Macroeconomic volatilities have dashed investor sentiments, and the likelihood of a continued bear market stands high. Therefore, we take a look at some of the “safe-haven” stocks Walmart Inc. (WMT), AbbVie Inc. (ABBV), and CVS Health Corporation (CVS), which could help survive a market downturn.
A blowout jobs report pushed the unemployment rate to a 53-year low, and despite high inflation, consumers fueled the economy with robust spending, have created significant pressure on the market. Adding to the anxiety are the Fed’s hawkish comments that signaled rate hikes are crucial to tame inflation and are not likely to stop anytime soon.
The market started this year with a state of euphoria, premised on the idea of easing inflation, booming economic data, and anticipations of rate hikes to end soon. But with situations reversed, experts anticipate the reversal to be excruciating, and aggressive rate hikes could tip the economy into recession, resulting in a bear market soon.
Over the past three months, the S&P 500 declined marginally, and the Dow Jones slipped 3.1%. Moreover, recently, after Dow dropped 697.10 points, B. Riley Wealth’s chief market strategist Art Hogan commented, “Now, I think the equity market is catching up to the fact that the Fed speakers mean business, and this data may well mean higher-for-longer interest rates … It’s just a catch-up that was overdue.”
Against this backdrop, fundamentally strong dividend-paying stocks WMT, ABBV, and CVS might be wise portfolio additions to navigate an anticipated bear market.
Walmart Inc. (WMT)
WMT engages in the operation of retail, wholesale, and other units worldwide. The company operates through three segments: Walmart U.S.; Walmart International; and Sam’s Club.
On January 12, 2023, Walmart Commerce Technologies, one of WMT’s companies, and Walmart GoLocal recently announced a partnership with Salesforce Inc. (CRM) to give retailers access to the tools and services that enable frictionless local pickup and delivery for customers worldwide.
WMT’s trailing-12-month ROCE of 14.60% is 40.4% higher than the 10.40% industry average. Its trailing-12-month ROTC of 8.71% is 41.2% higher than the 6.17% industry average.
WMT’s board of directors approved an annual dividend for the fiscal year 2024 of $2.28 per share, an increase of approximately 2% from the $2.24 per share paid for the previous fiscal year. This marks its 50th consecutive year of dividend increase. The annual dividend is payable in four quarterly installments of $0.57 per share.
WMT’s annual dividend of $2.28 per share translates to a 1.58% yield on current prices. Its dividends have grown at 1.9% CAGRs over the past three and five years. Its four-year average dividend yield is 1.68%.
WMT’s total revenues increased 7.3% year-over-year to $164.05 billion in the fiscal fourth quarter that ended January 31, 2023. Also, its net sales came in at $162.74 billion, up 7.4% year-over-year. Consolidated net income attributable to WMT increased 76.2% year-over-year to $6.28 billion. Its adjusted EPS came in at $1.71, representing an 11.8% year-over-year rise.
Street expects WMT’s revenue to increase 5% year-over-year to $147.31 billion for the fiscal first quarter ending April 2023. Its EPS for the same quarter is estimated to come at $1.30. It surpassed revenue estimates in each of the four trailing quarters.
Over the past six months, the stock has gained 7.2% to close the last trading session at $144.24. Over the past month, it has gained 2.6%.
WMT’s POWR Ratings reflect this promising outlook. It has an overall A rating, equating to a Strong Buy in our proprietary system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Stability and B for Growth and Quality. Within the A-rated Grocery/Big Box Retailers industry, it is ranked #4 out of 38 stocks.
Click here for the additional POWR Ratings for Value, Momentum, and Sentiment for WMT.
AbbVie Inc. (ABBV)
ABBV is a research-based biopharmaceutical company that develops, manufactures, and sells pharmaceuticals worldwide. The company’s product offerings include HUMIRA, SKYRIZI, and RINVOQ.
On January 10, 2023, ABBV and Anima Biotech partnered to discover and develop mRNA biology modulators for three targets across oncology and immunology. The agreement would provide ABBV access to Anima’s superior technology platform and deep understanding of mRNA biology, strengthening its world-class capabilities in discovering and developing medications.
On January 6, ABBV and Immunome, Inc. (IMNM), a clinical-stage biopharmaceutical firm, announced a global partnership and option agreement to discover up to 10 novel antibody-target pairings resulting from three specific tumor types using IMNM’s Discovery Engine.
