Although a fresh bout of anxieties set in amid the Fed’s hawkish statements and stronger-than-expected job report, with inflation slightly cooled this month and jitters over banking contagion ebbing away, investors’ optimism has kicked in. However, with price fluctuations not subsiding anytime soon, let us probe into dividend stocks Verizon Communications Inc. (VZ), Altria Group, Inc. (MO), and Spok Holdings, Inc. (SPOK) now.
Investors’ sentiments were dashed by the increasing likelihood of a half-point interest rate hike on the backs of the Fed’s hawkish comments and overly hot hiring of 311,000 in February. However, with the inflation rate coming in line with expectations, investor optimism rekindled.
Although consumer prices rose 6% annually, well below the 9.1% peak in June 2022, inflation remains far above the Fed’s target range of 2%. The inflation pressure remains anchored in much of the economy and is still a cause of concern for some.
On Tuesday, all three major U.S. indexes rose, and bank stocks clawed back from their recent losses, signaling that emergency measures by U.S. regulators were helping to boost the confidence that the fallout from Silicon Valley Bank's collapse would be contained. The S&P 500 rose 63.53 points, the Dow Jones Industrial Average added 336.26 points, and the tech-centric Nasdaq Composite climbed 239.31 points.
However, the Fed is still expected to keep its inflation-fighting measures and go forward with its rate-hiking campaign. Citigroup (C) sees the Fed continuing to raise its benchmark funds rate to a target range of 5.5%-5.75%, compared to the current 4.5%-4.75% and well above the market pricing of 4.75%-5%.
Against this backdrop, investors could opt for dividend stocks that ensure consistent returns to safeguard portfolios against such economic headwinds. Therefore, quality dividend stocks VZ, MO, and SPOK might be solid buys now.
Verizon Communications Inc. (VZ)
VZ offers communications, technology, information, and entertainment products and services worldwide to consumers, businesses, and governmental entities. It operates through two segments: Consumer and Business.
On March 2, VZ revealed an Edge Discovery & Quality of Service (QoS) API proof of concept with Amazon Web Services, Inc. (AWS) that allows customers to combine Dynamic Quality of Service (QoS) from VZ with AWS edge services. This combination should deliver the ability for customers to deploy low latency, high bandwidth applications across a variety of emerging use cases.
On February 12, 2023, VZ announced that its newest data plan, 50 Mbps Verizon Fios service, would be available in Boston to assist small business owners in the Boston area in gaining high-speed internet access. This is expected to enhance the company’s income streams.
On March 2, VZ announced a quarterly dividend of 65.25 cents per outstanding share, payable to its shareholders on May 1, 2023. The company made $10.80 billion in dividend payments in 2022. It has increased its dividend for 18 consecutive years.
VZ pays a $2.61 per share dividend annually, translating to a 7.14% yield on the current share price. Its four-year dividend yield is 4.77%. The company’s dividend payouts have grown at CAGRs of 2% and 2.1% over the past three and five years, respectively.
In terms of forward non-GAAP P/E, VZ is trading at 7.79x, 49.6% lower than the industry average of 15.45x. Its forward EV/EBITDA multiple of 6.98 is 16.8% lower than the industry average of 8.39x.
For the fiscal fourth quarter that ended December 31, 2022, VZ’s total operating revenues increased 3.5% year-over-year to $35.25 billion. The company’s wireless equipment revenue grew 4.1% from the prior-year period to $7.63 billion. Net income rose 41.4% year-over-year to $6.70 billion, while its adjusted EPS stood at $1.19 for the same quarter.
Analysts expect VZ’s revenue for the fiscal first quarter (ending March 2023) to increase 1.2% year-over-year to $33.95 billion. For the same quarter, EPS is expected to come in at $1.19. The company shows an impressive earnings surprise history, surpassing the consensus revenue estimates in each of the trailing four quarters.
The stock has gained marginally intraday to close the last trading session at $38.88.
VZ’s POWR Ratings reflect this positive outlook. VZ has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The company has a B grade for Stability. Within the Telecom – Domestic industry, it is ranked #4 among 19 stocks.
Click here to see the additional POWR Ratings of VZ for Growth, Value Momentum, Sentiment, and Quality.
Altria Group, Inc. (MO)
MO manufactures and sells smokeable and oral tobacco products in the United States. The company provides cigarettes, cigars, pipe tobacco, moist smokeless tobacco products, and oral nicotine pouches.
