The major market indexes have been experiencing high volatility due to investors’ concerns over rising inflation, the possibility of aggressive interest rate hikes, rising energy prices, and very little progress on ending the Ukraine-Russia war.
Concerns over a looming recession have kept the markets under pressure. Inflation data for March suggested a year-over-year CPI increase of 8.5%, its highest gain since December 1981. Furthermore, March jobs data suggested a tight labor market. Worries about crude oil supply disruption due to sanctions on Russia have kept the price of crude oil hovering above $100 per barrel. Historically, high crude oil prices have precipitated recessionary conditions.
Due to a confluence of these factors, we think it could be prudent to bet on quality dividend-yielding stocks Exxon Mobil Corporation (XOM), Dow Inc. (DOW), Coca-Cola FEMSA, S.A.B. de C.V. (KOF), Altria Group, Inc. (MO), and Telefônica Brasil S.A. (VIV) to generate a steady income stream. These stocks yield more than 4% and hold capital appreciation potential.
Exxon Mobil Corporation (XOM)
XOM in Irving, Tex., is in the energy business. The company’s principal business involves exploring for and producing crude oil and natural gas and the manufacture, trade, transport, and sale of crude oil, natural gas, petroleum products, petrochemicals, and a range of specialty products. Its segments include Upstream; Downstream; and Chemical.
On March 1, 2022, XOM announced that it was planning a hydrogen production plant and one of the world’s largest carbon capture and storage projects at its integrated refining and petrochemical site at Baytown, Tex., to reduce emissions in its operations and local industry. XOM’s Low Carbon Solutions President Joe Blommaert said, “By helping to activate new markets for hydrogen and carbon capture and storage, this project can play an important part in achieving America’s lower-emissions aspirations.”
XOM’s total revenues and other income increased 82.5% year-over-year to $84.96 billion for the fourth quarter, ended Dec. 31, 2021. The company’s net income came in at $8.87 billion, compared to a $20.07 billion net loss in the year-ago quarter. Also, its EPS came in at $2.08, compared to a $4.70 loss per share in the year-ago period.
Over the last three years, XOM’s dividend payout has grown at a 2.1% CAGR. Its four-year average dividend yield is 5.7%, and its current payout translates to a 4% yield.
Analysts expect XOM’s EPS and revenue for the quarter ending March 31, 2022, to increase 221.5% and 69.8%, respectively, year-over-year to $2.09 and $92.70 billion. It surpassed the Street’s EPS estimates in each of the trailing four quarters. And over the past year, the stock has gained 55.8% in price to close the last trading session at $86.81.
XOM’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
It has an A grade for Momentum and a B grade for Growth and Quality. It is ranked #38 among 97 stocks in the B-rated Energy – Oil & Gas industry. Click here to see the other ratings of XOM for Value, Stability, and Sentiment.
Dow Inc. (DOW)
DOW is the holding company for the Dow chemical company and its subsidiaries. The Midland, Mich.-based company’s portfolio of plastics, industrial intermediates, coatings, and silicones businesses delivers a range of science-based products and solutions for its customers in various market segments that include packaging; infrastructure; mobility; and consumer care.
On January 25, 2022, DOW announced an agreement with Locus Performance Ingredients to sell its high-performance sophorolipid biosurfactants in the global home care and personal markets. The ingredients offer a substantial reduction in carbon footprint compared to conventional surfactants. The agreement should enable DOW to strengthen its position in the biosurfactants market.
For its fiscal fourth quarter, ended Dec. 31, 2021, DOW’s net sales increased 34.1% year-over-year to $14.36 billion. The company’s net income attributable to its common shareholders increased 40.4% year-over-year to $1.73 billion. Also, its EPS came in at $2.32, representing a 40.6% increase year-over-year. In addition, its non-GAAP operating EBIT increased 114.85 year-over-year to $2.26 billion.
DOW’s four-year average dividend yield is 4.5%, and its current dividend translates to a 4.3% yield.
For the quarter ending March 31, 2022, DOW’s EPS and revenue are expected to increase 50.7% and 21.9%, respectively, year-over-year to $2.05 and $14.48 billion. It surpassed consensus EPS estimates in each of the trailing four quarters. The stock has gained 13.1% in price year-to-date to close the last trading session at $64.16.
DOW’s strong prospects are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system.
It has an A grade for Value and a B grade for Sentiment. Within the A-rated Chemicals industry, it is ranked #9 among 89 stocks. To see the other ratings of DOW for Growth, Momentum, Stability, and Quality, click here.
