The Fed’s rekindled hawkish stance has triggered a fresh bout of anxiety among investors. The price fluctuations are likely to continue amid the rising odds of rate hikes. Against this backdrop, let us take a dig at stocks Valero Energy Corporation (VLO), Ennis, Inc. (EBF), and Sisecam Resources LP (SIRE), which could make collecting passive income easy.
The already marred investors’ sentiments were further hampered by Fed Chair Jerome Powell’s hawkish statements on interest rate hikes. The upcoming decision will likely hinge on the already released strong U.S. job report and the impending inflation data.
The U.S. economy added 311,000 jobs in February. PNC Financial Services chief economist Gus Faucher, commenting on the February job report, stated, “It’s much hotter than the economy can run, and so this means the Fed is going to have to continue to hike interest rates, and that makes a recession more likely.”
While some economists anticipate a recession, on the flip side, some expect the Fed will be able to achieve a tricky “soft landing,” in which they raise interest rates enough to curb inflation without triggering a recession.
Against this backdrop, investors could opt for dividend stocks that ensure consistent returns to safeguard portfolios against such economic headwinds. Therefore, quality dividend stocks VLO, EBF, and SIRE might be solid buys now.
Valero Energy Corporation (VLO)
VLO manufactures, markets, and sells transportation fuels and petrochemical products. The company operates through its three broad segments – Refining; Renewable Diesel; and Ethanol.
On January 31, 2023, VLO approved an increase of its regular quarterly dividend on common stock from $0.98 per share to $1.02 per share, payable to holders on March 16, 2023. The increase in the dividend raises the annualized dividend rate on VLO’s common stock to $4.08 per share, which yields 3.09% on prevailing prices.
The company’s dividend payouts have increased at a 2.5% CAGR over the past three years and 6.4% CAGR over the five years. VLO’s four-year average dividend yield is 5%.
In terms of forward EV/EBIT, VLO is trading at 5.15x, 29.9% lower than the industry average of 7.35x. Its forward EV/Sales multiple of 0.38 is 79.3% lower than the 1.84 industry average.
VLO’s revenue has grown at 18.6% and 14.1% CAGRs over the past three and five years, respectively. Moreover, its EBITDA has grown at 43.8% CAGR over the past three years.
In the fiscal fourth quarter that ended December 31, 2022, VLO’s revenues increased 16.3% year-over-year to $41.75 billion. Its operating income grew 169.4% year-over-year to $4.30 billion.
Furthermore, adjusted net income attributable to VLO stockholders and adjusted earnings per common share came in at $3.23 billion and $8.45, registering increases of 226.6% and 250.6% from the prior-year period, respectively.
Analysts expect VLO’s revenue to come in at $38.17 billion for the fiscal first quarter (ending March 2023). Its EPS for the same quarter is expected to come in at $6.55, representing an 183.6% year-over-year. Moreover, VLO has an impressive surprise earnings history, as it topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 44.2% over the past year and 15.7% over the past six months to close the last trading session at $132.16.
It’s no surprise that VLO has an overall B rating, equating to Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
VLO has an A grade for Momentum and a B for Growth, Value, and Quality. VLO is ranked #6 in the B-rated 91-stock Energy - Oil & Gas industry.
Beyond what is stated above, we have also given VLO grades for Sentiment and Stability. Get access to all VLO ratings here.
Ennis, Inc. (EBF)
EBF designs, manufactures, and sells business forms and other business products. The company offers snap sets, continuous forms, laser cut sheets, tags, labels, envelopes, integrated products, jumbo rolls, and pressure-sensitive products. It distributes business products and forms through independent distributors.
EBF recently announced its acquisition of School Photo Marketing in Morganville, New Jersey. School Photo Marketing provides printing, yearbook publishing, and marketing-related services to over 1,400 school and sports photographers servicing schools around the country. This acquisition should bring possibilities to service the new channel with products produced through EBF manufacturing operations.
