As per the Labor Department’s report, November’s consumer price index rose just 0.1% from the previous month and 7.1% from a year ago. Economists surveyed by Dow Jones had expected a 0.3% monthly increase and a 7.3% 12-month rate.
Moreover, the Producer Price Index (PPI) for final demand rose 7.4% in November year over year, lower than October’s 8.1%.
The Federal Reserve has been raising interest rates since the beginning of the year to tame the multi-decade high inflation. After four straight three-quarter percentage point hikes in a row, the market widely expects a 0.5 percentage point rate increase this month.
However, inflation is still much higher than the Fed’s 2% target. So, the economic uncertainties are expected to linger. Therefore, it could be wise to invest in fundamentally strong stocks BHP Group Limited (BHP), Honda Motor Co., Ltd. (HMC), and Karooooo Ltd. (KARO), which pay steady dividends.
BHP Group Limited (BHP)
Headquartered in Melbourne, Australia, BHP operates globally as a resources company. The company operates through 3 segments: Copper; Iron Ore; and Coal segments. Along with mining, it provides other services such as towing, freight, marketing and trading, marketing support, finance, administrative, and other services.
On December 12, BHP entered a collaboration with I-ROX, under which the companies will work together to seek to accelerate the development of I-ROX’s technology and business, and BHP will be offered direct access to this potentially disruptive technology.
BHP also entered a collaboration and made an equity investment in I-Pulse to identify new applications for pulsed-power technology in a mining context.
Mike Henry, BHP’s Chief Executive Officer, said, “The collaboration with I-Pulse and I-ROX will contribute to our growing portfolio of options with potential to both improve the competitiveness of and help decarbonize our current business.”
On August 16, 2022, BHP Board declared a dividend of $1.75 per share that was payable on September 22. Its annual dividend of $7.00 yields 11.05% on the current share price. It has a four-year average dividend yield of 7.77%. The company’s dividend payouts have increased at a 37.6% CAGR over the past three years and a 33.1% CAGR over the past five years.
In terms of its forward non-GAAP P/E, BHP is trading at 12.63x, marginally lower than the industry average of 12.71x. Its forward EV/EBIT multiple of 6.71x is 36.7% lower than the 10.60x industry average.
BHP’s total revenue rose 14.4% year-over-year to $65.10 billion for the fiscal year ended June 30, 2022. Its underlying attributable profit and underlying basic earnings per ordinary share came in at $23.82 billion and $4.71, increasing 39.5% and 39.4% year-over-year, respectively.
For the fiscal year ending June 2023, Street expects BHP’s EPS to increase 6.6% year-over-year to $5.01. Its revenue is expected to come in at $53.44 billion in the current year.
The stock has gained 9.1% over the past month to close the last trading session at $63.36. It has gained 21.4% over the past three months.
BHP’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Value and Quality. It is ranked first among 36 stocks in the B-rated Industrial – Metals industry.
Click here for the additional POWR Ratings for Growth, Momentum, Stability, and Sentiment for BHP.
Honda Motor Co., Ltd. (HMC)
Headquartered in Tokyo, Japan, HMC develops, manufactures, and distributes motorcycles, automobiles, power products, and other products in Japan, North America, Europe, Asia, and internationally. It operates through four segments: Motorcycle Business, Automobile Business, Financial Services Business, and Life Creation and Other Businesses.
Its annual dividend of $1.42 yields 5.92% on prevailing prices. The stock has a 4-year average dividend rate of 3.38%. Over the past three years, HMC registered a CAGR of 7.08% dividend growth.
HMC’s forward Price/Cash Flow multiple of 2.43x is 77% lower than the industry average of 10.60x. Its forward EV/Sales multiple of 0.59x is 46.5% lower than the 1.09x industry average.
HMC’s sales revenue for the second quarter ended September 30, 2022, increased 25% year-over-year to ¥4.26 trillion ($31.18 billion). The company’s operating profit increased 16.2% year-over-year to ¥231.24 billion ($1.69 billion). Its profit for the period attributable to owners of the parent increased 13.6% year-over-year to ¥189.30 billion ($1.39 billion), while its EPS attributable to owners of the parent increased 14.8% from the prior-year period to ¥110.85.
Analysts expect HMC’s revenue for the current fiscal year ending March 2023 to increase 370.2% year-over-year to $125.58 billion. Its EPS for the current year is expected to amount to $2.42. The stock has an admirable revenue surprise history, as it surpassed the consensus revenue estimates in each of the trailing four quarters.
The stock has gained 1.9% over the past five days to close the last trading session at $24.32.
It is no surprise that HMC has an overall rating of A, translating to a Strong Buy in our proprietary POWR Ratings system.
It has an A grade for Value and a B for Stability and Quality. It is ranked #5 out of the 61 stocks in the Auto & Vehicle Manufacturers industry.
To see HMC’s rating for Growth, Momentum, and Sentiment, click here.
Karooooo Ltd. (KARO)
KARO, headquartered in Singapore, provides a mobility software-as-a-service (SaaS) platform for connected vehicles in several parts of the world. The company’s offerings include Fleet Telematics, a fleet management SaaS platform that provides real-time insights, and LiveVision, which offers proactive risk management and fleet visibility.
Its annual dividend of $2.40 yields 10.24% on current prices. KARO has a four-year average dividend yield of 0.42%.
In terms of its forward non-GAAP P/E, the stock is trading at 19.58x, which is marginally lower than the industry average of 19.72x. Its forward EV/EBITDA multiple of 7.50x is 41.5% lower than the 12.83x industry average.
KARO’s revenue increased 30.4% year-over-year to ZAR859.28 million ($49.15 million) in the second quarter that ended August 31. Its gross profit grew 26% from the year-ago value to ZAR569.21 million ($32.56 million), while its operating profit improved 22.8% year-over-year to ZAR218.13 million ($12.48 million). The company’s adjusted earnings per share rose 28.1% from its prior-year quarter to ZAR4.93.
The consensus revenue estimate of $200.02 million for the current fiscal year ending February 2023 indicates a 15.8% improvement year-over-year. The consensus EPS is expected to be $1.16 for the current year, indicating a rise of 14.5% from the prior year. It has surpassed its EPS estimate in three out of four trailing quarters, which is impressive.
Over the past five days, the stock has declined 1.6% to close its last trading session at $22.73.
It is no surprise that the company has an overall rating of A, which translates to Strong Buy in our proprietary rating system.
KARO is graded an A in Sentiment and Quality and a B in Value and Stability. Within the Software – Application industry, it is ranked #5 out of 139 stocks.
Beyond what we’ve stated above, we have also given KARO grades for Growth and Momentum.
BHP shares fell $0.77 (-1.22%) in premarket trading Wednesday. Year-to-date, BHP has gained 29.97%, versus a -14.48% 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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