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Buy 5 High-Yielding U.S. Bigwigs to Enhance Your Portfolio
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U.S. stocks markets have gathered pace after some volatility at the beginning of the year. Major stock indexes have recorded two consecutive weeks of gains.
A lower wage rate and a contraction in the services sector PMI raised hopes that inflation is cooling in the desired direction. At the same time, market participants remained optimistic that a resilient labor market would enable the Fed with a soft landing of the economy.
At this stage, it will be prudent to invest in high dividend paying U.S. corporate behemoths with a favorable Zacks Rank. These companies have a strong business model, a solid financial position and globally recognized brand value. A favorable Zacks Rank indicates near-term upside potential of the stocks and high dividend yields should provide a regular income stream.
Immediate Catalysts
The Department of Labor reported that the nonfarm payroll increased 223,000 in December beating the consensus estimate of 208,000. However, December’s job additions fell below November’s data that were revised downward to 256,000 from 263,000 reported earlier.
Hourly wage rate increased 0.3% in December below the consensus estimate of 0.4%. November’s data was revised downward to 0.4% from 0.6% reported earlier. Year over year, the hourly wage rate increased 4.6% in December compared with the consensus estimate of 5%. The wage rate increased 4.8% year over year in November.
Peak inflation seems behind us. Less-than-expected inflation rates in October and November with respect to several measures have clearly indicated this.
The Institute of Supply Management reported that the services sector index for December plummeted to 49.6% in December from 56.5% in November. The consensus estimate was 55.1%. Any reading below 50% indicates a contraction in services activities. The index contracted for the first time since May 2020, at the onset of the coronavirus pandemic.
A devastated housing market owing to the high mortgage rate, disappointing retail sales in December, the peak festive season, huge inventory accumulation by several retailers, a stiff fall in U.S. manufacturing activities and a good chunk of manpower retrenchment by several U.S. corporate giants indicated that the U.S. economy is cooling in the desired direction of the Fed.
Consumer Sentiment Data Indicates Inflation Will Ease
The University of Michigan Surveys of Consumers released on Jan 13 showed that the one-year inflation outlook slipped to a preliminary reading of 4.0% this month from 4.4% in December, the lowest reading since April 2021. At the five-year horizon, the outlook rose to 3.0% from 2.9% last month, staying within the range of 2.9%-3.1% for 17 of the last 18 months.
Per the report, consumers believe that price pressures will ease considerably over the next 12 months, with the one-year inflation outlook falling in January to the lowest level since the spring of 2021. Consequently, consumers spirits are getting a boost. The University of Michigan's preliminary January reading on the overall index of consumer sentiment came in at 64.6%, up from 59.7% in the prior month.
The chart below shows the price performance of our five picks in the past three months.
Image Source: Zacks Investment Research
PepsiCo Inc. (PEP - Free Report) benefits from the resilience and strength of global beverage and convenient food businesses. PEP expects to benefit by delivering convenience, variety and value proposition to customers through its brands. PepsiCo raised its revenue view for 2022.
PepsiCo has been continuously focused on driving greater efficiency and effectiveness, by driving down costs and plowing back these savings to develop scale and core capabilities. In 2019, PEP delivered in excess of $1 billion in productivity savings, keeping it on track with its goal of generating productivity savings of at least $1 billion annually through 2023.
PepsiCo has an expected earnings growth rate of 7.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last seven days. PEP has a current dividend yield of 2.6%.
Mondelez International Inc. (MDLZ - Free Report) has been gaining from the strength in emerging markets and its core chocolate and biscuit categories. MDLZ has also been focused on strengthening areas with higher growth potential through prudent buyouts (like Chipita, Clif Bar and Ricolino) and divestitures.
These upsides, together with pricing actions, fueled Mondelez’s third-quarter 2022 results. Driven by the solid quarterly results and continued momentum in the snacks business, management raised its guidance for 2022.
Mondelez has an expected earnings growth rate of 5.7% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.3% over the last 30 days. MDLZ has a current dividend yield of 2.3%.
McDonald's Corp. (MCD - Free Report) continues to impress investors with robust comps growth. MCD’s increased focus on menu innovation and loyalty program expansion is commendable. MCD is also undertaking every effort to drive growth in international markets. Robust digitalization is likely to help McDonald's to drive long-term growth and capture market share. MCD plans to open more than 1,800 restaurants globally in 2022-23.
McDonald's has an expected earnings growth rate of 5.3% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.1% over the last 30 days. MCD has a current dividend yield of 2.3%.
The Coca-Cola Co. (KO - Free Report) has benefited from its strategic transformation and ongoing recovery around the world. Strength across the majority of markets, investments in marketplace, recovery in certain markets as well as the cycling of last year’s pandemic-led impacts aided volumes. KO retained its upbeat 2022 view. Coca-Cola is poised to gain from innovations and accelerating digital investments.
Coca-Cola has an expected earnings growth rate of 2.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last seven days. KO has a current dividend yield of 2.9%.
International Business Machines Corp. (IBM - Free Report) is likely to witness growth driven primarily by analytics, cloud computing, and security in the long haul. Synergies from the Red Hat buyout are boosting the competitive position of IBM in the hybrid cloud market.
International Business Machines is likely to benefit from the robust adoption and broad-based availability of IBM Blockchain World Wire — a blockchain-driven global payments network aimed at accelerating and optimizing cross-border payments. IBM is also poised to gain from the spin-off of the legacy infrastructure services business as it focuses on the hybrid cloud strategy.
International Business Machines has an expected earnings growth rate of 6.3% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.1% over the last 60 days. IBM has a current dividend yield of 4.5%.
