Side-step the Market Volatility with These 2 Undervalued, Dividend Paying Stocks

Growing concerns about the potential economic impact of the COVID-19 omicron variant and related restrictions contributed to the major stock market indexes closing in the red on Friday, capping off a week of extreme market volatility. The Dow Jones Industrial Average slipped 532.20 points intraday to close Friday’s trading session at 35,365.44, while the S&P 500 and Nasdaq Composite Index fell 48.03 points and 10.75 points, respectively, to close at 4,620.64 and 15,169.68.

Investors have remained cautious about taking new long positions because November inflation data showed that consumer prices have surged to a 6-8%, 40-year high, their fastest increase since 1982. Inflationary pressures have forced the Fed to act, and it has indicated that it will halt its pandemic-driven asset purchases early next year, giving way to three interest rate hikes in 2022 to counter the high inflation threat. However, according to a FactSet report, the S&P 500 will close at or above 5,000 by fiscal 2022.

So, we think it could be wise to bet on quality dividend-yielding stocks to hedge one’s  portfolio against market volatility by ensuring a steady income stream. Given their stable dividend yield, Intel Corporation (INTC) and GlaxoSmithKline plc (GSK) could be solid additions to one’s  portfolio. In addition, they are currently trading at a discount to their peers.

Intel Corporation (INTC)

INTC in  Santa Clara, Calif., designs, manufactures, and sells essential technologies for the cloud, smart, and connected devices for retail, industrial, and consumer uses worldwide. The company’s segments include the Data Center Group, Internet of Things Group, Mobileye, Non-Volatile Memory Solutions Group and Programmable Solutions Group.

On December 16, INTC CEO Pat Gelsinger announced the building of a new chip packaging and testing factory in Malaysia, which is set to become operational in 2024. This new facility will likely allow the company to capture the rising demand for semiconductor chips worldwide as the application of semiconductor chips grows.

INTC began paying dividends in 1992. Over the last three years, the stock’s dividend payout has grown at a 5% CAGR, while its four-year average dividend yield is 2.41%, and its current dividend yield translates to a 2.75% yield. It paid a quarterly dividend of $0.35 per share on December 1, 2021.

INTC’s non-GAAP revenue for its fiscal third quarter, ended September 30, 2021, increased 5% year-over-year to $18.10 billion. The company’s non-GAAP net income increased 54% year-over-year to $7 billion. Also, its non-GAAP EPS came in at $1.71, up 59% year-over-year.

In terms of forward EV/S and P/S, INTC’s respective 2.84x and 2.79x are lower than the industry averages of 4.05x and 4x. Furthermore, its 9.58x forward non-GAAP P/E is 60.5% lower than the 24.25x industry average. Its EPS is expected to grow at a rate of 3.2% per annum over the next five years. Over the past month, the stock has gained 0.8% in price to close Friday’s trading session at $50.62.

INTC’s POWR Ratings reflect solid prospects. According to our proprietary rating system, it has an overall rating of A, translating to a Strong Buy. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

It has an A grade for Value and Momentum and a B grade for Sentiment and Quality. Within the A-rated Semiconductor & Wireless Chip industry, it is ranked #7 of 100 stocks. Click here to see the other ratings of INTC for Growth and Stability.

Click here to checkout our Semiconductor Industry Report 

GlaxoSmithKline plc (GSK)

Headquartered in Brentford, U.K., GSK is a global healthcare company. It operates through two segments: Pharmaceuticals and Vaccines. Also, its primary research areas include respiratory diseases, human immunodeficiency virus (HIV)/infectious diseases, vaccines, immune-inflammation, oncology, and rare diseases.

On December 2, GSK said that laboratory analysis of the antibody-based COVID-19 therapy developed with Vir Biotechnology, Inc. (VIR) is effective against the new omicron variant. So, this finding could lead to increased demand for the solution amid omicron-related concerns.

Over the last three years, GSK’s dividend payout has grown at a 10.38% CAGR, while its four-year average dividend yield is 5.28%, and its current dividend yield translates to a 5.11% yield. The company began paying dividends in 1995. It is expected to pay a quarterly dividend of $0.52 per share on January 13, 2022.

For its fiscal third quarter, ended September 30, 2021, GSK’s turnover increased 5% year-over-year to £9.07 billion ($12.01 billion). The company’s adjusted operating profit increased 8% year-over-year to £2.87 billion ($3.80 billion). In addition, its adjusted EPS came in at 36.60p, up 3% year-over-year.

In terms of forward EV/S and P/S, GSK’s 3.23x and 2.39x are lower than the industry averages of 5.80x and 7.12x, respectively. Moreover, its 14.18x forward non-GAAP P/Eis 36.2% lower than the 22.25x industry average. Analysts expect its EPS for its fiscal 2022 to increase 6.2% year-over-year to $3.23. Its revenue for the quarter ending December 31, 2021, is expected to increase 9% year-over-year to $12.59 billion. And it surpassed consensus EPS estimates in three of the trailing four quarters. Over the past nine months, the stock has gained 18.5% in price to close Friday’s trading session at $43.10.

GSK’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 an A grade for Value and a B grade for Growth, Stability, and Quality. In the Medical – Pharmaceuticals industry, it is ranked #2  of 191 stocks. To see the other ratings of GSK for Momentum and Sentiment, click here.

Click here to checkout our Healthcare Sector Report 

INTC shares were trading at $49.28 per share on Monday morning, down $1.34 (-2.65%). Year-to-date, INTC has gained 2.08%, versus a 21.98% rise in the benchmark S&P 500 index during the same period.

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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