Since the beginning of the year, the stock market has experienced heightened volatility on concerns over the Fed’s forthcoming interest rate increases to control multi-decade-high inflation. Also, economic sanctions imposed on Russia have exacerbated the equities’ market correction.
Recessionary talk is circulating as oil prices climb to multi-year highs. And even though not every economic slump has been precipitated by an increase in crude oil prices, every increase has led to a recession. Russia’s invasion of Ukraine has invited strict financial sanctions on the country. The U.S. and United Kingdom have imposed bans on importing Russian oil. Such measures may lead to a further escalation in oil prices, fueling the current surge in commodity prices.
Therefore, we think investors looking to dodge an economic slowdown could bet on quality dividend-paying stocks UnitedHealth Group Incorporated (UNH), General Dynamics Corporation (GD), McKesson Corporation (MCK), Waste Connections, Inc. (WCN), and AmerisourceBergen Corporation (ABC). In addition to providing capital appreciation, these stocks could ensure a steady income stream, which investors crave during a recession.
UnitedHealth Group Incorporated (UNH)
Diversified healthcare company UNH in Minnetonka, Minn., operates through four segments: UnitedHealthcare; OptumHealth; OptumInsight; and OptumRx. It conducts its operations through the health benefits platform under UnitedHealthcare and the health services platform under Optum.
On Dec. 1, 2021, UNH introduced a new health plan called the Doctors Plan of Arizona, which offers consumers in Southwest Arizona access to personalized and seamless customer support along with the potential to save up to 15% on premiums. The plan provides customers access to quality, affordable, patient-focused health care. This new plan is expected to help it expand its reach.
UNH’s dividend payouts have grown at a 17.2% CAGR over the last three years. Its four-year average dividend yield is 1.3%, and its current dividend translates to a 1.2% yield.
UNH’s revenue increased 12.6% year-over-year to $73.74 billion for the fourth quarter, ended Dec. 31, 2021. The company’s adjusted net earnings increased 76.7% year-over-year to $4.28 billion. Also, its adjusted EPS came in at $4.48, representing a 77.7% increase year-over-year.
Analysts expect UNH’s EPS for its fiscal year 2023 to increase 14.1% year-over-year to $24.66. The company’s revenue for the quarter ending June 30, 2022, is expected to increase 14.7% year-over-year to $79.71 billion. Also, it surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 36.7% in price to close the last trading session at $482.87.
UNH’s strong fundamentals are reflected in its POWR Ratings. It has an overall A rating, which equates to a Strong 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 Stability and a B grade for Growth, Sentiment, and Quality. It is ranked #3 out of 11 stocks in the Medical – Health Insurance industry. Click here to see the additional ratings of UNH for Value and Momentum.
General Dynamics Corporation (GD)
GD in Falls Church, Va., is a global aerospace and defense company. The company offers a portfolio of products and services in business aviation, ship construction and repair, land combat vehicles, weapons systems and munitions, and technology products and services. Its operating segments include Aerospace, Marine Systems, Combat Systems, and Technologies.
On Jan.31, 2022, GD’s business unit, General Dynamics Information Technology, announced that it had received a $518 million task order award from the U.S. Army Communications-Electronics Command to provide logistics, sustainment, and maintenance services for joint U.S. and coalition forces worldwide within the Army Field Support Brigade regions.
GD’s dividend payouts have grown at an 8.5% CAGR over the last three years. Its four-year average dividend yield is 2.3%, and its current dividend translates to a 2.1% yield.
For its fiscal year 2021, GD’s revenue increased 1.4% year-over-year to $38.46 billion. The company’s net earnings rose 2.8% year-over-year to $3.25 billion. Also, its EPS came in at $11.55, representing a 5% increase year-over-year.
For its fiscal year 2023, GD’s EPS and revenue are expected to increase 15.3% and 7.4%, respectively, year-over-year to $13.98 and $42.28 billion. It surpassed the consensus EPS estimates in each of the trailing four quarters. And over the past year, the stock has gained 34.6% in price to close the last trading session at $232.48.
GD’s POWR Ratings reflect solid prospects. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.
It has a B grade for Stability. Within the Air/Defense Services industry, it is ranked #11 of 73 stocks. To see the additional ratings of GD for Growth, Value, Momentum, Sentiment, and Quality, click here.
McKesson Corporation (MCK)
Irvine, Tex.-based MCK provides healthcare supply chain management, retail pharmacy, community oncology, specialty care, and healthcare information solutions. The company is focused on distributing pharmaceuticals and providing health information technology, medical supplies, and care management tools. It operates in the U.S. Pharmaceuticals, International, Medical-Surgical Solutions, and Prescription Technology Solutions segments.
On Dec. 20, 2021, MCK announced that it had agreed to sell its Austrian business to Quadrifolia Management GmbH. The transaction includes the sale of Herba Chemosan Apotheker-AG and Sanova Pharma GesmbH. CEO Brian Tyler said, “Today’s transaction marks another milestone in advancing McKesson’s intent to streamline the portfolio and prioritize investments in areas where we have deep expertise and are central to our long-term growth strategy.”
