The Fed raised the benchmark interest rates by 75 basis points yesterday, marking the largest hike in 28 years. The central bank is slated to maintain its aggressive stance in the near term, as Chairman Jerome Powell foresees a 50-basis point or a 75-basis point rate increase in July.
However, equity markets have reacted negatively to this news, as analysts and economists reiterated their expectation of a recession in the near term. The benchmark S&P 500 index declined 20.5% year-to-date and 5.7% over the past five days, driven by surging market volatility.
Blue-chip companies tend to weather market downturns, thanks to their substantial cash balances and significant market share. Most blue-chip companies pay high-yielding dividends to shareholders, hedging market risks.
Given this backdrop, investors could invest in blue-chip dividend stocks AT&T Inc. (T), LyondellBasell Industries N.V. (LYB), The Bank of Nova Scotia (BNS), International Business Machines Corporation (IBM), and Altria Group, Inc. (MO), yielding more than 4%.
AT&T Inc. (T)
T is a leading provider of telecommunications, media, and technology services globally. The company operates through three segments: Communication; WarnerMedia; and Latin America.
On May 10, T launched ‘Locate Before Route,’ its first location-based routing with Intrado to improve public safety response for wireless 9-1-1 calls. Due to its high-speed and accurate identification, this new feature might have a strong consumer demand globally.
The company paid a quarterly dividend of $0.28 on May 2, 2022, to its shareholders. T pays $1.11 as dividends annually, yielding 5.71% on the current price.
T’s fiscal first quarter (ended March 31, 2022), cash and cash equivalents came in at $38.57 billion compared to $21.17 billion as of December 31, 2021. Its operating expenses decreased 10.5% from the year-ago value to $32.46 billion.
The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past six months, the stock has gained 16.1%, closing yesterday’s trading session at $19.44.
T’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
It has a B grade for Sentiment. Among the 21 stocks in the Telecom - Domestic industry, it is ranked #5. Click here to see the POWR Ratings of T for Growth, Value, Momentum, Stability, and Quality.
LyondellBasell Industries N.V. (LYB)
LYB is a chemical company operating through six segments: Olefins and Polyolefins-Americas; Olefins and Polyolefins-Europe, Asia, International (O&P-EAI); Intermediates and Derivatives (I&D); Advanced Polymer Solutions; Refining; and Technology. It produces and markets olefins and co-products, polyolefins, polyethylene products, propylene oxide and its derivatives, oxyfuels, and various compounds and solutions.
On May 27, LYB’s Board of Directors declared a $5.20 special dividend and an increase of 5% in the company’s quarterly cash dividend to $1.19 per share, paid on June 13, 2022. LYB pays $4.76 as dividends annually, yielding 4.95% on the current price.
On April 12, LYB announced its goal to reduce greenhouse gas emissions, boost recycling of plastics and use renewable-based feedstock in its “Future Focused” sustainability report. The company is focused on achieving its circular and sustainable plastics and decarbonization goals in the upcoming years. Such plans are expected to make LYB appealing to ESG investors.
In the fiscal first quarter (ended March 31, 2022), LYB’s sales and other operating revenues increased 44.9% year-over-year to $13.16 billion. Its net income increased 23.4% from the year-ago value to $1.32 billion, while EBITDA grew 27.4% year-over-year to $2.02 billion. The company’s EPS came in at $4, representing a 25.8% year-over-year improvement.
For the fiscal second quarter (ending June 2022), LYB’s revenue is expected to increase 19.5% year-over-year to $13.82 billion. The Street expects its EPS to increase at a 3.3% CAGR over the next five years.
The stock has gained 10.5% over the past six months to close the last trading session at $96.14.
LYB's strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our POWR Ratings system. It has an A grade for Value. The stock is ranked #34 of 91 stocks in the A-rated Chemicals industry. Click here to see the other ratings of LYB for Growth, Momentum, Stability Sentiment, and Quality.
The Bank of Nova Scotia (BNS)
BNS is an international bank and a financial services provider which offers a range of products and services, including personal and commercial banking; wealth management and private banking; corporate and investment banking; and capital markets. It operates through four segments: Canadian Banking; International Banking; Global Wealth Management and Global Banking; and Markets.
On May 25, the company declared a quarterly dividend of $0.80 per share payable on July 27, 2022. BNS pays $3.21 as dividends annually, yielding 5.11% on the current price.
On May 24, BNS won six awards and was recognized as a global leader in the 2022 Global Finance Sustainable Finance awards. It also received the award for Outstanding Global Leadership in sustainability transparency for the second consecutive year. This reflects the company’s outstanding performance within the industry.
