The recent hot inflation report has added to worries that the Fed may have to keep rates higher for longer to quell inflationary pressures. Therefore, investors could safeguard their portfolios with stocks of financially resilient companies such as The Coca-Cola Company (KO), Bristol-Myers Squibb Company (BMY), and Sysco Corporation (SYY).
In the recent news, the Federal Reserve's closely-watched inflation gauge exhibited stronger-than-expected price increases last month, suggesting that the central bank may have to work more aggressively to slow the economy down. The Personal Consumption Expenditures (PCE) price index rose 0.6% in January and 5.4% from last year.
Meanwhile, a bumpier-than-anticipated road to restoring price stability and strong economic data released last month with nonfarm payrolls rising by 517,000, while retail sales surged 3%, have prompted investors to alter expectations for upcoming rate hikes, putting a dent in the market's recent momentum.
Given this backdrop, market volatility is not expected to ease anytime soon. Hence, investors might invest in fundamentally sound stocks KO, BMY, and SYY. Due to their attractive dividends, these stocks are considered a “safe haven” when stock markets turn volatile.
The Coca-Cola Company (KO)
KO is a famous beverage company that manufactures, markets, and sells various non-alcoholic beverages globally. It sells its products under the brands: Coca-Cola, Sprite, Fanta, Diet Coke, Coca-Cola Zero Sugar, Thumbs Up, Aquarius, fairlife, Minute Maid Pulpy, and Simply, among others.
On February 16, the company announced its 61st consecutive annual dividend increase, raising the quarterly dividend by 4.6% to 46 cents per common share. KO’s four-year average dividend yield is 3.06%, and its forward annual dividend of $1.84 translates to a 3.06% yield at the current price level. Its dividend has grown at a 3.2% CAGR over the past three years and a 3.5% CAGR over the past five years.
KO’s trailing-12-month levered FCF margin of 18.17% is 608.1% higher than the 2.57% industry average. Likewise, its trailing-12-month net income margin of 22.19% is 540% higher than the industry average of 3.47%.
KO’s net operating revenue increased 7% year-over-year to $10.13 billion in the fourth quarter that ended December 31, 2022. Its gross profit grew 4.4% from the year-ago value to $5.61 billion, while its adjusted operating income increased 10.9% from the prior-year quarter to $2.32 billion. The company’s non-GAAP net income and non-GAAP EPS came in at $1.94 billion and $0.45, respectively.
The consensus EPS estimate of $0.65 for the first quarter ending on March 31, 2023, represents a marginal improvement year-over-year. The consensus revenue estimate of $10.81 billion for the current quarter indicates a 2.9% increase from the prior-year period. The company has an excellent earnings surprise history, as it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past month, the stock has lost marginally to close the last trading session at $60.09.
KO’s solid prospects are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Sentiment and a B for Stability and Quality. The stock is ranked #17 of 37 stocks in the B-rated Beverages industry. To see additional POWR Ratings of KO for Growth, Value, and Momentum, click here.
Bristol-Myers Squibb Company (BMY)
BMY is a biopharmaceutical company offering pharmaceutical products for treating hematology, oncology, cardiovascular, immunology, fibrotic, neuroscience, and COVID-19 diseases.
On January 27, 2023, BMY received a positive Committee for Medicinal Products for Human Use (CHMP) opinion for Reblozyl® (luspatercept) as a treatment for adult patients with anemia-associated, non-transfusion-dependent (NTD) beta-thalassemia. In the pivotal BEYOND study, Reblozyl significantly increased hemoglobin levels, which were sustained over a longer time compared to placebo.
On the same day, CHMP also gave a positive opinion for once-daily Sotyktu (deucravacitinib) as a treatment for adults with moderate-to-severe plaque psoriasis. Sotyktu has demonstrated superior efficacy over twice-daily Otezla® (apremilast) and placebo in improving skin clearance and symptoms.
Such positive approvals are expected to expand the adoption of Reblozyl and Sotyktu in Europe.
