Deepening supply chain disruptions due to the Russia-Ukraine war, surging inflation, and the potential of aggressive interest rate hikes later this year might extend the stock market's current volatility. Furthermore, surging COVID-19 cases and lockdowns in China could worsen the downside.
Amid this scenario, betting on dividend stocks could be one of the best strategies to generate a steady income stream. Investors’ interest in large-cap dividend stocks is evident in the WisdomTree LargeCap Dividend ETF’s (DLN) 8.1% returns over the past six months, versus the SPDR S&P 500 Trust ETF’s (SPY) 2.5% gains.
Dividend-paying big-brand stocks Microsoft Corporation (MSFT), Johnson & Johnson (JNJ), Walmart Inc. (WMT), Costco Wholesale Corporation (COST), and PepsiCo, Inc. (PEP) are well-positioned to weather the market’s volatility because of their wide market reach and financial flexibility. So, we think it could be wise to grab these stocks because of their history of consistent dividend payments and low beta.
Microsoft Corporation (MSFT)
With a $2.24 trillion market cap, MSFT in Redmond, Wash., develops, supports, licenses, and sells various software products, services, and solutions worldwide. The company also manufactures and sells PCs, tablets, gaming and entertainment consoles, other intelligent devices, and related accessories through OEMs, distributors, resellers, digital marketplaces, and retail stores. It has a 0.91 beta.
MSFT will pay a quarterly cash dividend of $0.62 per share on June 9, 2022. The stock’s $2.48 per share annual dividend translates to a 0.83% yield. The company’s dividend has grown at a 9.49% rate over the past five years. MSFT has increased its dividends for 18 consecutive years.
On March 15, 2022, MSFT announced advancements in cloud technologies for healthcare and life sciences with the general availability of MSFT’s Azure Health Data Services and updates to Microsoft Cloud for Healthcare. Azure Health Data Services ingests, manages, and transforms a combination of clinical, imaging, and MedTech data. The recent acquisition of Nuance Communications Inc. (NUAN) should allow MSFT to leverage trusted AI to address the biggest challenges transforming the future of healthcare for all.
For its fiscal year 2022 second quarter, ended Dec. 31, 2021, MSFT’s total revenue increased 20.1% year-over-year to $51.73 billion. The company’s gross profit came in at $34.77 billion, representing a 20.4% rise from the prior-year period. MSFT’s operating income came in at $22.25 billion, up 24.3% from the year-ago period. While its net income increased 21.4% year-over-year to $18.77 billion, its EPS increased 22.2% to $2.48. As of Dec. 31, 2021, the company had $20.60 billion in cash and cash equivalents.
Analysts expect the company’s EPS to hit $9.34 for its fiscal year 2022, ending June 30, 2022, representing a 16% rise from the prior-year period. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The $199.08 billion consensus revenue estimate for the same fiscal year indicates an 18.4% year-over-year improvement. The company’s EPS is expected to grow at a 17.4% rate per annum over the next five years.
MSFT’s revenue, EBITDA, and total assets have grown at CAGRs of 16%, 22.4%, and 9.6%, respectively, over the past three years.
Over the past nine months, the stock has gained 13.9% in price and closed yesterday’s trading session at $299.16. MSFT’s trailing-12-month ROE, ROA, and ROTC are 49.1%, 15.3%, and 21.7%, respectively.
MSFT’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, 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 Stability, Sentiment, and Quality. Click here to see the additional ratings for MSFT’s Growth, Value, and Momentum.
MSFT is ranked #19 of 163 stocks in the Software - Application industry.
Note that MSFT is one of the few stocks handpicked currently in the Reitmeister Total Return portfolio. Learn more here.
Click here to check out our Software Industry Report for 2022
Johnson & Johnson (JNJ)
With a market capitalization of $462.37 billion, JNJ develops, manufactures, and sells health care products and provides related services. The New Brunswick, N.J. company serves primarily the consumer, pharmaceutical, and medical devices and diagnostics markets and distributes its products through retail outlets and distributors, wholesalers, hospitals, and health care professionals for prescription use. It has a 0.71 beta.
JNJ paid a $1.06 per share quarterly cash dividend on March 8, 2022. The stock pays a $4.24 per share dividend annually, translating to a 2.5% yield. Its dividend has grown at a 5.8% rate over the past five years. JNJ has increased its dividends for 59 consecutive years.
