With concerns mounting over the Fed’s capacity to counter inflation without concurrently undermining the economy and triggering a mild recession, it could be wise to consider the suitability of dividend-paying and stable stocks Walmart Inc. (WMT), BHP Group Limited (BHP), and American Vanguard Corporation (AVD) for a retirement portfolio.

The past year has seen the Fed raising its benchmark interest rates eight times, the last being by 25 basis points in January. This brought the borrowing rate into a targeted range of 4.5%-4.75%. Despite the Fed’s efforts, inflation is still well above its 2% target.

Persistently high inflation has followed the economy into 2023, with the Consumer Price Index (CPI) accelerating by 0.5% for the month in January and 6.4% from a year ago, surpassing economists’ expectations of 0.4% and 6.2%, respectively. Elevated inflation levels indicate that the Fed has more work to do. Minutes from the Fed’s latest meeting warn of more interest rate hikes.

Democratic legislators, in particular, are increasingly worried that the Fed could drag down the economy with its commitment to fight inflation. This has left markets on edge, with apprehension mounting as to whether Fed chair Jerome Powell can lower inflation without simultaneously weakening the broader economy.

Former Treasury Secretary Larry Summers has warned, “The process of bringing down inflation will bring on a recession at some stage.” He continued, “The economy could hit an air pocket in a few months.”

Thus, investors nearing retirement could check out stocks with a strong foundation of stability. Let’s discuss why WMT, BHP, and AVD could be solid picks on that front.

Walmart Inc. (WMT)

WMT runs retail, wholesale, and other units across the globe. Its segments include Walmart U.S.; Walmart International; and Sam's Club. The company runs membership-only warehouse clubs, supermarkets, discount stores, and cash and carry facilities. Furthermore, it operates online under 46 different banners.

On March 2, 2023, WMT announced the opening of 28 additional WMT Health center locations in 2024. This is expected to expand WMT Health’s footprint in Missouri and Arizona and strengthen its foothold in Texas. Moreover, with 90% of the U.S. population living within 10 miles of a WMT, the company should benefit from expanded operations and increased customers.

On February 28, WMT and Citigroup (C) announced their partnership to introduce the Bridge built by Citi platform to WMT’s 10,000 small- and medium-sized businesses (SMBs) in their U.S.-based supplier network. With this platform, WMT’s suppliers would get better access to the capital required to grow their businesses and meet and surpass their objectives. This should strategically contribute to the company’s growth.

Also, on February 21, WMT approved an annual cash dividend of $2.28 per share for 2024, a rise of approximately—2% over the $2.24 per share paid for the previous fiscal year. The company has a record of 49 years of consecutive dividend growth.

Its annual dividend of $2.28 yields 1.62% on the current price level. Its four-year average yield is 1.67%, and its dividend payouts have grown at a 1.9% CAGR over the past three years.

WMT’s total revenues increased 7.3% year-over-year to $164.05 billion in the fiscal 2023 fourth quarter that ended January 31. Its income before income taxes rose 86.2% from the previous year’s quarter to $8.90 billion. In addition, the company’s consolidated net income grew 59.9% year-over-year to $5.81 billion, while its adjusted EPS came in at $1.71, up 11.8%year-over-year.

The consensus revenue estimate of $648.85 billion for the fiscal year ending January 2025 reflects a 3.4% year-over-year improvement. The consensus EPS estimate of $6.79 for the same year indicates an 11.4% rise from the previous year. Moreover, WMT surpassed its consensus EPS estimates in three of the four trailing quarters.

Shares of WMT have gained 6.3% over the past six months to close the last trading session at $140.65. Moreover, the stock has a beta of 0.53.

WMT’s POWR Ratings reflect its strong outlook. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

The stock has an A grade for Stability and a B for Quality and Value. In the A-rated 38-stock Grocery/Big Box Retailers industry, it is ranked #3.

Beyond what we stated above, we also have WMT’s ratings for Growth, Sentiment, and Momentum. Get all WMT ratings here.

