Amid the Federal Reserve’s outsized interest rate hikes and elevated inflation, the Bureau of Labor Statistics reported that PPI for final demand rose 0.3% for November, while prices for final demand services advanced 0.4%. The measure shows price pressures cooled off but are still at an alarmingly high level.

The Fed officials have said borrowing costs will need to remain restrictive for some time. Federal Reserve Chairman Jerome Powell earlier said, “Given our progress in tightening policy, the timing of that moderation is far less significant than the questions of how much further we will need to raise rates to control inflation and the length of time it will be necessary to hold policy at a restrictive level.”

On the bright side, Goldman Sachs Group Inc. (GS) expects a significant decline in inflation next year as prices and wage growth slow down. The bank expects core personal consumption expenditure (PCE) to fall to 2.9% by December 2023. Moreover, Moody’s Analytics chief economist Mark Zandi believes the economy will narrowly escape a recession.

Given this backdrop, fundamentally strong stocks Bristol-Myers Squibb Company (BMY), Waste Management, Inc. (WM), and Hillenbrand, Inc. (HI) might be solid buys for next year. Moreover, these companies have a significant dividend-paying record.

Bristol-Myers Squibb Company (BMY)

BMY engages in the discovery, development, licensing, manufacture, and sale of biopharmaceutical products globally. The company’s offerings include products for hematology, oncology, cardiovascular, immunology, fibrotic, neuroscience, and COVID-19 diseases.

On November 29, 2022, BMY and Envisagenics, an Artificial Intelligence -driven biotechnology company, announced their research collaboration agreement. Under the agreement, Envisagenics’ SpliceCore® AI platform will enhance BMY’s oncology portfolio.

Also, on November 10, 2022, BMY announced Health Canada’s approval of CAMZYOSTM (mavacamten capsules) for treating symptomatic obstructive hypertrophic cardiomyopathy. This marks yet another milestone achievement for the company.

On December 08, BMY declared a quarterly dividend of fifty-seven cents per share on the $.10 par value common stock of the company, payable on February 1, 2023. This quarterly dividend represents a 5.6% increase over last year’s quarterly dividend rate. BMY has raised dividends for six consecutive years.

Its annual dividend of $2.28 per share translates to a 2.89% yield on the current share price. Its four-year dividend yield is 3.03%. The company’s dividend payouts have grown at a CAGR of 9.6% over the past three years and 6.7% over the past five years.

In the third quarter that ended September 30, 2022, BMY’s total in-line products’ worldwide revenue increased 5.2% from its prior-year value to $8.07 billion, while its total new product portfolio’s worldwide revenue rose 60.8% year-over-year to $553 million.

The company’s non-GAAP earnings before income taxes increased marginally year-over-year to $5.13 billion. Its non-GAAP EPS attributable to BMY increased 3.1% year-over-year to $1.99.

Analysts expect BMY’s revenue for the fiscal second quarter ending June 2023 to grow marginally year-over-year to $12 billion. In the same quarter, its EPS is expected to increase 7.5% from the prior-year quarter to $2.07. BMY has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.

BMY has gained 39.9% over the past year to close its last trading session at $78.83.

BMY’s POWR Ratings reflect this promising outlook. The stock 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.

BMY has an A grade for Value and a B for Stability, Sentiment, and Quality. In the 160-stock Medical-Pharmaceuticals industry, it is ranked #3.

Click here to access additional grades for Growth and Momentum for BMY.

Waste Management, Inc. (WM)

WM provides waste collection, transfer, disposal, recycling, and resource recovery and owns landfill gas-to-energy facilities in the United States. The company serves residential, commercial, industrial, and municipal customers.

On December 08, WM received authorization from its Board of Directors to repurchase up to $1.5 billion of the company’s common stock. This new authorization replaces the company’s prior $1.5 billion authorization that was fully utilized in 2022.

On the same day, WM announced that its Board of Directors had approved a 7.7% increase in the planned quarterly dividend rate for 2023 from $0.65 to $0.70 per share.

As a result, its annual dividend rate increased from $2.60 to $2.80 per share. This marks the twentieth consecutive year of dividend rate increases. Moreover, the company’s dividend payouts have grown at a CAGR of 8.2% over the past three years and 8.9% over the past five years.

WM’s revenue rose 8.8% year-over-year to $5.08 billion in the fiscal third quarter that ended September 30, 2022. Its net income grew 18.8% year-over-year to $639 million, while its EPS came in at $1.54, indicating an increase of 20.3% year-over-year.

WM’s revenue is expected to increase by 10.1% year-over-year to $19.74 billion in the current fiscal year ending December 2022. Its EPS is expected to grow 18.1% year-over-year to $5.71 in the current year. It also surpassed EPS estimates in three of the trailing four quarters.

The stock has gained 5.5% over the past month to close the last trading session at $166.83.

WM’s strong fundamentals are reflected in its POWR Ratings. The stock's overall A rating indicates a Strong Buy in our proprietary rating system.

The stock has a B grade for Stability, Sentiment, and Quality. WM is ranked #3 among 15 stocks in the B-rated Waste Disposal industry.

In addition to the POWR Ratings stated above, get WM’s additional POWR Ratings for Growth, Value, and Momentum.

Hillenbrand, Inc. (HI)

HI operates as a diversified industrial company worldwide. It operates through three segments: Advanced Process Solutions, Molding Technology Solutions, and Batesville.

On December 1, HI announced the completion of the acquisition of the Peerless Food Equipment division of Illinois Tool Works Inc. for a purchase price of approximately $59 million.

Peerless will be included in the company’s Advanced Process Solutions (APS) segment, which is focused on highly engineered industrial processing solutions and aftermarket parts and services for various end markets and applications, including food, plastics, chemicals, and recycling. The company aims to increase shareholder value with the acquisition.

On December 8, HI declared a regular quarterly cash dividend of $0.22 per share on the company’s common stock, payable on December 30, 2022.

Its four-year average dividend yield is 2.35%, and its forward annual dividend of $0.88 per share translates to a 1.77% yield. Over the last three years, HI’s dividend payouts have grown at a 1.2% CAGR.

For the fiscal fourth quarter ended September 30, 2022, HI’s gross profit increased 0.6% year-over-year to $242.70 million. Net income attributable to HI increased 3.3% from the year-ago period to $56.80 million, while its adjusted EPS increased 5% year-over-year to $1.05.

Street expects its EPS to increase 6.6% year-over-year to $1.08 in its fiscal second quarter ending March 2023. HI’s revenue for the same quarter is expected to increase 10.2% year-over-year to $817.33 million. It has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.

It has gained 21.9% over the past three months to close the last trading session at $49.80.

It is no surprise that HI has an overall rating of B, which translates to a Buy in our proprietary rating system.

It has a B grade for Value, Sentiment, and Quality. It is ranked #4 out of 36 stocks in the A-rated Industrial – Manufacturing industry.

To see the additional ratings of HI for Growth, Momentum, and Stability, click here.

BMY shares were trading at $78.53 per share on Monday morning, down $0.30 (-0.38%). Year-to-date, BMY has gained 29.86%, versus a -15.95% rise in the benchmark S&P 500 index during the same period.

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.

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