The market lapsed after Fed Chair Jerome Powell expressed concerns over the pace of interest-rate increases, and a new streak of volatility might have set in. With uncertainties still hanging around, investors could opt for dividend stocks that conventionally provide consistent returns.
So let us dive into fundamentally strong AbbVie Inc. (ABBV), Cisco Systems, Inc. (CSCO), Westlake Chemical Partners LP (WLKP), and Spok Holdings, Inc. (SPOK) that are well-positioned to generate passive income and deliver outperformance in turbulent market times.
U.S. stocks plummeted following the Fed Chairman’s remarks during the Senate Banking Committee testimony that interest rates may rise ‘higher’ than previously expected as the Fed continues a persistent fight against inflation. Powell's concern over the hot data from January and early February led him to warn that the Fed may increase rates faster if the data supported such a move.
While it's no surprise that the terminal rate will have to move higher given the hot Personal Consumption Expenditures (PCE) report, investors await the latest Jobs Report, Consumer Price Index (CPI), and the Fed’s decision slated to release in two weeks, which could impact whether a recession becomes official.
Amid this backdrop, investing in quality dividend-paying stocks could offer investors an opportunity to cushion their portfolios against market volatility and generate a steady income stream. Over the past year, the SPDR S&P Dividend ETF’s (SDY) marginal gains outpaced the S&P 500, which plunged 4.2%.
Therefore, investors could scoop up fundamentally strong dividend stocks, ABBV, CSCO, WLKP, and SPOK, to add a defensive layer to their portfolios. Given their impressive yields and solid growth prospects, these stocks could be excellent buys for passive income-seeking investors.
AbbVie Inc. (ABBV)
ABBV is engaged in developing, manufacturing, and selling pharmaceuticals globally. It offers its products in various categories: immunology, oncology, neuroscience, eye care, and women's healthcare. The company markets its products to wholesalers, distributors, government agencies, healthcare facilities, and independent retailers.
On February 23, ABBV and Capsida Biotherapeutics Inc. announced an expanded strategic collaboration to develop genetic medicines for eye diseases with high unmet needs. This partnership combines ABBV’s extensive capabilities with Capsida's novel adeno-associated virus (AAV) engineering platform to deliver novel therapies enabling extraordinary benefits to eye patients.
On January 10, ABBV and Anima Biotech collaborated on discovering and developing mRNA biology modulators for three targets across oncology and immunology. This collaboration leverages Anima's mRNA Lightning technology platform and ABBV’s extensive expertise to strengthen the company’s capability to address 'undruggable' targets with implications across multiple therapy areas.
On February 16, the company declared a quarterly dividend of $1.48 per share, payable to its shareholders on May 15, 2023. Its forward annual dividend of $5.92 translates to a 3.9% yield on current prices. ABBV’s four-year average dividend yield is 4.59%.
Its dividends have grown at 9.2% and 16.9% CAGRs over the past three and five years, respectively. Also, it has a record of nine years of consecutive dividend growth.
ABBV’s trailing-12-month gross profit margin of 71.53% is 28.8% higher than the 55.54% industry average. Likewise, its trailing-12-month EBITDA margin of 53.55% is significantly higher than the industry average of 3.39%.
ABBV’s net revenues increased 1.6% year-over-year to $15.12 billion in the fourth quarter that ended December 31, 2022. The company’s non-GAAP net earnings increased 16.5% from the year-ago value to $6.42 billion, while its adjusted EPS rose 16.9% from the prior-year quarter to $3.60.
Analysts expect ABBV’s EPS to increase marginally year-over-year to $11.11 in the fiscal year 2024. It surpassed the EPS estimates in each of the trailing four quarters. ABBV has gained 6.5% over the past six months to close the last trading session at $149.60.
ABBV’s POWR Ratings reflect this promising outlook. 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.
It has an A grade for Quality and a B for Stability. Among the 169 stocks in the Medical – Pharmaceuticals industry, it is ranked #12. To see the other ratings of ABBV for Growth, Value, Momentum, and Sentiment, click here.
Cisco Systems, Inc. (CSCO)
CSCO designs, manufactures, and sells Internet Protocol-based networking and other communications and information technology products. In addition, it provides infrastructure platforms, including networking technologies of switching, routing, wireless, and data center products.
On February 27, the company partnered with Mercedes-Benz AG to provide an optimal mobile office experience in its new Mercedes-Benz E Class vehicles. The vehicles would be equipped with Webex Meetings and Calling and utilize Webex AI audio capabilities to enable greater flexibility for the hybrid workforce and modern luxury and intuitive features.
In the same month, CSCO introduced powerful new cloud management tools for industrial IoT applications, simplified dashboards to converge IT and OT operations, and flexible network intelligence to see and secure all industrial assets. With these new innovations, the company should be able to provide greater visibility and control over networks.
On January 31, CSCO exhibited its new range of collaboration devices for Microsoft Teams and unveiled the new Cisco Table Microphone Pro, a digital and multi-directional table microphone for hybrid workspaces and audio interoperability advancements.
Such innovations are expected to advance hybrid workers’ experience by delivering more inclusivity and choice for meetings while improving the manageability, configuration, and security required by IT.
On February 15, the company declared a quarterly dividend of $0.39 per common share, representing an increase of 3% from the previous quarter. This dividend is payable on April 26, 2023. It pays a $1.56 per share dividend annually, which translates to a 3.18% yield on the current price. Its four-year average dividend yield is 3%.
The company’s dividend payouts have grown at a 2.8% CAGR over the past three years and a 5.6% CAGR over the past five years. Moreover, CSCO has a record of 11 years of consecutive dividend growth.
