2 Stocks to Help You Sail Through This Volatile Market Although favorable macro data rekindled investor optimism, the Fed's intention of raising rates to tame stubbornly high inflation could possibly tip the economy into recession. With anxiety escalating, it would...
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Although favorable macro data rekindled investor optimism, the Fed's intention of raising rates to tame stubbornly high inflation could possibly tip the economy into recession. With anxiety escalating, it would be wise to add quality stocks Johnson & Johnson (JNJ) and Bristol-Myers Squibb (BMY) to your portfolio to sail through this volatile market. Read on….
The Feds chose a less aggressive stance and dialed down rate hikes to 0.25 percentage points. This revived investor optimism. However, inflation reaccelerated in January, as the Consumer Price Index (CPI) rose 0.5% in January, translating to a 6.4% annual gain. This higher-than-expected inflation shows that the Fed might have to keep its tight monetary policy in place.
Fed Chair Jerome Powell, reflecting the central bank's commitment to the 2% inflation target, commented, "We have more work to do. We're going to be cautious about declaring victory and sending signals that we think the game is won." Persistent rate hikes could tip the economy into a recession.
On the flip side, Loyola Marymount University economics professor Sung Won Sohn anticipates a "rolling recession." He stated, "In this situation, we will never see an overall economy-wide recession. But we take turns as a result. Everyone suffers. But an overall recession does not occur."
Amid such an uncertain macroeconomic backdrop, fundamentally strong dividend-paying stocks Johnson & Johnson (JNJ) and Bristol-Myers Squibb Company (BMY) could be solid buys now to navigate a volatile market.
Johnson & Johnson (JNJ)
JNJ researches, develops, manufactures, and sells various products in the healthcare field worldwide. The company operates through the broad segments of Consumer Health; Pharmaceuticals; and MedTech.
On December 22, 2022, JNJ announced that it had completed its acquisition of Abiomed, Inc. (ABMD), a heart, lung, and kidney support technologies company, for an enterprise value of approximately $16.60 billion. This acquisition is expected to broaden JNJ's MedTech segment's position as a cardiovascular innovator.
On January 3, 2023, JNJ declared a dividend for the first quarter of 2023 of $1.13 per share on its common stock, payable to shareholders on March 7, 2023. JNJ has raised dividends for 60 consecutive years. This reflects its cash generation abilities.
Its annual dividend of $4.52 yields 2.79% on prevailing prices. The company's dividend payouts have increased at a 5.9% CAGR over the past three years and a 6% CAGR over the five years. Its four-year average dividend yield is 2.60%. JNJ has increased its dividend in each of the past 60 years.
JNJ's forward non-GAAP P/E of 15.48x is 21.9% lower than the industry average of 19.82x, while its forward EV/EBIT of 13.62x is 20.5% lower than the industry average of 17.13x.
For the fiscal fourth quarter of 2022, JNJ's reported sales came in at $23.71 billion. Its non-GAAP adjusted net earnings rose 9.5% year-over-year to $6.22 billion. The company's non-GAAP adjusted net earnings per share rose 10.3% from its year-ago value to $2.35.
For the fiscal first quarter ending March 2023, the consensus EPS estimate is $2.52. Its revenue is expected to increase marginally year-over-year to $23.61 billion for the same quarter. Additionally, JNJ topped consensus EPS estimates in each of the trailing four quarters, which is impressive.
The stock has lost marginally intraday to close its last trading session at $162.04.
JNJ's POWR Ratings reflect this promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
JNJ is rated an A for Value and a B for Stability and Quality. Within the Medical – Pharmaceuticals industry, it is ranked #6 out of 172 stocks.
Click here to see additional POWR Ratings for JNJ (Momentum, Growth, and Sentiment).
Bristol-Myers Squibb Company (BMY)
BMY discovers, develops, manufactures, and markets biopharmaceutical products globally. The company offers solutions for hematology, oncology, cardiovascular, immunology, fibrotic, neuroscience, and COVID-19 diseases.
On February 13, 2023, BMY and Exelixis, Inc. (EXEL) announced three-year follow-up results from the Phase 3 CheckMate-9ER trial, demonstrating sustained survival and response rate benefits with the combination of Opdivo® (nivolumab) and CABOMETYX® (cabozantinib) versus sunitinib in the first-line treatment of advanced renal cell carcinoma. This should enhance the long-term benefits for the patients and the growth prospects of BMY.
On January 3, BMY announced that it had completed the sale of its manufacturing facility in Syracuse, New York, to LOTTE BIOLOGICS. Additionally, the company entered into a contract manufacturing organization (CMO) relationship with LOTTE, under which LOTTE BIOLOGICS would manufacture products for BMY at the facility. The divestiture should support BMY's product portfolio.
On December 8, 2022, BMY declared a quarterly dividend of $0.57 per share, paid to stockholders on February 1, 2023. This represents an increase of 5.6% over its previous quarterly dividend rate of $0.54 per share. Its dividend yield of $2.28 per share translates to a 3.16% yield on current prices.
BMY's dividends have grown at 9.2% and 6.9% CAGRs over the past three and five years, respectively. BMY's four-year average dividend yield is 3.02%. This reflects the company's solid shareholder return ability.
BMY's forward non-GAAP P/E of 9.14x is 53.9% lower than the industry average of 19.82x, while its forward EV/EBIT of 9.92x is 42.1% lower than the industry average of 17.13x.
For the fiscal fourth quarter that ended December 31, 2022, BMY's total revenue stood at $11.41 billion, while total in-line products and new product portfolio revenue increased 7.4% year-over-year to $8.97 billion. Non-GAAP net earnings attributable to BMY stood at $3.87 billion for the same quarter, and the non-GAAP earnings per share stood at $1.82.
Analysts expect BMY's revenue for the fiscal second quarter ending June 2023 to increase marginally year-over-year to $11.95 billion. The company's EPS for the same period is expected to grow 8.5% from the prior-year quarter to $2.09. Moreover, BMY has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in each of the trailing four quarters.
BMY's stock has gained 8.1% over the past year to close the last trading session at $72.25.
BMY's POWR Ratings reflect this promising outlook. The company's overall A rating translates to a Strong Buy in our proprietary rating system.
BMY also has an A grade for Value and a B for Growth, Stability, Sentiment, and Quality. It is ranked #4 in the same industry.
To see additional POWR Ratings for Momentum for BMY, click here.
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JNJ shares fell $0.14 (-0.09%) in premarket trading Wednesday. Year-to-date, JNJ has declined -8.27%, versus a 7.90% 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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