January’s robust jobs report raises concerns about how long the Fed will keep interest rates high. Market experts now expect a higher final interest rate. As uncertainty settles, quality stocks Gilead Sciences (GILD), Valero Energy (VLO) and ARC Document (ARC) that pay stable dividends could be ideal buys for 2023. Read on.
While the stock market got off to a solid start this year, surprisingly strong job numbers raise concerns about aggressive action by the Federal Reserve. US job growth accelerated sharply in January, with nonfarm payrolls rising rapidly 517,000 jobs, well above the estimate of 185,000. The unemployment rate hit a more than 50-year low of 3.4%.
The Federal Reserve probably will, according to Morgan Stanley’s latest research paper raise interest rates by another 25 basis points at the March policy meeting. The company also raised the top Fed Funds rate from a previous estimate of 4.75% to 4.875% and sees the first rate cut in December 2023.
In addition, Reuters market analyst John Kemp said in a column that U.S. manufacturers “likely to enter a recessionin the fourth quarter of last year, based on the new results of the monthly Institute for Supply Management Report.
While the manufacturing industry has so far avoided widespread layoffs, Kemp attributed this in part to “labor hoarding” or a reluctance by companies to let workers go after struggling to attract labor over the past year.
As uncertainty is expected to remain, stocks offering high and stable dividends are Gilead Sciences, Inc. (GUILD), Valero Energy Corporation (FLEA), and ARC Document Solutions, Inc. (BOW), perhaps ideal purchases for 2023.
Gilead Sciences Inc. (GUILD)
GILD, a biopharmaceutical company, discovers, develops and commercializes medicines for unmet medical needs in the United States, Europe and internationally.
On Feb. 3, GILD announced that the U.S. Food and Drug Administration (FDA) had approved Trodelvy for the treatment of breast cancer in adult patients who have received endocrine therapy and at least two additional systemic therapies in the metastatic setting.
Trodelvy is also recommended as a category 1 treatment of choice for metastatic HR+/HER2 breast cancer by the National Comprehensive Cancer Network (NCCN) as defined in the Clinical Practice Guidelines in Oncology. This represents an important achievement for the company.
On February 2, GILD announced a 2.7% increase in the company’s quarterly cash dividend, resulting in a quarterly dividend of $0.75 per common share, payable March 30.
GILD pays $3.00 annually as a dividend. This translates to one yield of 3.55% at the current price, compared to the 4-year average dividend yield of 4.00%. Dividend payments have grown at a CAGR of 5% and 7% respectively over the past three and five years. It has also paid dividends for seven consecutive years.
GILD’s total revenues increased 2% year-over-year to $7.39 billion in the fourth quarter, which ended December 31, 2022. The company’s non-GAAP net income increased 143.2% year-over-year to $2 .11 billion, while non-GAAP EPS increased 142% year over year to $1.67.
Analysts expect GILD’s revenue for the fiscal second quarter ending June 2023 to be $6.48 billion, indicating 3.6% year-over-year growth. The company’s earnings per share are expected to increase 8.3% from the same quarter last year to $1.71 for the same quarter. Plus, it beat consensus revenue and EPS estimates in each of the next four quarters, which is impressive.
The stock is up 41.2% over the past nine months to close out its last trading session at $86.36.
from GILD POWR ratings reflect the promising prospects. The stock has an overall rating of A, which translates to a strong buy in our proprietary rating system. The POWR ratings are calculated by considering 118 different factors, with each factor optimally weighted.
GILD also has an A rating for Value and B for Quality. It ranks number 5 out of 401 stocks in the Biotech industry.
To access additional assessments for GILD’s growth, stability, sentiment and momentum, click here.
Valero Energy Company (FLEA)
VLO manufactures, markets and sells transportation fuels and petrochemical products in the United States, Canada, United Kingdom, Ireland and internationally. The company operates in three segments: refining; renewable diesel; and ethanol.
On January 31, VLO and Darling Ingredients Inc. (OVER THERE) announced that the companies have made the final investment decision on a Sustainable Aviation Fuel (SAF) project at the Diamond Green Diesel (DGD) plant in Port Arthur, owned and operated by Diamond Green Diesel Holdings LLC, a 50/ 50 joint venture between VLO and DAR.
With the completion of this project, DGD Port is expected to be one of the largest SAF manufacturers in the world.
On January 31, VLO announced an increase in the company’s regular quarterly cash dividend on common stock from $0.98 per share to $1.02 per share. The dividend will be made payable on 16 March.
VLO pays an annual dividend of $4.08 per share, which translates to a yield of 3.10% on the current price. Dividend payments have grown at a CAGR of 2.9% and 7% over the past three and five years. The company has an average four-year dividend yield of 5.03%. It has also paid dividends for 25 consecutive years.
For the fiscal fourth quarter ended December 31, 2022, VLO revenue increased 16.3% year over year to $41.75 billion. Adjusted net income attributable to VLO grew 227% year-over-year to $3.23 billion, while adjusted earnings per share increased 250.6% year-over-year to $8.45.
VLO’s revenue is expected to grow 2.1% year-over-year to $39.34 billion for the current quarter ending March 2023. The company’s earnings per share for the same quarter are expected to grow 184% year-over-year to $6.56.
Shares of VLO are up 22% over the past six months to close out the latest trading session at $128.09.
VLO’s strong fundamentals are reflected in its POWR ratings. The stock has an overall rating of A, which equates to a strong buy in our proprietary rating system.
The stock has an A rating for Momentum and a B for Growth, Quality and Value. Within the B rating Energy – Oil & Gas industry, it ranks number 4 out of 93 stocks.
In addition to what has been stated above, we also assessed VLO for stability and sentiment. Get all VLO ratings here.
ARC Document Solutions, Inc. (BOW)
ARC, a digital printing company, provides digital printing and document-related services in the United States. It provides managed printing services for the placement, management and optimization of printing and imaging equipment in customers’ offices, work sites and other facilities; and cloud-based document management software and other digital hosting services.
On December 8, 2022, ARC announced a quarterly cash dividend of $0.05 per share, payable February 28. The company pays an annual dividend of $0.20, which translates to a yield of 5.87% at the current price, higher than the average 4-year dividend yield of 2.17%.
ARC’s net sales increased slightly year over year to $73.14 million in the third quarter ended September 30, 2022. The company’s adjusted earnings per share increased 12.5% year over year to $0.09, while adjusted net income increased 15.6% year over year to $3.70 million.
The stock is up 39.6% over the past three months to close out its last trading session at $3.63.
ARC’s robust outlook is reflected in the POWR ratings. The stock has an overall A rating, which equates to a strong buy in our proprietary rating system.
ARC has an A rating for value, sentiment and quality. It ranks first out of 42 stocks in the B rating Outsourcing – Business Services industry.
click here to see the additional POWR ratings for ARC (Growth, Momentum, and Stability).
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GILD shares. Year-to-date, GILD has gained 0.59%, versus a 7.16% gain in the benchmark S&P 500 index over the same period.
About the author: Kritika Sarmah
Her interest in risky instruments and passion for writing turned Kritika into an analyst and financial journalist. She received her bachelor’s degree in commerce and is currently attending the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.