4 Top Stocks to Invest in if We Head into a Recession Lingering supply crunch and soaring inflation have increased the odds of the Fed raising interest rates aggressively later this year, which could dampen corporate earnings. Moreover, as the GDP is...
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Lingering supply crunch and soaring inflation have increased the odds of the Fed raising interest rates aggressively later this year, which could dampen corporate earnings. Moreover, as the GDP is estimated to be lower than the prior estimate, many analysts expect the economy to witness recessionary pressure. Therefore, it could be wise to bet on quality stocks Walmart (WMT), Altria Group (MO), Ambev (ABEV), and Albertsons Companies (ACI), which might fare well in case we head into a recession.
The Russia-Ukraine conflict has aggravated logistic disruptions, further pushing inflation higher. Therefore, the expected aggressive interest rate hikes could stall the economic recovery. Despite the current positive outlook of the U.S. market owing to increasing jobs amid a steady economic recovery, possibilities of an upcoming recession might not be ruled out as an inverted yield curve in the bond market is hinting at a potential recessionary environment.
Moreover, economists at Goldman Sachs have already slashed their GDP estimates from 2% to 1.7%. And amid a recessionary environment, consumer staples, alcohol, tobacco, grocery store companies usually perform steadily because of almost inelastic demand for their products.
So, you could make your portfolio recession-ready by adding Walmart Inc. (WMT), Altria Group, Inc. (MO), Ambev S.A. (ABEV), and Albertsons Companies, Inc. (ACI). Apart from their potential to perform steadily during a recession, these stocks also pay good dividends.
Walmart Inc. (WMT)
WMT engages in the operation of retail, wholesale, and other units worldwide. The company operates through three segments: Walmart U.S.; Walmart International; and Sam's Club. It continues to be a leader in sustainability, corporate philanthropy, and employment opportunities.
On February 17, 2022, Doug McMillon, WMT's President and CEO, said, "We have momentum in our business in all three segments. We're being aggressive with our plans and executing the strategy. It's exciting to see how the teams are simultaneously navigating today's challenges and reshaping our business."
WMT's dividend payouts have grown at a 2% CAGR over the past five years. Its four-year average yield is 1.82%, while its current dividend yield is 1.49%. On February 17, 2022, WMT approved an annual cash dividend for the fiscal year 2023 of $2.24 per share.
For the fiscal 2022 fourth quarter ended January 31, 2022, WMT's total revenues came in at $152.87 billion, compared to $152.08 billion in the previous period. Its net income came in at $3.56 billion, compared to a loss of $2.09 billion in the year-ago period. Moreover, its adjusted EPS came in at $1.53, up 10.1% year-over-year.
Analysts expect WMT's revenue to be $590.88 billion in fiscal 2023, representing a 3.2% year-over-year increase. The company's EPS is expected to rise 8.4% per annum for the next five years. In addition, it has surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 10.4% to close yesterday's trading session at $149.87.
WMT's POWR Ratings reflect its solid prospects. The company has an overall A rating, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
In addition, it has a B grade for Growth, Value, Stability, Sentiment, and Quality. WMT is ranked #6 out of 39 stocks in the A-rated Grocery/Big Box Retailers industry. Click here to see the additional POWR Ratings for WMT (Momentum).
Altria Group, Inc. (MO)
MO, along with its subsidiaries, manufactures and sells smokable and oral tobacco products in the United States. It sells its tobacco products primarily to wholesalers, including distributors, and large retail organizations, such as chain stores.
On January 27, 2022, Billy Gifford, MO's CEO, said, "We returned more than $8.1 billion in cash to shareholders in 2021 through dividends and share repurchases. This total represents the third-largest single-year cash return in Altria's history and the largest annual return since 2002."
MO's dividend payouts have grown at an 8.3% CAGR over the past five years. Its four-year average yield is 6.82%, while its current dividend yield is 6.92%. On February 25, 2022, MO announced a regular quarterly dividend of $0.90 per share, payable on April 29, 2022.
