Despite the Fed’s aggressive interest rate hikes, inflation continues to take a toll on the economy. With growing recession fears, it could be best to invest in Walmart (WMT) and Coca-Cola (KO), given their solid fundamentals. Also, these stocks have an impressive dividend-paying history and could help cushion your portfolio in 2022. Read on….
The stock markets tumbled after the hotter-than-expected inflation compelled the Federal Reserve to deliver another 75-basis point rate hike this week. The central bank also hinted at continuing its aggressive rate hikes until inflation comes under control. The consecutive rate hikes are raising the odds of the economy tipping into a recession.
“If we continue to have sticky inflation, and if Powell sticks to his guns as he indicates, I think we enter recession, and we see a significant drawdown on earnings expectations,” said Mike Mullaney, director of global markets at Boston Partners.
Although the stock market is expected to remain under pressure in the near term, Andrew Slimmona top Morgan Stanley strategist, believes that the S&P 500 will enjoy some upside and end the year closer to where it started at around 4,778.
Given these uncertain times, investing in fundamentally sound stocks Walmart Inc. (WMT(and The Coca-Cola Company)KO), could be wise. Their solid dividend payout track records could help generate a steady income stream.
Walmart Inc. (WMT)
WMT engages in retail, wholesale, and other units worldwide. The company operates supercenters, supermarkets, hypermarkets, warehouse clubs, cash and carry stores, and discount stores; membership-only warehouse clubs; e-commerce websites; and mobile commerce applications through its segments Walmart US; Walmart International; and Sam’s Club.
On September 22, WMT announced its efforts to double down on customer convenience, experience, and value by offering more deals, top gifts, and easy, no-concern return options to its clients.
In the same month, the company welcomed 40,000 associates across various business roles to deliver a great holiday season. These should help the company strategically expand its revenue streams.
WMT’s annual dividends of $2.24 yields 1.68% at its current share price. Its quarterly dividend of $0.56 is payable on January 3, 2023. The company’s dividend payouts have increased at a 1.9% CAGR over the past three years. The company has a record of 48 years of consecutive dividend growth.
WMT’s total revenues came in at $152.86 billion for the second quarter ended July 31, 2022, up 8.4% year-over-year. Its net income increased 20.4% year-over-year to $5.15 billion, while its EPS came in at $1.88, up 23.7% year-over-year.
WMT’s revenue is expected to increase 4.9% year-over-year to $146 billion in its third fiscal quarter ending October 2022. Its consensus EPS is estimated to be $1.31 for the same quarter.
WMT gained 10.5% over the past three months to close the last trading session at $133.39.
WMT’s POWR Ratings reflect this promising outlook. The company’s overall A rating translates to Strong Buy in our proprietary rating system. The POWR Ratings assesses stocks by 118 different factors, each with its own weighting.
WMT also has an A grade for Sentiment and a B in Growth, Stability, and Quality. It is ranked #5 of 38 stocks in the A-rated Grocery/Big Box Retailers industry.
Beyond what is stated above, we have also rated WMT for Value and Momentum. Get all WMT ratings here.
The Coca-Cola Company (KO)
KO, a beverage company, manufactures, markets, and sells various non-alcoholic beverages worldwide. It sells its products under various brand names, including Coca-Cola, Sprite, Fanta, Diet Coke, Coca-Cola Zero Sugar, Thumbs Up, Aquarius, fairlife, Minute Maid Pulpy, and Simply.
On June 13, KO announced a global relationship with Brown-Forman Corporation to debut the iconic Jack & Coke cocktail as a branded, ready-to-drink (RTD) pre-mixed cocktail option. This should be widely in demand, given its brand popularity.
KO’s annual dividends of $1.76 yields 2.97% at its current share price. On July 21, 2022, it declared a quarterly dividend of $0.44, payable to its shareholders on October 3, 2022. KO’s dividend has grown at a 3.1% CAGR over the past three years and a 3.6% CAGR over the past five years. The company has a record of 59 consecutive years of dividend growth.
KO’s net operating revenue increased 11.8% year-over-year to $11.33 billion in the second quarter ended July 1, 2022. Its gross profit grew 2.4% from the year-ago value to $6.49 billion, while its non-GAAP net income improved 4.4% year-over -year to $3.06 billion. The company’s non-GAAP EPS increased 2.9% from its year-ago value to $0.70.
Analysts expect KO’s EPS to increase 6.5% year-over-year to $0.48 and its revenue to increase 5.1% year-over-year to $9.95 billion in the fiscal fourth quarter ending December 2022. The company also surpassed the consensus EPS estimates in three of the trailing four quarters, which is impressive.
Over the past year, the stock has gained 9.5% to close the last trading session at $59.26.
KO’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.
It also has a B grade for Stability, Sentiment, and Quality. KO is ranked #21 of 35 stocks in the A-rated Beverages industry.
Click here to see additional ratings for KO for Growth, Value, and Momentum.
WMT shares were trading at $131.70 per share on Friday morning, down $1.69 (-1.27%). Year-to-date, WMT has declined -7.89%, versus a -21.65% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal’s passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.