The U.S. Gross Domestic Product (GDP) rose at a 2.9% annualized pace in the fourth quarter, surpassing the Dow Jones estimate of 2.8%. The restoration of growth in the fourth quarter was led by increases in consumer spending, government spending, private inventory investment, and non-residential fixed investment.
Inflation has shown signs of cooling as it eased for the sixth consecutive month in December. However, the Fed is expected to keep raising interest rates this year until it can bring inflation down to its desired level.
The Fed’s tight monetary policy could fuel a recession this year. Amid this uncertainty, investors looking to stabilize their portfolios could add established businesses with strong fundamentals and solid dividend yields.
To that end, investors should consider buying fundamentally strong stocks Johnson & Johnson (JNJ), The Kroger Co. (KR), and Bluegreen Vacations Holding Corporation (BVH).
Johnson & Johnson (JNJ)
JNJ researches, develops, manufactures, and sells various products in the healthcare field worldwide. It operates under three segments: Consumer Health, Pharmaceutical, and MedTech.
Over the last three years, JNJ’s dividend payouts have grown at a 5.9% CAGR. Its four-year average dividend yield is 2.60%, and its forward annual dividend of $4.52 per share translates to a 2.77% yield on the current price level. It is expected to pay a quarterly dividend of $1.13 per share on March 7, 2023.
On December 22, 2022, JNJ announced its acquisition of Abiomed, Inc. (ABMD). JNJ’s CEO, Joaquin Duato, believes that this acquisition is essential to accelerate growth in its MedTech business segment and deliver innovative medical technologies to more people around the world.
JNJ’s U.S. sales increased 2.9% year-over-year to $12.52 billion for the fourth quarter (ended December 31, 2022). Its non-GAAP net earnings rose 9.5% year-over-year to $6.22 billion. The company’s non-GAAP EPS increased 10.3% from the year-ago value to $2.35.
JNJ's EPS for the quarter ending June 30, 2023, is expected to increase 0.9% year-over-year to $2.61. Its revenue for the quarter ending March 31, 2023, is expected to increase 0.8% year-over-year to $23.61 billion.
The company has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past three months, the stock has fallen 6.1% to close the last trading session at $163.42.
JNJ’s strong fundamentals are reflected in its POWR Ratings. The company 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.
In addition, it has a B grade for Value, Stability, and Quality. Within the Medical - Pharmaceuticals industry, it is ranked #5 of 172 stocks.
Click here to see the additional POWR Ratings of JNJ for Growth, Momentum, and Sentiment.
The Kroger Co. (KR)
KR operates combination food and drug stores, multi-department stores, marketplace stores, and price impact warehouses. Its combination food and drug stores offer natural food, organic sections, pharmacies, general merchandise, and pet centers, and multi-department stores provide apparel, home fashion, furnishings, electronics, and toys.
Over the last three years, KR’s dividend payouts have grown at a 16.1% CAGR. Its four-year average dividend yield is 1.98%, and its forward annual dividend of $1.04 per share translates to a 2.33% yield on prevailing prices. It is expected to pay a quarterly dividend of $0.26 per share on March 1, 2023.
On December 16, 2022, Kroger Health, the healthcare division of KR, and Prime Therapeutics LLC announced a direct agreement for the Kroger Family of Pharmacies to remain in-network. President of Kroger Health, Colleen Lindholz, said, "We look forward to working collaboratively to improve the health outcomes of our collective customers by increasing health access, delivering pricing transparency and ensuring affordable prices."
For the fiscal third quarter (ended November 5, 2022), KR’s sales increased 7.3% year-over-year to $34.20 billion. Adjusted net earnings attributable to KR rose 9.2% from the prior-year quarter to $643 million. Additionally, its adjusted EPS came in at $0.88, representing a 12.8% increase from the prior-year quarter.
Analysts expect KR’s EPS for the quarter ending April 30, 2023, to increase 2.2% year-over-year to $1.48. Its revenue for the quarter ending January 2023 is expected to increase 5.4% year-over-year to $34.82 billion.
It has a commendable earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 2.4% to close the last trading session at $44.63.
KR’s promising prospects are reflected in its POWR ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. It is ranked #9 out of 39 stocks in the A-rated Grocery/Big Box Retailers industry. It has a B grade for Growth, Value, and Quality.
We have also given KR grades for Momentum, Stability, and Sentiment. Get all KR ratings here.
Bluegreen Vacations Holding Corporation (BVH)
BVH operates as a vacation ownership company. It markets and sells vacation ownership interests and manages resorts in leisure and urban destinations. The company provides resort management, mortgage, title, reservation, construction design, and other services.
Over the last three years, BVH’s dividend payouts have grown at a 32.8% CAGR. Its four-year average dividend yield is 0.77%, and its trailing-12-month annual dividend of $0.45 per share translates to a 1.39% yield. It paid a quarterly dividend of $0.15 per share on November 21, 2022.
For the fiscal third quarter (ended September 30, 2022), BVH’s total revenue increased 16.9% year-over-year to $250.80 million. The company’s net income increased 1.2% year-over-year to $27.65 million, compared to $1.21 billion for the fiscal year that ended December 31, 2021.
In addition, its EPS came in at $1.19, representing a 12.3% increase from the prior-year quarter. Its adjusted EBITDA came in at $46.59 million.
Analysts expect BVH’s EPS and revenue estimates for the quarter that ended December 31, 2022, to increase 8.1% and 2.7% year-over-year to $0.64 and $208.46 million, respectively. Over the past three months, the stock has gained 87.4% to close the last trading session at $32.44.
BVH’s POWR Ratings reflect its positive outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It is ranked first out of 22 stocks in the Travel - Hotels/Resorts industry. It has an A grade for Value and Sentiment and a B for Quality.
Beyond what we have stated above, we have also given BVH grades for Growth, Momentum, and Stability. Get all BVH ratings here.
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JNJ shares were trading at $164.31 per share on Wednesday afternoon, up $0.89 (+0.54%). Year-to-date, JNJ has declined -6.99%, versus a 5.74% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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