Due to lingering inflation and slashed growth estimates because of Federal Reserve interest rate increases, the markets are extraordinarily volatile. However, despite tremendous fluctuations, the S&P 500 index has managed to secure marginal returns over the past month.
Despite the relief rally, Bank of America strategists see high volatility ahead. Thus, investing in renowned dividend stocks has gotten popular of late. The ability to pay substantial dividends indicates a company’s financial strength. Investors’ interest in the high-yielding dividend stocks is evident from the iShares Core High Dividend ETF’s (HDV) 4.7% returns over the past month.
Therefore, we think the stocks of fundamentally sound S&P 500 index constituents Altria Group, Inc. (MO) and Lumen Technologies, Inc. (LUMN) could be wise bets to generate a steady income stream amid an uncertain market and economic environment. They currently offer more than a 6% yield and are Buy-rated in our POWR Ratings system.
Altria Group, Inc. (MO)
MO and its subsidiaries manufacture and sell smokable and oral tobacco products in the United States. It sells its tobacco products primarily to wholesalers, including distributors; and large retail organizations, such as chain stores. MO is headquartered in Richmond, Va.
On April 28, 2022, Billy Gifford, MO’s CEO, said, “We are off to a strong start to the year and believe our businesses are on track to deliver against their full-year plans. Our tobacco businesses performed well in a challenging macroeconomic environment, and we continued to make progress toward our vision to responsibly lead the transition of adult smokers to a smoke-free future.”
MO has been paying dividends for 52 consecutive years. Its dividend payouts have grown at an 8.3% CAGR over the past five years. Its four-year average yield is 6.91%, while its current dividend yield is 6.65%.
MO’s operating income came in at $2.88 billion for the first quarter, ended March 31, 2022, up 7.2% year-over-year. Its net earnings came in at $1.96 billion, up 37.6% year-over-year. Also, its EPS was $1.08, up 40.3% year-over-year.
For its fiscal 2023, analysts expect MO’s revenue to increase marginally to $21.34 billion in 2023. Its EPS is expected to increase 5.6% to $5.13 for the same period. In addition, it has surpassed the consensus EPS estimates in three of the trailing four quarters. And over the past six months, the stock has gained 25.3% in price to close yesterday’s trading session at $54.15.
MO’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
The stock has an A grade for Quality. Within the A-rated Tobacco industry, it is ranked #3 of 10 stocks. Click here to see the additional MO ratings for Growth, Value, Momentum, Stability, and Sentiment.
Lumen Technologies, Inc. (LUMN)
LUMN in Monroe, La., is a facilities-based technology and communications company. It provides various integrated products and services under the Lumen, Quantum Fiber, and CenturyLink brands to business and residential customers in the United States and internationally. Its two segments are Business and Mass Markets.
On April 27, 2022, LUMN announced its investment in high-bandwidth Ethernet architecture to bring advanced Ethernet services to approximately 40 cities by 2022. The Ethernet upgrade is expected to meet Metro Ethernet Forum's (MEF) 3.0 standards and offer super speed facilities in Internet of Things and Augmented Reality.
LUMN has been paying dividends for 22 consecutive years. Its current dividend translates to an 8.46% yield, while its four-year average yield is 10.15%.
LUMN’s operating income came in at $1.08 billion for the first quarter ended March 31, 2022, up 9.7% year-over-year. Its net income came in at $599 million, up 26.1% year-over-year, while its EPS came in at $0.59, up 34.1% year-over-year.
LUMN surpassed EPS estimates in three of the trailing four quarters. Over the past month, the stock has gained 15.2% to close yesterday’s trading session at $11.82.
LUMN has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has an A grade for Value and a B grade for Quality. Within the Telecom - Domestic industry, it is ranked #3 out of 21 stocks. Click here to see the additional POWR Ratings for Growth, Momentum, Stability, and Sentiment for LUMN.
MO shares were trading at $53.88 per share on Friday afternoon, down $0.27 (-0.50%). Year-to-date, MO has gained 15.65%, versus a -13.27% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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