CSCO’s trailing 12-month net income margin of 21.26% is 628.8% higher than the industry average of 2.92%. Likewise, the stock’s trailing-12-month ROCE and ROTA of 27.92% and 11.79% compare to the industry averages of 4.75% and 1.54%, respectively.
For the fiscal second quarter that ended January 28, 2023, CSCO’s total revenue increased 6.9% year-over-year to $13.59 billion, and its gross margin grew 4.7% from the year-ago value to $8.43 billion. Its non-GAAP operating came in at $4.41 billion, up 1.1% year-over-year.
Furthermore, the company’s non-GAAP net income increased 2.6% year-over-year to $3.64 billion, while its adjusted EPS came in at $0.88, indicating an increase of 4.8% year-over-year.
The consensus EPS estimate of $0.97 for the third quarter (ending April 30, 2023) represents an 11.6% improvement year-over-year. The consensus revenue estimate of $14.40 billion for the current quarter indicates a 12.2% increase from the prior-year period. The company has an excellent earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 9.3% over the past nine months to close the last trading session at $49.11.
CSCO’s solid prospects are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system.
It also has an A grade for Quality and a B for Stability. Within the B-rated Technology - Communication/Networking industry, it is ranked #3 out of 49 stocks. Click here to see the additional ratings of CSCO (Growth, Value, Momentum, and Sentiment).
Westlake Chemical Partners LP (WLKP)
WKLP acquires, develops, and operates ethylene production facilities and related assets in the United States. The company’s ethylene production facilities primarily convert ethane into ethylene. It also sells ethylene co-products, including propylene, crude butadiene, pyrolysis gasoline, and hydrogen, directly to third parties on either a spot or contract basis.
On February 16, WLKP paid a quarterly dividend of $0.4714 per unit, marking the 34th consecutive quarterly distribution to its unitholders. Its annual dividend of $1.89 yields 8.47% on prevailing prices. The company’s dividend payouts have increased at a 4.9% CAGR over the past five years.
During the fourth fiscal quarter, WLKP’s total net sales increased 11% year-over-year to $366.84 million. Its attributable net income and EBITDA amounted to $16.78 million and $125.55 million, respectively, for the same quarter.
Its total liabilities declined 7.8% to $468.27 million for the period that ended December 31, 2022, compared to $508 million in the same period last year.
Analysts expect WLKP’s EPS and revenue to increase 12.4% and 8.7% year-over-year to $0.52 and $394 million, respectively, for the fiscal first quarter (ending March 31, 2023). The company surpassed the consensus revenue estimates in three of the trailing four quarters, which is impressive.
WLKP’s trailing 12-month EBIT margin and EBITDA margin of 21.82% and 29.42% are 69% and 53.3% higher than the industry averages of 12.91% and 19.19%, respectively. Likewise, the stock’s trailing-12-month levered FCF margin of 20.05% compare to the industry average of 4.68%.
Over the past three months, the stock has gained marginally to close its last trading session at $22.26.
WLKP’s strong fundamentals are reflected in its POWR Ratings. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. The stock also has an A grade for Value and Quality and a B for Stability and Sentiment. It is ranked first out of nine stocks in the B-rated MLPs – Other industry.
To see additional POWR Ratings of Growth and Momentum for WLKP, click here.
Spok Holdings, Inc. (SPOK)
SPOK operates as a healthcare communication solution provider, offering a suite of unified clinical communication and collaboration solutions. The company offers its products and services through three market segments: healthcare; government; and large enterprises.
On February 22, the company declared a quarterly dividend of $0.3125 per share, payable on March 30, 2023. SPOK’s four-year average dividend yield is 6.73%, and its current dividend of $1.25 translates to an 11.95% yield on prevailing prices. Its dividends have grown at a 35.7% CAGR over the past three years and a 10.8% CAGR over the past five years.
For the fiscal fourth quarter that ended on December 31, 2022, SPOK’s operating income and net income came in at $2.96 million and $24.23 million, versus an operating loss and net loss of $20.81 million and $16.67 million in the year-ago period.
Its net income per common share improved 240.7% year-over-year to $4.66 million. Also, its adjusted EBITDA amounted to $5.65 million compared to an adjusted EBITDA loss of $3.79 million in the same quarter last year.
The consensus EPS estimate of $0.18 for the second quarter ending June 30, 2023, indicates an 80% increase year-over-year. Shares of SPOK have gained 46.5% over the past nine months and 27.7% year-to-date to close the last trading session at $10.46.
SPOK’s trailing 12-month net income margin of 16.25% is 386.7% higher than the industry average of 3.34%. Likewise, the stock’s trailing-12-month ROCE and ROTA of 12.64% and 8.94% compare to the industry averages of 3.62% and 1.68%, respectively.
It is no surprise that SPOK has an overall rating of A, equating to a Strong Buy in our proprietary rating system. It has an A grade for Growth, Sentiment, and Quality. Out of 19 stocks in the Telecom - Domestic industry, it is ranked first.
In addition to the POWR Ratings stated above, we have also given SPOK grades for Value, Momentum, and Stability. Get all SPOK ratings here.
What To Do Next?
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What gives these stocks the right stuff to become big winners, even in this brutal stock market?
First, because they are all low-priced companies with the most upside potential in today’s volatile markets.
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Click below now to see these 3 exciting stocks that could double or more in the year ahead.
ABBV shares were trading at $149.06 per share on Thursday afternoon, down $0.54 (-0.36%). Year-to-date, ABBV has declined -6.89%, versus a 4.18% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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