The stock market is experiencing substantial volatility due to concerns over high inflation and fears regarding the global spread of the COVID-19 Delta variant. According to Dr. Rochelle Walensky, director of the Centers for Disease Control and Prevention, the seven-day average of COVID-19 cases had climbed approximately 70% in the space of a week. The highly contagious Delta variant is primarily responsible for this resurgence in COVID-19 cases.
Concerns over a potential slowdown in global economic growth drove a broad market sell-off on July 19, representing the market’s worst day in nine months. Given this backdrop, low-volatility dividend-paying stocks could be the best bet now. Investing in dividend-paying stocks is a popular way to beat market volatility and mitigate portfolio losses.
Johnson & Johnson (JNJ), McDonald’s Corporation (MCD), and Medtronic plc (MDT) are well-established companies that have been paying steady dividends for years. The dividends paid by these companies yield more than 2%. Also, each of these stocks possesses a low beta, indicating that they are less volatile than the broader market.
Johnson & Johnson (JNJ)
JNJ is principally engaged in the research, development, production, and sale of various healthcare products targeted at improving the health and well-being of consumers. Consumer, Pharmaceutical, and Medical Devices are the New Brunswick, N.J., company’s three business segments. In addition, the company has received much attention in recent months because of its Janssen COVID-19 vaccine, which has become a prominent player in the COVID-19 vaccination market.
This month, the FDA approved JNJ’s DARZALEX FASPRO in combination with pomalidomide and dexamethasone (Pd) to treat adult patients with multiple myeloma who have had at least one prior line of therapy, including lenalidomide and a proteasome inhibitor.
Also this month, JNJ released data showing that its single-shot COVID-19 vaccine has strong, long-lasting effectiveness against the fast-spreading Delta form of SARS-CoV-2 and other SARS-CoV-2 virus variants. Furthermore, the findings revealed that the immune response was durable for at least eight months, which is the longest time studied this far.
During the first quarter, ended July 21, 2021, JNJ’s worldwide sales increased 27.1% year-over-year to $23.31 billion. Its net income increased 73.1% year-over-year to $6.28 billion, while its EPS grew 72.8% from the prior-year quarter to $2.35. Furthermore, the company’s gross profit increased 33.8% year-over-year to $15.73 billion over this period.
A $9.52 consensus EPS estimate for the current year represents an 18.6% improvement year-over-year. JNJ has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. The $91.3 billion consensus revenue estimate for the current year represents a 10.5% increase from the same period last year. The stock has gained 13.3% over the past year and 17.2% over the past nine months. It has a 0.66 beta.
JNJ’s $4.24 annual dividend yields 2.5% on its current stock price. On July 19, the company approved a $1.06 quarterly dividend, payable on September 7. It has a 2,6% four-year average dividend yield.
JNJ's POWR Ratings reflect this promising outlook. The company has an overall A rating, 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.
JNJ has also been rated an A grade for Growth, and a B for Stability and Sentiment. Within the Medical-Pharmaceuticals industry, it is ranked #1 of 221 stocks.
To see additional POWR Ratings for Momentum, Quality, and Value for JNJ, click here.
Click here to checkout our Healthcare Sector Report for 2021
McDonald’s Corporation (MCD)
Oak Brook, Ill.-based MCD is a prominent global foodservice retailer that operates and franchises more than 39,000 McDonald’s restaurants worldwide. The company organizes its operations into four reportable business segments, arranged by geographic markets: U.S., International Lead Markets, High Growth Markets, and Foundational Markets and Corporate.
In May, MCD announced that it would form new multi-year agreements with media firms. This longer-term strategy should aid in the improvement of the company's marketing supply chain and foster an inclusive, authentic narrative between its brand and a broad group of customers.
MCD’s revenue increased 8.7% year-over-year to $5.12 billion in the first quarter ended March 31, 2021. Its operating income grew 34.7% from its year-ago value to $2.28 billion, while its net income improved 38.9% year-over-year to $1.54 billion over this period. The company’s EPS increased 39.5% from its year-ago value to $2.05.
A $8.63 consensus EPS estimate for the current year represents a 42.6% improvement year-over-year. Analysts expect MCD's revenue to increase 16.8% year-over-year to $22.4 billion in its fiscal year 2021. The stock has gained 20.2% over the past year and 11.2% year-to-date. It has an 0.80 beta.
MCD has declared a $1.29 quarterly dividend, payable on June 15. In the last five years, its dividend payout has grown at a 7.8% CAGR. While MCD’s four-year average dividend yield is 2.4%, its current dividend translates to a 2.2% yield.
MCD’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our POWR Ratings system. The stock also has an A grade for Quality and a B for Growth, and Stability. In the A-rated Restaurants industry, it is ranked #5 of 46 stocks.
In total, we rate MCD on eight different levels. Beyond what we've stated above, we have also given MCD grades for Sentiment, Momentum, and Value. Get all the MCD ratings here.
Medtronic plc (MDT)
MDT specializes in medical technology and services. The company develops, produces, and offers medical equipment and technology to hospitals, physicians, clinicians, and patients in nearly 160 countries. Its cardiac and vascular group, minimally invasive technologies group, restorative therapies group, and diabetes group are the four segments through which the company operates. MDT is based in Fridley, Minn.
This month, MDT announced the installation of the Hugo robotic-assisted surgery (RAS) system at Hospital Clinico de la Red de Salud UC CHRISTUS in Santiago, Chile, to support the teaching institution's new robotic surgery program. Through surgical robotics, the company aims to provide access to quality care to people in more places.
MDT's net sales increased 4.2% year-over-year to $30.12 billion in its fiscal year ended April 30, 2021. While its operating profit came in at $4.48 billion, its net income amounted to $3.61 billion over this period. The company reported $2.66 in EPS for its fiscal year 2021.
The company's EPS is expected to grow 27.9% year-over-year to $5.68 in the current year. Analysts expect MDT's revenue to increase 10.3% to $33.2 billion in its fiscal year 2022. MDT's stock has gained 30.4% over the past year and 13.7% over the past nine months. It has a 0.91 beta.
MDT’s $2.52 annual dividend yields 2% on its current stock price. On May 27, the company approved a $0.63 quarterly dividend, payable on July 16. It has a 2.1% four-year average dividend yield.
It is no surprise that MDT has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has an A grade for Growth, and a B for Stability. In the Medical – Devices/Equipment industry, it is ranked #30 of 186 stocks.
In addition to the POWR Ratings grades I have just highlighted, you can see the MDT rating for Value, Momentum, Quality, and Sentiment here.
Click here to checkout our Healthcare Sector Report for 2021
JNJ shares were trading at $171.65 per share on Friday morning, up $1.67 (+0.98%). Year-to-date, JNJ has gained 10.43%, versus a 18.18% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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