Coca-Cola FEMSA, S.A.B. de C.V. (KOF)
KOF is based in Mexico City, Mexico. The company is the largest franchise bottler of Coca-Cola trademark beverages globally by sales volume. It produces, distributes, and markets certain Coca-Cola beverages. Its segments include its Mexico and Central America division; its South America division; and its Asian division.
KOF’s total revenues increased 8.4% year-over-year to MNX53.27 billion ($2.69 billion) for the fourth quarter ended December 31, 2021. The company’s gross profit increased 9.3% year-over-year to MXN23.98 billion ($1.21 billion). Also, its net income increased 82.8% year-over-year to MNX5.80 billion ($0.29 billion).
Over the last three years, KOF’s dividend payout has grown at a 13.1% CAGR. Its four-year average dividend yield is 3.8%, and its current payout translates to a 4.4% yield.
KOF’s EPS and revenue for fiscal 2023 are expected to increase 11.6% and 6%, respectively, year-over-year to $3.76 and $10.66 billion. It surpassed the Street’s EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 16.3% in price to close the last trading session at $55.81.
KOF’s POWR Ratings reflect solid prospects. The company has an overall A rating, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Stability and a B grade for Value, Sentiment, and Quality. Within the B-rated Beverages industry, it is ranked first among 34 stocks. Click here to see the other ratings of KOF for Growth and Momentum.
Altria Group, Inc. (MO)
MO in Richmond, Va., manufactures and sells smokable and oral tobacco products in the United States. The company provides cigarettes, primarily under the Marlboro brand; cigars and pipe tobacco, principally under the Black & Mild brand; and moist smokeless tobacco products under the Copenhagen, Skoal, Red Seal, and Husky brands, as well as providing on! oral nicotine pouches.
On April 5, 2022, MO announced that it had signed a virtual power purchase agreement for energy produced by the new wind farm project in Haskell and Throckmorton Counties, Texas. MO’s Executive VP and CFO Sal Mancuso said, “This is our first-ever VPPA and marks significant progress towards our science-based environmental targets-achieving 100% renewable electricity and reducing operational greenhouse gases emissions by 55% by 2030.”
For its fiscal fourth quarter, ended Dec. 31, 2021, MO’s net revenues for smokeable products increased 0.4% year-over-year to $5.59 billion, while its net revenues for oral tobacco products increased 4.9% year-over-year to $663 million. The company’s adjusted EPS came in at $1.09, representing an increase of 10.1% year-over-year.
Over the last three years, MO’s dividend payout has grown at a 4.7% CAGR. Its four-year average dividend yield is 6.8%, and its current payout translates to a 6.5% yield.
For its fiscal year 2023, MO’s EPS and revenue are expected to increase 6.2% and 1.5%, respectively, year-over-year to $5.14 and $21.37 billion. It surpassed the consensus EPS estimates in three of the trailing four quarters. And over the past nine months, the stock has gained 17% in price to close the last trading session at $54.80.
MO’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.
It has an A grade for Quality and a B grade for Growth. It is ranked #3 among 10 stocks in the B-rated Tobacco industry. To see the other ratings of MO for Value, Momentum, Stability, and Sentiment, click here.
Telefônica Brasil S.A. (VIV)
Headquartered in Sao Paulo, Brazil, VIV provides residential and corporate customers mobile and fixed telecommunications services. Its fixed-line services portfolio includes local, domestic, and international long-distance calls. Its mobile portfolio consists of voice, broadband through 3G, 4G, 5G, and other value-added and roaming services.
VIV’s net operating revenues increased 2.8% year-over-year to R$11.50 billion ($2.45 billion) for the fourth quarter, ended Dec. 31, 2021. The company’s net income increased 103.2% year-over-year to R$2.62 billion ($0.55 billion). Also, its recurring EBITDA increased 1.2% year-over-year to R$4.93 billion ($1.05 billion).
VIV's $0.64 forward annual dividend translates to a 5.6% yield. The company's five-year average dividend yield is 6.1%
Analysts expect VIV’s EPS and revenue for the quarter ending March 31, 2022, to increase 60% and 14%, respectively, year-over-year to $0.16 and $2.26 billion. It surpassed the Street’s EPS estimates in three of the trailing four quarters. And over the past year, the stock has gained 45.7% in price to close the last trading session at $11.35.
VIV’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.
It has a B grade for Stability and Quality. It is ranked #9 out of 47 stocks in the A-rated Telecom – Foreign industry. Click here to see the additional ratings of VIV for Growth, Value, Momentum, and Sentiment.
XOM shares fell $0.46 (-0.53%) in premarket trading Thursday. Year-to-date, XOM has gained 43.44%, versus a -6.37% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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