With concerns growing over multi-decade-high inflation, supply chain constraints, and rising COVID-19 cases owing to the spread of new variants, analysts predict a potential market correction in the near term. So, with the Federal Reserve trying to maintain low-interest rates now, investors are seeking shelter with fundamentally sound, dividend-paying stocks with stable dividend payout histories—so-called Dividend Aristocrats.
TheProShares S&P 500 Dividend Aristocrats ETF’s (NOBL) 3.5% gains over the past month have surpassed the SPDR S&P 500 Trust ETF’s (SPY) 2.8% returns.
Given this backdrop, we believe prominent blue-chip stocks AbbVie Inc. (ABBV), PepsiCo, Inc. (PEP), Caterpillar Inc. (CAT), Target Corporation (TGT), and Cardinal Health, Inc. (CAH) could help investors generate a stable passive income while dodging the market’s short-term fluctuations.
AbbVie Inc. (ABBV)
ABBV in North Chicago, Ill., develops, manufactures, and sells a range of pharmaceutical products. The company’s products are focused on treating diseases related to immunology, oncology, virology, neuroscience, eye care, women’s health, gastroenterology, and other serious health conditions.
ABBV paid a $1.30 per share quarterly cash dividend on Nov.15, 2021. The stock pays a $5.64 per share dividend annually, translating into a 4.17% yield. The company’s dividend has grown at a 17.93% rate over the past five years.
On December 16, 2021, ABBV’s Allergan Aesthetics company acquired Soliton, Inc. (SOLY). SOLY’s RESONIC device has received FDA 510(k) clearance for showing long-term improvement in the appearance of cellulite. This technology enables Allergan Aesthetics' portfolio of non-invasive body contouring treatments to include a proven treatment for the appearance of cellulite.
For its fiscal third quarter, ended September 30, 2021, ABBV’s net revenues increased 11.2% year-over-year to $14.34 billion. The company’s operating earnings came in at $4.31 billion, representing a 32.3% rise from the prior-year period. While its adjusted net income increased 17.9% year-over-year to $5.95 billion, its adjusted EPS increased 17.7% to $3.33. As of September 30, 2021, the company had $12.18 billion in cash and equivalents.
Analysts expect the company’s EPS to increase 20% year-over-year to $12.67 in the current year. A $56.22 billion consensus revenue estimate for the current year represents a 22.8% rise from the prior-year period. In addition, it surpassed the Street’s EPS estimates in each of the trailing four quarters. ABBV’s EPS is expected to grow at a 4.5% rate per annum over the next five years. The stock has gained 15.8% in price over the past month and closed yesterday’s trading session at $135.36.
ABBV’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has a B grade for Growth, Value, and Quality. Click here to see the additional ratings for ABBV’s Sentiment, Stability, and Momentum. ABBV is ranked #13 of 191 stocks in the Medical - Pharmaceuticals industry.
Click here to checkout our Healthcare Sector Report
PepsiCo, Inc. (PEP)
Harrison, N.Y.-based PEP manufactures or uses contract manufacturers, markets, and sells a variety of grain-based snacks, carbonated and non-carbonated beverages, and foods worldwide. It markets its products through a network of direct-store-delivery, customer warehouse, distributor networks, as well as through e-commerce platforms and retailers.
PEP is scheduled to pay a $1.08 quarterly cash dividend on Jan. 7, 2022. The stock pays a $4.30 per share dividend annually, which translates to a 2.67% yield. The company’s dividend has grown at a 7.6% rate over the past five years.
On October 7, 2021, PEP’s Frito-Lay division announced 2021 site investments to further enable the snack leader’s ability to meet strong consumer demand by funding new manufacturing lines, warehouse expansions, and improving its distribution network. This allows Frito-Lay to further expand the market reach of its products.
PEP’s revenues for its fiscal third quarter, ended September 4, 2021, increased 11.6% year-over-year to $20.19 billion. The company’s non-GAAP gross profit came in at $10.82 billion, representing a 9.2% rise from the prior-year period. Its non-GAAP operating profit was $3.24 billion, up 6.5% from the prior-year period. PEP’s non-GAAP net income came in at $2.48 billion, indicating a 7.4% year-over-year improvement. And its non-GAAP EPS increased 7.8% year-over-year to $1.79. The company had $6.51 billion in cash and cash equivalents as of September 4, 2021.
A $6.24 consensus EPS estimate for the current year represents a 13% rise from the prior-year period. It surpassed the consensus EPS estimates in each of the trailing four quarters. Analysts expect PEP’s revenue to rise 11.2% year-over-year to $78.28 billion in the current year. PEP’s EPS is expected to grow at a 9.8% rate per annum over the next five years. Over the past month, the stock has gained 5.4% in price and ended yesterday’s trading session at $172.97.
It is no surprise that PEP has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has a B grade for Quality and Stability. Click here to see the additional ratings for PEP (Growth, Value, Momentum, and Sentiment). The stock is ranked #11 of 36 stocks in the B-rated Beverages industry.
Caterpillar Inc. (CAT)
CAT designs, manufactures, and sells construction, mining, forestry machinery, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. The Peoria, Ill., company also manufactures related parts for its equipment, offers financing and insurance, and distributes its products through dealers.
CAT is scheduled to pay a $1.11 quarterly cash dividend on February 18, 2022. The stock pays a $4.44 per share dividend annually, translating into a 2.14% yield. The company’s dividend has grown at a 6.8% rate over the past five years.