The strategy employed by IMNM holds the potential to unlock novel cancer biology and yield multiple therapeutic candidates. ABBV intends to utilize IMNM’s Discovery Engine to strengthen its existing oncology pipeline.
On February 16, ABBV declared a quarterly dividend of $1.48 per share, payable to shareholders on May 15, 2023. ABBV has raised its dividends for nine consecutive years. Since the company's inception in 2013, the company has increased its dividend by more than 270%.
Its annual dividend of $5.92 per share dividend translates to a 3.93% yield on the current price level. ABBV’s dividend payments have grown at a CAGR of 9.2% and 16.9% over the past three and five years, respectively. Its four-year average dividend yield is 4.60%.
ABBV’S trailing-12-month gross profit margin of 71.53% is 28.5% higher than the 55.67% industry average. Its trailing-12-month EBITDA margin of 53.55% is significantly higher than the 3.74% industry average.
ABBV’s net revenues came in at $15.12 billion for the fourth quarter that ended December 31, 2022, up 1.6% year-over-year. Its operating earnings increased 8.4% year-over-year to $5.50 billion. In addition, its total operating cost and expenses decreased 2% year-over-year to $9.62 billion. Its adjusted earnings per share came in at $3.60, up 16.9% year-over-year.
For the fiscal second quarter ending June 2023, analysts expect ABBV’s revenue and EPS to come in at $13.44 billion and $2.88. The company surpassed the consensus EPS estimates in each of the trailing four quarters.
ABBV’s shares have gained 3.5% over the past year and 7.4% over the past six months to close the last trading session at $150.67.
It is no surprise that ABBV has an overall A rating, equating to a Strong Buy in our POWR Ratings system.
ABBV has an A grade for Quality and a B for Value and Stability. It is ranked #11 in the 173-stock Medical – Pharmaceuticals industry.
Beyond what has been stated above, we’ve also rated ABBV for Momentum, Growth, and Sentiment. Click here to see all POWR Ratings of ABBV.
CVS Health Corporation (CVS)
CVS provides health services in the United States. The company operates through three segments: Health Care Benefits; Pharmacy Services; and Retail/LTC. It operates retail locations, online retail pharmacy websites, LTC pharmacies, and onsite pharmacies.
On December 1, 2022, CVS opened its first MinuteClinic locations in northern Delaware. MinuteClinic, the medical clinics inside select CVS Pharmacy stores, offers affordable care for acute and chronic conditions for patients aged 18 months or older. The new locations might be beneficial for the company.
On December 15, CVS announced a quarterly dividend of $0.605 per share on the corporation’s common stock, which indicates an increase of 10% over the previous quarterly dividend. The dividend was paid to its shareholders on February 1, 2023. This reflects the cash generation ability of the company.
Its annual dividend of $2.42 per share dividend translates to a 2.77% yield on the current price. CVS’ dividend payments have grown at a CAGR of 4.1% and 2.4% over the past three and five years, respectively. Its four-year average dividend yield is 2.75%.
CVS’ trailing-12-month ROCE is 5.68% compared to the negative 39.49% industry average. Its trailing-12-month EBITDA margin of 6.11% is 63.6% higher than the 3.74% industry average.
For the fiscal fourth quarter that ended December 31, 2022, CVS’ total revenues increased 9.5% year-over-year to $83.85 billion. Its adjusted operating income stood at $4 billion. In addition, net income attributable to CVS stood at $2.30 billion, up 76.3% year-over-year, while the company’s adjusted earnings per share came in at $1.99, up marginally year-over-year.
Analysts expect CVS’ revenue and EPS for the fiscal second quarter (ending June 2023) to increase 3.4% and 2.1% from the prior-year period to $83.37 billion and $2.45, respectively. Also, the company surpassed the consensus EPS and revenue estimates in each of the trailing four quarters, which is impressive.
Over the past five days, the stock has lost marginally to close the last trading session at $87.21.
CVS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
CVS has a B for Value and Stability. It is ranked first out of the four stocks in the B-rated Medical – Drug Stores industry.
Beyond what we’ve mentioned above, we have also given CVS grades for Growth, Momentum, Sentiment, and Quality. Get all the CVS ratings here.
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WMT shares were unchanged in premarket trading Thursday. Year-to-date, WMT has gained 1.73%, versus a 4.21% 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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