Last year in December, the company increased the quarterly dividend by 5.6% to $0.57 per share on the common stock. This dividend was paid to its shareholders on February 1, 2023. This marks the 14th consecutive fiscal year the company increased its dividend and the 91st consecutive year it paid a dividend.
BMY’s four-year average dividend yield is 3.02%, and its forward annual dividend of $2.28 translates to a 3.19% yield on current prices. Its dividends have grown at 9.2% and 6.9% CAGRs over the past three and five years, respectively.
For the fiscal year 2022 that ended on December 31, 2022, BMY’s total in-line products and new product portfolio revenue increased 6.5% year-over-year to $33.34 billion. Its non-GAAP EBIT grew 2.1% year-over-year to $19.55 billion, while net earnings attributable to BMY increased 2.8% year-over-year to $16.53 billion. The company’s non-GAAP EPS increased 7.5% from its prior-year value to $7.70.
Analysts expect BMY’s EPS and revenue for the fiscal year 2023 (ending December 31, 2023) to increase 4.2% and 1.7% year-over-year to $8.02 and $46.93 billion, respectively. The company surpassed the consensus EPS estimates in each of the trailing four quarters, which is excellent.
The stock’s trailing-12-month EBITDA margin of 43.68% is significantly higher than the 3.73% industry average. Also, its trailing 12-month asset turnover ratio of 0.45x is 33.6% higher than its industry average of 0.34x.
Shares of BMY have gained 5.1% over the past year to close the last trading session at $71.40.
It is no surprise that BMY has an overall rating of A, which translates to a Strong Buy in our POWR Ratings system. It has an A grade for Value and a B for Growth, Stability, Sentiment, and Quality. Out of 174 stocks in the Medical - Pharmaceuticals industry, it is ranked #2.
Beyond what we’ve stated above, we’ve also rated BMY for Momentum. Get all BMY ratings here.
Sysco Corporation (SYY)
SYY distributes food and related products primarily to the food service or food-away-from-home industry. It operates through four segments: U.S. Foodservice; International Foodservice; SYGMA; and Other. The company serves restaurants, healthcare, and educational facilities, lodging establishments, and other customers.
On December 7, 2022, SYY announced the launch of its 10th professional truck driver training facility since March 2022. The company now operates Commercial Driver’s License (CDL) training facilities at its sites throughout the United States. This industry-leading program should help increase the number of qualified drivers at the company’s disposal, thereby bolstering its robust supply chain.
The company pays a $1.96 per share dividend annually, which translates to a 2.56% yield on the current price level. Its dividend payouts have increased at a 6.2% CAGR over the past three years and a 7.5% CAGR over the past five years. On February 22, 2022, SYY declared a quarterly dividend of $0.49 per share, payable to shareholders on April 6, 2023.
SYY’s trailing-12-month ROCE of 106.87% is 927.6% higher than the 10.40% industry average. Likewise, its trailing-12-month asset turnover ratio of 3.38x is 304.9% higher than the industry average of 0.84x.
In the fiscal second quarter that ended December 31, 2022, SYY’s net sales increased 13.9% year-over-year to $18.59 billion. Its non-GAAP operating income increased 37.6% from the year-ago value to $682.07 million, while its non-GAAP net earnings grew 39.7% year-over-year to $407.92 million.
The company’s EPS came in at $0.80, representing a 40.4% year-over-year improvement. Also, its adjusted EBITDA increased 23.9% from the prior-year quarter to $831.34 million.
Street expects SYY’s EPS and revenue to increase 30.9% and 9.1% year-over-year to $0.93 and $18.44 billion for the third quarter, ending on March 31, 2023. It surpassed the revenue estimates in each of the trailing four quarters, which is promising.
The stock has gained marginally year-to-date to close the last trading day at $76.55.
SYY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has a B grade for Growth, Value, and Stability. Out of 82 stocks in the B-rated Food Makers industry, it is ranked #7. Click here to see the other ratings of SYY for Momentum, Sentiment, and Quality.
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KO shares were trading at $59.53 per share on Friday afternoon, down $0.56 (-0.93%). Year-to-date, KO has declined -6.41%, versus a 3.37% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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