On March 6, MO announced that it had entered into a definitive agreement to acquire NJOY Holdings, Inc. for approximately $2.75 billion in cash, payable at closing. The transaction terms include an additional $500 million in cash payments that are contingent upon regulatory outcomes with respect to certain NJOY products.
As a result of this transaction, MO’s enhanced smoke-free portfolio is expected to include full global ownership of products and technologies across the three largest smoke-free categories and a joint venture with JT Group for the commercialization of heated tobacco stick products.
On March 1, 2023, MO’s board of directors declared a quarterly dividend of $0.94 per share, payable to shareholders on April 28. 2023. The company paid dividends worth $1.70 billion in the fourth quarter and $6.60 billion for the full year.
Its annual dividend of $3.76 per share yields 8.05% on the current share price. Its four-year average dividend yield is 7.49%. The company’s dividend payments have grown at a 3.9% CAGR over the past three years and a 7.7% CAGR over the past five years.
In the fourth quarter, MO repurchased 8.3 million shares at an average price of $45.09, for a total cost of $374 million. Its board of directors authorized a new $1 billion share repurchase program, which is expected to complete by December 31, 2023.
In terms of its forward EV/EBIT, MO is trading at 8.57x, 42.5% lower than the industry average of 14.90x, while its forward non-GAAP P/E multiple of 9.22 is 49.1% lower than the industry average of 18.11x.
MO’s revenue for the fiscal fourth quarter that ended December 31, 2022, stood at $6.11 billion. Its operating income increased 3.1% year-over-year to $2.82 billion. Adjusted net earnings attributable to MO rose 6% from the prior-year quarter to $2.11 billion. In addition, its adjusted EPS came in at $1.18, representing an increase of 8.3% year-over-year.
Analysts expect MO’s EPS and revenue for the first quarter ending March 31, 2023, to increase 5.9% and 1.9% year-over-year to $1.19 and $4.91 billion, respectively. It topped the consensus EPS estimates in three of the trailing four quarters.
Over the past six months, the stock has gained 11.9% to close the last trading session at $46.74. It increased marginally intraday.
MO’s promising prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system.
The stock has an A grade for Quality. Within the A-rated Tobacco industry, it is ranked #5 out of 9 stocks.
To see the additional POWR Ratings of MO for Growth, Value, Momentum, Stability, and Sentiment, click here.
Spok Holdings, Inc. (SPOK)
Healthcare communications establishment SPOK offers unified clinical communication and collaboration solutions comprising call center operations, clinical alerting and notifications, and mobile communications to care teams.
On February 22, the company declared a regular quarterly dividend of $0.3125 per share, payable to stockholders on March 30, 2023. This cumulates to an annual dividend of $1.25 per share and yields 12.58% on the current share price. Its four-year average dividend yield is 6.75%.
The company’s dividend payments have grown at a 35.7% CAGR over the past three years and a 20.1% CAGR over the past five years.
In terms of forward EV/EBITDA, SPOK is trading at 7.45x, 11.2% lower than the industry average of 8.39x. Its forward EV/Sales multiple of 1.36 is 26.6% lower than the 1.85 industry average.
Vincent D. Kelly, SPOK’s chief executive officer, said, “Going forward, we believe our extensive experience operating our established communication solutions will create significant value for stockholders by maximizing revenue and cash flow generation."
For the fiscal fourth quarter that ended December 31, SPOK’s operating income came in at $2.96 million, compared to an operating loss of $20.81 million in the year-ago period. Its adjusted EBITDA came in at $5.65 million, compared to a negative adjusted EBITDA of $3.79 million, while its net income came in at $24.23 million, compared to a net loss of $16.67 million in the prior-year period.
In addition, the company’s net income per common share came in at $1.21, compared to a net loss per common share of $0.86 in the prior-year period.
Analysts expect SPOK’s EPS for the fiscal quarter ending June 2023 to grow 80% from the prior-year period to $0.18. The company’s revenue for the same quarter is expected to come in at $32.55 million.
The stock has gained 45.5% over the past six months to close the last trading session at $10.61. It gained 6.7% intraday.
SPOK’s POWR Ratings reflect its promising prospects. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
The stock has an A grade for Quality and Sentiment and a B for Growth and Value. Within the Telecom – Domestic industry, it is ranked #1 among 19 stocks.
Click here to see additional ratings of SPOK for Stability and Momentum.
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VZ shares were trading at $36.83 per share on Wednesday morning, down $0.05 (-0.14%). Year-to-date, VZ has declined -5.06%, versus a 0.95% 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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