Keith Walters, Chairman, Chief Executive Officer and President, commented, “Our profitability and strong financial condition will allow us to continue operations and fund acquisitions without incurring debt. We also anticipate timely access to credit should larger acquisition opportunities materialize as we continue to explore strategic opportunities in the acquisition arena to increase profitability."
On December 15, 2022, EBF’s board of directors declared a quarterly dividend of 25 cents per share on the company’s common stock, which was paid to the shareholders on February 2, 2023. This reflects the shareholder return ability of the company.
EBF’s annualized dividend rate of $1 per share yields 4.71% on prevailing prices. The company’s dividend payouts have increased at a 3.6% CAGR over the past three years and a 5.2% CAGR over the five years. EBF’s four-year average dividend yield is 4.81%.
EBF’s forward EV/EBITDA of 5.97x is 43.5% lower than the industry average of 10.57x. Its forward EV/Sales multiple of 1.10 is 34% lower than the industry average of 1.67.
EBF’s revenue has grown at 3% CAGRs over the past five years. Moreover, its EBITDA has grown at 4.5% CAGR over the past three years.
EBF’s revenue rose 7.1% year-over-year to $110.25 million in the third quarter that ended November 30, 2022. The company’s non-GAAP EBITDA increased 35.1% year-over-year to $20.80 million, and earnings per share came in at $0.44, up 51.7% from the prior-year quarter.
Street EPS estimate of $0.36 for the fiscal fourth quarter that ended February 2023 reflects a rise of 33.3% year-over-year. Its revenue estimate for the same quarter of $101.85 million indicates an improvement of 2.2% from the prior-year quarter. Additionally, EBF has topped consensus EPS and revenue estimates in three of the trailing four quarters, which is impressive.
The stock has gained 18% over the past year to close the last trading session at $21.25. It gained 1.3% over the past month.
EBF’s solid prospects are reflected in its POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
EBF has an A grade for Quality and B in Growth, Sentiment, and Stability. It is ranked first in the 54-stock Consumer Goods industry.
Click here to see the additional POWR Ratings for EBF (Value and Momentum).
Sisecam Resources LP (SIRE)
SIRE engages in the trona ore mining and soda ash production businesses internationally. It processes trona ore into soda ash, which is a raw material in flat glass, container glass, chemicals, paper, and other consumer and industrial products.
On February 1, SIRE declared its quarterly cash dividend of $0.50, which was paid to unitholders on February 23, 2023. Its annual dividend of $2.00 yields 7.93% on the current share price. It has a four-year average yield of 7.10%. Its dividend payouts have increased at 13.7% CAGR over the past three years.
SIRE’s trailing 12-month EV/EBIT of 6.09x is 43.5% lower than the industry average of 10.78x. Its trailing 12-month EV/Sales multiple of 1.13 is 19% lower than the industry average of 1.40.
SIRE’s revenue has grown at 11.3% and 7.7% CAGRs over the past three and five years, respectively. Moreover, its EBITDA has grown at 6.6% CAGR over the past three years.
SIRE’s total net sales came in at $177.10 million for the fourth quarter (ended December 31, 2022), up 13.5% year-over-year. Its net income increased 43.6% year-over-year to $16.80 million. Moreover, its EPS came in at $0.83, up 48.2% year-over-year.
SIRE has gained 25.5% over the past year to close the last trading session at $25.23. It has also gained 15.5% over the past six months.
SIRE’s promising outlook is reflected in its POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
It also has a B grade for Growth, Value, Stability, and Quality. SIRE is ranked first out of 86 stocks in the B-rated Chemicals industry.
Click here to see the additional POWR Ratings for Momentum and Sentiment for SIRE.
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VLO shares were trading at $129.05 per share on Monday morning, down $3.11 (-2.35%). Year-to-date, VLO has gained 2.47%, versus a 0.92% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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