On March 11, 2022, the South African Health Products Regulatory Authority (SAHPRA) approved the once monthly dapivirine vaginal ring, developed by JNJ’s Janssen Therapeutics in collaboration with not-for-profit International Partnership for Microbicides, Inc. (IPM), for use by women above 18 years to help reduce their risk of contracting HIV. The approval of the dapivirine ring, which is the first discreet, long-acting HIV prevention method designed for women, in South Africa marks an important step in the decades-long fight against HIV and should witness high demand in the coming months.
For its fiscal year 2021 fourth quarter, ended Dec. 31, 2021, JNJ’s sales came in at $24.80 billion, representing a 10.4% year-over-year improvement. The company’s gross profit was $16.85 billion, up 14.9% from the prior-year period. Its pre-tax income came in at $4.74 billion for the quarter, indicating a 193.6% year-over-year improvement. While its adjusted net earnings increased 14.4% year-over-year to $5.68 billion, its adjusted EPS rose 14.5% to $2.13. The company had $36.22 billion in cash and cash equivalents as of Dec. 31, 2021.
Analysts expect JNJ’s EPS to improve 7.4% year-over-year to $10.53 for its fiscal year 2022, ending Dec. 31, 2022. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $99.59 billion for the same fiscal year represents a 6.2% rise from the prior-year period. The company’s EPS is expected to grow at a 6.1% rate per annum over the next five years.
JNJ’s revenue, EBITDA, and total assets have grown at CAGRs of 4.8%, 5.1%, and 6%, respectively, over the past three years.
JNJ has gained 7.3% in price over the past nine months and ended yesterday’s trading session at $175.83. The stock’s trailing-12-month ROE, ROA, and ROTC are 30.4%, 8.8%, and 15.1%, respectively.
JNJ’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.
It has an A grade for Stability and a B grade for Value and Quality. Click here to see the additional ratings for JNJ (Momentum, Sentiment, and Growth).
JNJ is ranked #4 of 175 stocks in the Medical - Pharmaceuticals industry.
Click here to checkout our Healthcare Sector Report for 2022
Walmart Inc. (WMT)
With a market cap of $400.08 billion, WMT in Bentonville, Ark., operates retail, wholesale, supermarkets, other units, and e-commerce websites worldwide. The company operates through Walmart U.S.; Walmart International; and Sam’s Club. In addition, it offers fuel and financial services and related products. It has a 0.53 beta.
WMT will pay a $0.56 per share quarterly cash dividend on April 4, 2022. The stock pays a $2.24 per share dividend annually, translating into a 1.64% yield. Its dividend has grown at a 2.07% rate over the past five years. WMT paid dividends for 49 consecutive years.
On March 7, 2022, WMT and Space NK, a British retailer of personal care and beauty products, announced a collaboration called BEAUTYSPACENK to bring prestige beauty products to Walmart.com and Walmart stores nationwide this summer. The collaboration leverages WMT’s size and scales with Space NK’s assortment of high-quality beauty brands and products. By offering a wide variety of price points across skincare, makeup, haircare and bath, and body, WMT should witness high demand for Space NK in the coming months.
For its fiscal 2022 fourth quarter, ended Jan. 31, 2022, WMT’s total revenues increased marginally from the prior-year period to $152.87 billion. The company’s adjusted operating income came in at $6 billion, indicating a 5.9% rise from the year-ago period. WMT’s net income came in at $3.56 billion, compared to a $2.09 billion net loss in the prior-year period. Its adjusted EPS increased 10.1% year-over-year to $1.53. The company had cash and cash equivalents of $14.76 billion as of Jan. 31, 2022.
Analysts expect WMT’s EPS to improve 4.6% year-over-year to $6.76 for its fiscal year 2023, ending Jan. 31, 2023. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The $590.82 billion consensus revenue estimate for the same fiscal year represents a 3.2% rise from the prior-year period. The company’s EPS is expected to grow at an 8.4% rate per annum over the next five years.
WMT’s revenue, EBITDA, and total assets have grown at CAGRs of 3.7%, 3.9%, and 3.7%, respectively, over the past three years.
Over the past nine months, the stock has gained 5.7% in price to close yesterday’s trading session at $144.23. WMT’s trailing-12-month ROE, ROA, and ROTC are 15.5%, 6.5%, and 10.8%, respectively.
WMT’s POWR Ratings reflect its solid prospects. It has an overall rating of A, which equates to Strong Buy in our proprietary rating system.
The stock has a B grade for Quality, Stability, Growth, and Value. In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for WMT’s Momentum and Sentiment here.
WMT is ranked #5 of 39 stocks in the A-rated Grocery/Big Box Retailers industry.