BHP Group Limited (BHP)

Headquartered in Melbourne, Australia, BHP is a global resources corporation. Its international operations encompass potash development, nickel mining, smelting, and refining.

On February 21, 2023, Mike Henry, BHP’s Chief Executive Officer, said, “We are positive about the demand outlook in the second half of FY23 and into FY24.” He continued, “The long-term outlook for our commodities remains strong given population growth, rising living standards, and the metals intensity of the energy transition, including for steel-making raw materials.” 

On January 24, BHP announced that production at the Jansen potash project in Saskatchewan, Canada, is expected to begin in late 2026, yielding 4.35 million tonnes of potash annually. BHP’s partnerships would offer it the edge needed to expand operations and grow in Saskatchewan and across Canada.

BHP’s financial income rose 744% year-over-year to $211 million during the half-year that ended December 31, 2022. As of December 31, 2022, the company’s total non-current assets stood at $67.72 billion, compared to $66.50 billion as of June 30, 2022, while BHP’s total current liabilities were $11.89 billion, versus $16.92 billion as of June 30, 2022.

BHP pays an annual dividend of $7.00, which translates to a 10.63% yield on the current price level. The company’s dividend payments have grown at a 37.6% CAGR over the past three years, and its four-year average yield is 7.84%.

The consensus EPS estimate of $5.08 for the fiscal year (ending June 2024) reflects a 32.5% year-over-year improvement. Shares of BHP have gained 28.5% over the past six months to close the last trading session at $64.04. Also, BHP has a beta of 0.81.

BHP’s solid fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The stock has a Quality grade of A and a Stability grade of B. In the 36-stock Industrial - Metals industry, it is ranked #2.

Beyond what we stated above, we also have BHP’s ratings for Value, Growth, Sentiment, and Momentum. Get all BHP’s ratings here.

American Vanguard Corporation (AVD)

AVD develops and markets specialized chemicals for agricultural, commercial, and consumer applications. Additionally, the business offers biological and end-use chemical solutions for crop applications, and chemicals for the turf and ornamental industries.

On January 17, 2023, AMGUARD™ Environmental Technologies, the specialty markets division of AMVAC Chemical Corporation, a fully owned subsidiary of AVD, announced the acquisition of American Bio-Systems' product and trademark assets. American Bio-Systems’ proprietary-formula microbial cleaning products BioMop-Plus® and DrainGel® are great additions to AMGUARD's portfolio.

For the fiscal third quarter that ended September 30, 2022, AVD’s net sales increased 3.3% year-over-year to $152.12 million, while its gross profit grew 7.6% from the prior year’s period to $61.38 million. The company’s operating income rose 25.7% from the year-ago value to $11.24 million.

Additionally, AVD’s adjusted EBITDA grew 11.4% from the prior-year period to $18.91 million. The company’s net income and EPS increased 22.6% and 27.8% year-over-year to $6.74 million and $0.23, respectively.

The company pays an annual dividend of $0.12, translating to a 0.56% yield on the current price level. AVD’s dividends have grown at an 11.8% CAGR over the past five years, and its four-year average yield is 0.44%.

Analysts expect AVD’s revenue to increase 8.2% year-over-year to $657.70 million for the fiscal year ending December 2023. The company’s EPS for the ongoing year is expected to rise 41.6% from the previous year to $1.23. The stock has gained 25.3% over the past year to close the last trading session at $20.48. In addition, AVD has a beta of 0.92.

AVD’s POWR Ratings reflect its strong prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.

AVD has a B grade for Quality, Stability, Value, and Sentiment. It ranks #2 in the B-rated 84-stock Chemicals industry.

In addition to the POWR Ratings I’ve just highlighted, you can see AVD’s ratings for Growth and Momentum here.

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WMT shares were trading at $138.86 per share on Tuesday afternoon, down $1.79 (-1.27%). Year-to-date, WMT has declined -2.07%, versus a 4.14% rise in the benchmark S&P 500 index during the same period.

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.

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