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Buy 5 High-Yielding U.S. Bigwigs to Enhance Your Portfolio
U.S. stocks markets have gathered pace after some volatility at the beginning of the year. Major stock indexes have recorded two consecutive weeks of gains.
A lower wage rate and a contraction in the services sector PMI raised hopes that inflation is cooling in the desired direction. At the same time, market participants remained optimistic that a resilient labor market would enable the Fed with a soft landing of the economy.
At this stage, it will be prudent to invest in high dividend paying U.S. corporate behemoths with a favorable Zacks Rank. These companies have a strong business model, a solid financial position and globally recognized brand value. A favorable Zacks Rank indicates near-term upside potential of the stocks and high dividend yields should provide a regular income stream.
Immediate Catalysts
The Department of Labor reported that the nonfarm payroll increased 223,000 in December beating the consensus estimate of 208,000. However, December’s job additions fell below November’s data that were revised downward to 256,000 from 263,000 reported earlier.
Hourly wage rate increased 0.3% in December below the consensus estimate of 0.4%. November’s data was revised downward to 0.4% from 0.6% reported earlier. Year over year, the hourly wage rate increased 4.6% in December compared with the consensus estimate of 5%. The wage rate increased 4.8% year over year in November.
Peak inflation seems behind us. Less-than-expected inflation rates in October and November with respect to several measures have clearly indicated this.
The Institute of Supply Management reported that the services sector index for December plummeted to 49.6% in December from 56.5% in November. The consensus estimate was 55.1%. Any reading below 50% indicates a contraction in services activities. The index contracted for the first time since May 2020, at the onset of the coronavirus pandemic.
A devastated housing market owing to the high mortgage rate, disappointing retail sales in December, the peak festive season, huge inventory accumulation by several retailers, a stiff fall in U.S. manufacturing activities and a good chunk of manpower retrenchment by several U.S. corporate giants indicated that the U.S. economy is cooling in the desired direction of the Fed.
Consumer Sentiment Data Indicates Inflation Will Ease
The University of Michigan Surveys of Consumers released on Jan 13 showed that the one-year inflation outlook slipped to a preliminary reading of 4.0% this month from 4.4% in December, the lowest reading since April 2021. At the five-year horizon, the outlook rose to 3.0% from 2.9% last month, staying within the range of 2.9%-3.1% for 17 of the last 18 months.
Per the report, consumers believe that price pressures will ease considerably over the next 12 months, with the one-year inflation outlook falling in January to the lowest level since the spring of 2021. Consequently, consumers spirits are getting a boost. The University of Michigan's preliminary January reading on the overall index of consumer sentiment came in at 64.6%, up from 59.7% in the prior month.
Our Top Picks
We have narrowed our search to five U.S. corporate bigwigs (market capital > $50 billion) with a current dividend yield of > 2%. Each of our picks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The chart below shows the price performance of our five picks in the past three months.
Image Source: Zacks Investment Research
PepsiCo Inc. (PEP - Free Report) benefits from the resilience and strength of global beverage and convenient food businesses. PEP expects to benefit by delivering convenience, variety and value proposition to customers through its brands. PepsiCo raised its revenue view for 2022.
PepsiCo has been continuously focused on driving greater efficiency and effectiveness, by driving down costs and plowing back these savings to develop scale and core capabilities. In 2019, PEP delivered in excess of $1 billion in productivity savings, keeping it on track with its goal of generating productivity savings of at least $1 billion annually through 2023.
PepsiCo has an expected earnings growth rate of 7.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last seven days. PEP has a current dividend yield of 2.6%.
Mondelez International Inc. (MDLZ - Free Report) has been gaining from the strength in emerging markets and its core chocolate and biscuit categories. MDLZ has also been focused on strengthening areas with higher growth potential through prudent buyouts (like Chipita, Clif Bar and Ricolino) and divestitures.
These upsides, together with pricing actions, fueled Mondelez’s third-quarter 2022 results. Driven by the solid quarterly results and continued momentum in the snacks business, management raised its guidance for 2022.
Mondelez has an expected earnings growth rate of 5.7% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.3% over the last 30 days. MDLZ has a current dividend yield of 2.3%.
McDonald's Corp. (MCD - Free Report) continues to impress investors with robust comps growth. MCD’s increased focus on menu innovation and loyalty program expansion is commendable. MCD is also undertaking every effort to drive growth in international markets. Robust digitalization is likely to help McDonald's to drive long-term growth and capture market share. MCD plans to open more than 1,800 restaurants globally in 2022-23.
McDonald's has an expected earnings growth rate of 5.3% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.1% over the last 30 days. MCD has a current dividend yield of 2.3%.
The Coca-Cola Co. (KO - Free Report) has benefited from its strategic transformation and ongoing recovery around the world. Strength across the majority of markets, investments in marketplace, recovery in certain markets as well as the cycling of last year’s pandemic-led impacts aided volumes. KO retained its upbeat 2022 view. Coca-Cola is poised to gain from innovations and accelerating digital investments.
Coca-Cola has an expected earnings growth rate of 2.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last seven days. KO has a current dividend yield of 2.9%.
International Business Machines Corp. (IBM - Free Report) is likely to witness growth driven primarily by analytics, cloud computing, and security in the long haul. Synergies from the Red Hat buyout are boosting the competitive position of IBM in the hybrid cloud market.
International Business Machines is likely to benefit from the robust adoption and broad-based availability of IBM Blockchain World Wire — a blockchain-driven global payments network aimed at accelerating and optimizing cross-border payments. IBM is also poised to gain from the spin-off of the legacy infrastructure services business as it focuses on the hybrid cloud strategy.
International Business Machines has an expected earnings growth rate of 6.3% for the current year. The Zacks Consensus Estimate for current-year earnings improved 0.1% over the last 60 days. IBM has a current dividend yield of 4.5%.