On Dec.14, 2021, CAT’s Progress Rail company, BNSF Railway Company (BNSF), and Chevron Corporation’s (CVX) Chevron U.S.A. Inc. subsidiary announced an agreement to advance the demonstration of a locomotive powered by hydrogen fuel cells. Progress Rail plans to build a prototype hydrogen fuel cell locomotive for line-haul and/or other rail services, which is expected to be demonstrated on BNSF’s lines for a mutually agreed period. Chevron will develop the fueling concept and infrastructure to support this demonstration. The companies expect the technology to be a cost-competitive, lower-carbon alternative solution for line-haul service.
CAT’s total sales and revenues for its fiscal third quarter, ended September 30, 2021, increased 25.5% year-over-year to $12.40 billion. The company’s adjusted operating profit came in at $1.70 billion, up 54.9% from the prior-year period. CAT’s adjusted profit came in at $1.46 billion for the quarter, representing a 74.9% rise from its year-ago period. And its adjusted EPS increased 75% year-over-year to $2.66. The company had $9.45 billion in cash and equivalents as of September 30, 2021.
Analysts expect the company’s EPS to be $10.40 for the current year, representing a 58.5% rise from the prior-year period. It surpassed the Street’s EPS estimates in each of the trailing four quarters, which is impressive. The $50.23 billion consensus revenue estimate for the current year indicates a 20.3% year-over-year improvement. CAT’s EPS is expected to grow at a 32.2% rate per annum over the next five years. The stock has gained 5.8% in price over the past month and closed yesterday’s trading session at $207.33.
CAT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The stock has a B grade for Growth and Value. Click here to see the additional ratings for CAT’s Momentum, Stability, Sentiment, and Quality. CAT is ranked #23 of 77 stocks in the A-rated Industrial - Machinery industry.
Note that CAT is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Growth portfolio. Learn more here.
Click here to check out our Industrial Sector Report
Target Corporation (TGT)
TGT operates as a general merchandise retailer that offers food assortments, apparel, accessories, home decor products, electronics, seasonal offerings, and beauty and household essentials through its stores and digital channels. As of Jan.30, 2021, the company operated approximately 1,897 stores. TGT is headquartered in Minneapolis, Minn.
TGT paid a $0.90 quarterly cash dividend on Dec.10, 2021. The stock pays a $3.60 per share dividend annually, which translates to a 1.58% yield. The company’s dividend has grown at a 6.38% rate over the past five years.
On October 26, TGT introduced ‘Shopping Partner,’ ‘Backup Items,’ and ‘Forgot Something’ features to its industry-leading Drive-Up, Order Pickup, and Same-Day Delivery with Shipt services. These convenient offerings have helped the company generate tremendous sales over the past year, and it expects to capitalize on rising holiday sales toward the end of this year.
TGT’s revenues for its fiscal third quarter, ended October 30, 2021, increased 13.3% year-over-year to $25.65 billion. The company’s operating income came in at $2.01 billion, indicating a 3.9% rise from the prior-year period. TGT’s net earnings were $1.49 billion, up 46.8% from the prior-year period. Its adjusted EPS increased 8.6% year-over-year to $3.03. The company had $5.75 billion in cash and cash equivalents as of October 30, 2021.
The $13.27 consensus EPS estimate for the current year represents a 40.9% rise from the prior-year period. For the current year, analysts expect TGT’s revenue to improve 13.9% from the prior-year period to $106.57 billion. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The company’s EPS is expected to grow at a 14.8% rate per annum over the next five years. Over the past month, the stock has declined 8.5% in price and closed yesterday’s trading session at $227.92.
TGT’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, which equates to Buy in our proprietary rating system. TGT has a B grade for Value and Quality. In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for TGT’s Growth, Stability, Momentum, and Sentiment here. TGT is ranked #15 of 39 stocks in the A-rated Grocery/Big Box Retailers industry.
Click here to checkout our Retail Industry Report
Cardinal Health, Inc. (CAH)
CAH is an integrated healthcare services and products company internationally. It provides customized solutions for hospitals, healthcare systems, pharmacies, ambulatory surgery centers, clinical laboratories, physician offices, and patients in the home. CAH is based in Dublin, Ohio.
CAH is scheduled to pay a $0.49 quarterly cash dividend on Jan.15, 2022. The stock pays a $1.96 per share dividend annually, translating into a 3.77% yield. The company’s dividend has grown at a 3.16% rate over the past five years.
On November 18, 2021, CAH announced the availability of its WaveMark Supply Management and Workflow Solutions business for implementation in clinical labs across the U.S. As the first in the industry to optimize manual clinical lab processes through cutting-edge automation, WaveMark solutions enable labs to deliver faster test results and diagnoses. Also, it proactively alerts users about recalled, expired and at-risk products and supplies, ensuring patient safety and decreasing costs and waste. CAH expects to witness high demand for this solution in the coming months.
CAH’s revenue for its fiscal first quarter, ended Sept.30, 2021, increased 12.6% year-over-year to $43.97 billion. The company had $2.46 billion in cash and equivalents as of Sept. 30, 2021.
Analysts expect the consensus EPS estimate for the current year to be $5.71, representing a 2.5% rise from the prior-year period. The $177.89 billion consensus revenue estimate for the current year indicates a 9.5% year-over-year improvement. Analysts expect the company’s EPS to grow at a 7.1% rate per annum over the next five years. Over the past month, the stock has gained 9.7% in price and ended yesterday’s trading session at $52.05.
CAH’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The stock has an A grade for Value. Click here to see the additional ratings for CAH’s Growth, Momentum, Stability, Sentiment, and Quality. CAH is ranked #21 of 88 stocks in the Medical - Services industry.
Click here to checkout our Healthcare Sector Report
ABBV shares were trading at $136.65 per share on Thursday afternoon, up $1.29 (+0.95%). Year-to-date, ABBV has gained 33.65%, versus a 29.62% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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