MO's gross profit came in at $3.31 billion for the fourth quarter ended December 31, 2021, up 5.4% year-over-year. Its operating income came in at $2.73 billion, up 5.9% year-over-year. Also, its adjusted EPS came in at $1.09, up 10.1% year-over-year.
For fiscal 2023, analysts expect MO's revenue to increase 1.5% year-over-year to $21.38 billion. Its EPS is expected to increase 6.4% to $5.15 in 2023. In addition, it has surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past six months, the stock has gained 14.4% to close yesterday's trading session at $52.05.
MO's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system.
It has an A grade for Quality and a B grade for Growth. Within the B-rated Tobacco industry, it is ranked #2 of 11 stocks. Click here to see the additional POWR Ratings for Value, Momentum, Stability, and Sentiment for MO.
Ambev S.A. (ABEV)
Based in São Paulo, Brazil, ABEV and its subsidiaries produce, distribute, and sell beer, draft beer, carbonated soft drinks (CSD), other non-alcoholic beverages, malt, and food products in the Americas. Its three segments are Brazil; Central America and the Caribbean; Latin America South; and Canada.
On February 24, 2022, Jean Jereissati, CEO, said, "We ended 2021 consolidating our record topline performance, with a step-change in volumes thanks to market share gains in a growing industry, and Normalized EBITDA back to double-digit growth and above pre-pandemic levels despite unprecedented cost headwinds."
ABEV's four-year average yield is 3.36%, while its current dividend translates to a 2.67% yield.
For its fourth quarter ended December 31, 2021, ABEV's net revenue increased 18.6% year-over-year to R$ 22.01 billion ($4.34 billion). Its gross profit came in at R$ 11.51 billion ($2.27 billion), up 11.2% year-over-year. Moreover, the company's total assets came in at R$ 138.60 billion (27.31 billion) for the period ended December 31, 2021, compared to R$ 125.20 billion ($24.67 billion) for the period ended December 31, 2020.
Analysts expect ABEV's revenue to increase 19.8% year-over-year to $16.17 billion in 2022. Its EPS is estimated to grow 9.6% per annum for the next five years. Over the past year, the stock has gained 14.6% to close yesterday's session at $3.14.
ABEV's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system.
ABEV has an A grade for Quality and a B for Stability and Sentiment. Within the B-rated Beverages industry, it is ranked #11 out of 37 stocks. Click here to see the additional POWR Rating for Growth, Value, and Momentum for ABEV.
Albertsons Companies, Inc. (ACI)
ACI, a leading food and drug retailer in the United States, engages in operating food and drug stores in the United States through its subsidiaries. The company employs around 2,278 stores under various banners across 34 states.
On March 30, 2022, ACI announced that customers could use supplemental benefits to purchase over-the-counter medications and fresh produce in its stores. Omer Gajial, EVP of Pharmacy and Health at ACI, said, "Using supplemental benefits enables shoppers to conveniently shop for fresh food and over-the-counter medications contributing to their overall health and well-being."
ACI's four-year average dividend yield is 1.00%, while its current dividend yield is 1.43%. On January 11, 2022, ACI declared a cash dividend of $0.12 per share.
ACI's net sales and other revenue came in at $16.73 billion for the third quarter ended December 4, 2021, up 8.6% year-over-year. Its net income came in at $424.50 million, up 243.2% year-over-year, while its EPS came in at $0.74, up 270% year-over-year.
Analysts expect ACI's revenue to be $21.81 billion for the quarter ended May 2022, representing a 6.6% year-over-year rise. It surpassed Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 69.7% to close yesterday's trading session at $33.51.
ACI's POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to a Strong Buy in our POWR Ratings system.
It has an A grade for Growth and a B grade for Value, Quality, and Sentiment. It is ranked first of 39 stocks in the A-rated Grocery/Big Box Retailers industry. Click here to see the additional ratings for ACI (Momentum and Stability).
WMT shares were trading at $148.92 per share on Thursday afternoon, down $0.95 (-0.63%). Year-to-date, WMT has gained 3.32%, versus a -4.61% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
The post 4 Top Stocks to Invest in if We Head into a Recession appeared first on StockNews.com