Costco Wholesale Corporation (COST)
With a $246.22 billion market capitalization, COST operates wholesale membership warehouses that offer branded and private-label products in a range of merchandise categories worldwide. The Issaquah, Wash.-based company sells all kinds of food, automotive supplies, hardware, sporting goods, jewelry, electronics, apparel, health, and beauty aids, as well as other goods. It currently operates e-commerce sites and operates 820 warehouses. It has a 0.66 beta.
COST paid a $0.79 per share quarterly cash dividend on Feb. 18, 2022. The company pays a $3.16 dividend annually, representing a 0.57% yield. Its dividend has grown at an 11.91% rate over the past five years. COST has increased its dividends for 17 consecutive years.
COST’s net sales came in at $15.76 billion for January 2022, up 15.5% from $13.64 billion last year. For its fiscal year 2022 second quarter, ended Feb. 13, 2022, COST’s total revenue increased 15.9% year-over-year to $51.90 billion. The company’s operating income came in at $1.81 billion for the quarter, indicating a 35.2% gain over the prior-year period. COST’s net income was $1.30 billion, representing a 36.6% rise from the prior-year period. Its EPS increased 36.5% year-over-year to $2.92. COST had $11.82 billion in cash and cash equivalents as of Feb. 13, 2022.
Analysts expect the company’s EPS to improve 17.8% year-over-year to $13.06 for fiscal year 2022, ending Aug. 31, 2022. The $220.24 billion consensus revenue estimate for the same fiscal year indicates a 12.4% year-over-year improvement. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Cost’s EPS is expected to grow at an 11.3% rate per annum over the next five years.
COST’s revenue, EBITDA, and total assets have grown at CAGRs of 12.6%, 17.5%, and 13.8%, respectively, over the past three years.
Over the past nine months, the stock has gained 43.6% in price and ended yesterday’s trading session at $555.53. COST’s trailing-12-month ROE, ROA, and ROTC are 31%, 8.6%, and 18.2%, respectively.
COST’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 has a B grade for Stability and Sentiment. Click here to see the additional ratings for COST (Value, Quality, Growth, and Momentum).
COST is ranked #22 in the Grocery/Big Box Retailers industry.
PepsiCo, Inc. (PEP)
With a $224.89 billion market capitalization, 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, and e-commerce platforms and retailers. It has a 0.65 beta. Pep is headquartered in Harrison, N.Y.
PEP will pay a $1.08 quarterly cash dividend on March 31, 2022. The stock pays a $4.30 per share dividend annually, translating to a 2.65% yield. The company’s dividend has grown at a 7.39% rate over the past five years. PEP has paid dividends for 49 consecutive years.
On Feb. 23, 2022, PEP introduced Nitro Pepsi, the first-ever nitrogen-infused cola, softer than a soft drink. The drink has a creamy, smooth, mesmerizing cascade of tiny bubbles topped off by a frothy foam head. The company has launched Nitro Pepsi in Draft Cola and Vanilla Draft Cola flavors. PEP should witness good demand for the new product in the coming months.
For its fiscal year 2021 fourth quarter, ended Dec. 25, 2021, PEP’s net sales increased 12.4% year-over-year to $25.25 billion. The company’s non-GAAP gross profit came in at $13.19 billion, up 9.9% from the prior-year period. PEP’s non-GAAP net income came in at $2.13 billion, indicating a 4.4% year-over-year improvement. Its non-GAAP EPS increased 4.1% year-over-year at $1.53. The company had $5.60 billion in cash and cash equivalents as of Dec. 25, 2021.
Analysts expect PEP’s EPS to grow 6.4% year-over-year to $1.40 billion for its fiscal year 2022, ending Dec. 31, 2022. The $81.57 billion consensus revenue estimate for the current year represents a 2.6% rise from the prior-year period. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock’s EPS is expected to grow at a rate of 7.7% per annum over the next five years.
PEP’s revenue, EBITDA, and total assets have grown at CAGRs of 7.1%, 4.6%, and 6%, respectively, over the past three years.
PEP has gained 10.9% in price over the past nine months and closed yesterday’s trading session at $162.56. Its trailing-12-month ROE, ROA, and ROTC are 51.7%, 8%, and 12.5%, respectively.
PEP’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.
PEP has a B grade for Quality and Stability. Click here to see the additional ratings for PEP (Value, Growth, Sentiment, and Momentum).
PEP is ranked #13 of 37 stocks in the B-rated Beverages industry.
MSFT shares were trading at $303.19 per share on Tuesday afternoon, up $4.03 (+1.35%). Year-to-date, MSFT has declined -9.66%, versus a -5.39% 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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