Over the last three years, MCK’s dividend payouts have grown at a 6.6% CAGR. Its four-year average dividend yield is 1%, and its current dividend translates to a 0.7% yield. It is expected to pay a quarterly dividend of $0.47 per share on April 1, 2022.
MCK’s revenues for its fiscal third quarter, ended Dec. 31, 2021, increased 10% year-over-year to $68.61 billion. The company’s adjusted earnings rose 27% year-over-year to $944 million. Also, its non-GAAP EPS came in at $6.15, compared to $4.60 in the year-ago period.
Analysts expect MCK’s EPS and revenue for its fiscal year 2022 to increase 38.8% and 9.8%, respectively, year-over-year to $23.89 and $261.55 billion. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 53.5% to close the last trading session at $281.23.
MCK’s strong fundamentals 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 Growth and Stability. It is ranked #2 of 84 stocks in the Medical – Services industry. Click here to see the other ratings of MCK for Momentum, Sentiment, and Quality.
Click here to checkout our Healthcare Sector Report for 2022
Waste Connections, Inc. (WCN)
WCN is an integrated solid waste services company that provides non-hazardous waste collection, transfer, and disposal services, along with recycling and resource recovery. The company, which is headquartered in The Woodlands, Tex., offers a range of commercial waste collection, recycling, shredding service, dumpster rental, intermodal container services, and portable toilets services.
On Sept. 1, 2021, WCN announced that it had acquired solid waste services company E.L. Harvey & Sons Inc., with operations in Massachusetts. Harvey will add total annualized revenue of approximately $110 million to WCN’s books and help it expand to areas in Central Massachusetts, Eastern Massachusetts, and Southern New Hampshire.
Over the last three years, WCN’s dividend payouts have grown at a 13.1% CAGR. Its four-year average dividend yield is 0.7%, and its current dividend translates to a 0.7% yield.
For its fiscal fourth quarter, ended Dec. 31, 2021, WCN’s revenue increased 16.1% year-over-year to $1.62 billion. The company’s adjusted net income increased 21.5% year-over-year to $217.12 million. Also, its adjusted EPS came in at $0.83, representing an increase of 22% year-over-year. In addition, its adjusted EBITDA increased 16.1% year-over-year to $495.43 million.
For the quarter ending June 30, 2022, WCN’s EPS and revenue are expected to increase 20.6% and 16.8%, respectively, year-over-year to $1.23 and $16.80.Over the past year, the stock has gained 31.3% in price to close the last trading session at $134.22.
WCN’s POWR Ratings reflect solid prospects. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.
It has a B grade for Stability, Sentiment, and Quality. Within the A-rated Waste Disposal industry, it is ranked #6 of 17 stocks. To see the other ratings of WCN for Growth, Value, and Momentum, click here.
AmerisourceBergen Corporation (ABC)
ABC sources and distributes pharmaceutical products. The Chesterbrook, Pa.-based company’s segments include Pharmaceutical Distribution Services and Other. It provides services to healthcare providers and pharmaceutical and biotech manufacturers.
On Jan. 25, 2022, ABC and TrakCel announced an integrated technology platform to accelerate patient access to prescribed cell and gene therapies and deliver complete visibility throughout the treatment journey. The offering adds to ABC’s portfolio of services and solutions that support the needs of the cell and gene therapy innovators, providers, and patients—from preclinical to market access and reimbursement consulting and patient support services.
Over the last three years, ABC’s dividend payouts have grown at a 4.9% CAGR. While its four-year average dividend yield is 1.7%, its current dividend translates to a 1.2% yield.
ABC’s revenues for its fiscal first quarter, ended Dec. 31, 2021, increased 13.5% year-over-year to $59.62 billion. The company’s non-GAAP operating income increased 21.4% year-over-year to $749.14 million. Also, its non-GAAP net income increased 21% year-over-year to $545.38 million. In addition, its non-GAAP EPS came in at $2.58, representing an increase of 18.3% year-over-year.
Analysts expect ABC’s EPS for the quarter ending June 30, 2022, to increase 21.8% year-over-year to $2.63. Its revenue for its fiscal year 2022 is expected to grow 11% year-over-year to $237.44 billion. It surpassed the consensus EPS estimates in each of the trailing four quarters. And over the past year, the stock has gained 31.5% in price to close the last trading session at $144.56.
ABC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
It has a B grade for Growth, Value, Stability, and Sentiment. It is ranked #6 of 84 stocks in the Medical – Services industry. Click here to see the other ratings of ABC for Momentum and Quality.
Click here to checkout our Healthcare Sector Report for 2022
UNH shares were trading at $488.38 per share on Monday afternoon, up $5.51 (+1.14%). Year-to-date, UNH has declined -2.45%, versus a -11.66% 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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