BNS’ total revenue increased 2.7% year-over-year to $7.94 billion in the second quarter ended April 30, 2022. The company’s adjusted net income grew 11.7% year-over-year to $2.77 billion, while its adjusted EPS rose 14.7% from the prior-year quarter to $2.18.
The consensus EPS estimate of $1.71 for the fiscal third quarter (ending July 2022) represents a 7.4% improvement year-over-year. The consensus revenue estimate of $6.50 billion for the ongoing quarter indicates a 5.6% increase from the same period last year. The company has an excellent earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past nine months, the stock has gained marginally to close yesterday’s trading session at $62.81.
The stock has an A grade for Stability and a B for Momentum. Within the B-rated Foreign Banks industry, it is ranked #77 of 95 stocks. To see additional POWR Ratings for Growth, Value, Sentiment, and Quality for BNS, click here.
International Business Machines Corporation (IBM)
IBM is a provider of integrated solutions and services globally. It operates through three segments: Cloud & Cognitive Software; Global Business Services (GBS); Systems, and Global Financing. It also provides consulting services to help communications service providers and media on multiple cloud platforms.
On June 6, the company announced its plans to acquire Randori, a leading provider of attack surface management and offensive cybersecurity. Analysts expect this acquisition to advance IBM's hybrid cloud strategy and strengthen its AI-powered cybersecurity products and services portfolio.
On May 11, IBM collaborated with Amazon Web Services, Inc. to offer its Software-as-a-Service (SaaS) on AWS. This is expected to enhance the company’s software portfolio.
The company paid a quarterly dividend of $1.65 on June 10, 2022, to its shareholders. IBM pays $6.60 as dividends annually, yielding 4.82% on the current price.
IBM’s revenues increased 8% year-over-year to $14.20 billion in the fiscal first quarter (ended March 31, 2022). The company’s gross profit increased 4.4% from the year-ago value to $7.34 billion. Its non-GAAP income from continuing operations grew 25.5% from the year-ago value to $1.27 billion, while its non-GAAP earnings per share from continuing operations increased 25% from the year-ago value to $1.40.
Analysts expect IBM’s EPS and revenue to increase 23.5% and 6.3% year-over-year to $9.79 and $60.95 billion, respectively, in fiscal 2022 (ending December 2022). It is no surprise that the company has surpassed the consensus EPS estimates in each of the trailing four quarters, which is excellent.
Shares of IBM rose 11.3% over the past six months to close yesterday’s trading session at $137.06.
IBM has an overall B rating, which translates to Buy in our proprietary rating system. It has a B grade for Quality. Also, it is ranked #27 of 82 stocks in the Technology - Services industry.
In addition to the POWR Ratings grades I’ve just highlighted, you can see the IBM ratings for Growth, Value, Momentum, Stability, and Sentiment here.
Altria Group, Inc. (MO)
MO is engaged in manufacturing and selling smokeable and oral tobacco products in the United States. It offers its products under six brand names, including Marlboro, Black & Mild, Copenhagen, Skoal, Red Seal, and Husky, to wholesalers, distributors, and chain stores.
On May 19, MO declared its quarterly dividend of $0.90 per share, payable on July 11, 2022. The company pays $3.60 as dividends annually, yielding 7.88% on the current price.
On April 5, MO signed a virtual power purchase agreement (VPPA) for energy produced by Inertia Wind Energy Centre. This might accelerate progress towards its goal of achieving 100% renewable electricity and reducing operational greenhouse gas emissions by 55% by 2030. During the fiscal 2022 first quarter (ended March 31, 2022), MO’s operating income increased 7.2% year-over-year to $2.88 billion. Its gross profit rose 3.1% from the year-ago value to $3.37 billion. Net earnings attributable to Altria grew 37.6% from the same period last year to $1.96 billion, while its adjusted earnings per share came in at $1.12, representing a 4.7% increase year-over-year.
Analysts expect MO’s EPS to increase 8.1% year-over-year to $1.32 in the fiscal third quarter (ending September 2022). MO’s revenue is expected to increase marginally year-over-year to $5.58 billion in the next quarter. It surpassed the consensus EPS estimates in three of the trailing four quarters, which is impressive.
The stock has declined marginally over the past six months to close the last trading session at $45.67.
MO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our POWR Ratings system. MO also has an A grade for Quality. The stock is ranked #5 of 10 stocks in the A-rated Tobacco industry. Click here to see the other ratings of MO for Growth, Value, Momentum, Stability, and Sentiment.
T shares were trading at $18.96 per share on Thursday afternoon, down $0.48 (-2.47%). Year-to-date, T has gained 5.70%, versus a -22.53% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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