These 2 Stocks Are Proven Long-Term Winners Inflation is far from the Fed's target, which might induce it to deliver more rate hikes in the coming months, increasing the likelihood of a recession. Amid this, we think...

Inflation is far from the Fed's target, which might induce it to deliver more rate hikes in the coming months, increasing the likelihood of a recession. Amid this, we think investors should consider buying fundamentally sound stocks, Coca-Cola (KO) and United Parcel Services (UPS), which are proven long-term winners and reliable dividend payers. Keep reading….

According to the Federal Reserve, U.S economic activity expanded modestly in recent weeks. Moreover, the Fed noted that the inflation pressures had eased somewhat and are expected to wane further, indicating that the aggressive interest rate hikes may have started to turn the tide.

However, inflation is nowhere near the Fed's target of 2%, and the Fed is expected to continue its rate hikes to tame it. Amid the consecutive rate hikes, a recession looks increasingly likely.

On the other hand, corporate earnings are a big focus on Wall Street this week. As of October 20, out of 64 S&P 500 components that have reported third-quarter earnings, more than 70% have reported a positive surprise.

Amid the uncertainty ahead, we think fundamentally sound stocks, The Coca-Cola Company (KO) and United Parcel Service, Inc. (UPS), which are proven long-term winners, could be ideal buys now. Moreover, these companies have a long history of stable dividend growth.

The Coca-Cola Company (KO)

KO is a popular beverage company that manufactures, markets, and sells various nonalcoholic beverages worldwide. The company offers sparkling soft drinks, flavored and enhanced water, sports drinks, juice, dairy, plant-based beverages, and energy drinks.

On September 29, KO and Molson Coors Beverage Company (TAP) entered into an exclusive agreement to develop and commercialize Topo Chico Spirited, a line of spirit-based, ready-to-drink cocktails inspired by the bright and refreshing taste of tequila and vodka-based beverages. It will be launched in more than 20 markets across the country in 2023 and might bolster the company's revenue stream.

On October 20, KO declared a quarterly dividend of 44 cents per common share, payable to shareholders on December 20. Its annual dividend of $1.76 yields 3.20% on prevailing prices. The company's dividend payouts have increased 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 years of consecutive dividend growth.

KO's net operating revenue increased 11.8% year-over-year to $11.33 billion in the second quarter that ended July 1. Its non-GAAP gross profit grew 7.2% from the year-ago value to $6.67 billion, while its non-GAAP net income improved 4.4% year-over-year to $3.06 billion. The company's non-GAAP net earnings per common share increased 2.9% from its year-ago value to $0.70.

KO's revenue estimate of $42.05 billion represents 8.8% growth from the prior year for the current fiscal year ending December 2022. Similarly, its EPS is estimated to improve by 5.8% year-over-year to $2.465 for the same year. On top of it, KO has surpassed EPS estimates in all four trailing quarters, which is impressive.

The stock declined 1.5% intraday to close its last trading session at $55.08.

KO's POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

KO is rated a B in Stability, Sentiment, and Quality. Within the A–rated Beverages industry, it is ranked #20 out of 35 stocks.

Beyond what we've stated above, we have also given KO grades for Value, Momentum, and Growth. Get all KO ratings here.

United Parcel Service, Inc. (UPS)

UPS provides package delivery services and supply chain management solutions globally. The company operates through two broad segments, U.S. Domestic Package and International Package.

On August 8, 2022, UPS announced its plans to acquire Bomi Group, an industry-leading multinational healthcare logistics provider. The transaction is expected to enhance the company's end-to-end global healthcare logistic capabilities by adding temperature-controlled facilities in 14 countries and nearly 3,000 highly skilled team members to the UPS Healthcare network in Europe and Latin America.

On August 3, UPS announced its regular quarterly dividend of $1.52 on all outstanding Class A and B shares, which was payable on September 1. Its annual dividend of $6.08 yields 3.78% on prevailing prices. The company's dividend payouts have increased at a 13.8% CAGR over the past three years and an 11.3% CAGR over the past five years. The company has a record of 12 years of consecutive dividend growth.

During the second fiscal quarter that ended June 30, 2022, UPS' consolidated revenues increased 5.7% from the year-ago value to $24.80 billion. The company's adjusted consolidated operating profit increased 9.3% year-over-year to $3.58 billion. Adjusted EPS for the quarter increased 7.5% year-over-year to $3.29.

For the current fiscal year ending December 2022, analysts expect UPS's revenue to rise 4.5% year-over-year to $101.64 billion. Its EPS is likely to increase 5.4% year-over-year to $12.78. The company has an impressive earnings surprise history, as it has topped consensus EPS estimates in each of the trailing four quarters.

The stock has declined marginally over the past five days to close the last trading session at $160.98.

It is no surprise that the company has an overall rating of B, which translates to Buy in our proprietary rating system.

The stock has an A grade for Quality and a B for Stability. UPS is ranked #6 among 17 stocks in the A-rated Air Freight & Shipping Services industry.

Click here to access additional ratings for UPS for Growth, Value, Momentum, and Sentiment.

KO shares were trading at $55.05 per share on Friday morning, down $0.03 (-0.05%). Year-to-date, KO has declined -4.95%, versus a -22.30% rise in the benchmark S&P 500 index during the same period.

About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.

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