 27.3% lower than the 47.69x industry average. And in terms of trailing-12-month Price/Cash Flow, WPC is currently trading at 16.34x, which is 4.1% lower than the 17.02x industry average.
WPC’s strong fundamentals are reflected in its POWR Ratings. The stock has a B grade for Growth, Sentiment, Stability, and Momentum. Click here to see the additional ratings for WPC (Value and Quality).
WPC is ranked #12 of 51 stocks in the REITs - Diversified industry.
IBM shares were trading at $127.79 per share on Thursday afternoon, up $0.75 (+0.59%). Year-to-date, IBM has declined -3.24%, versus a -7.51% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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