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3 Safe Stocks for Seniors to Consider in 2022

Aggressive interest rate hikes and escalating recession fears are expected to keep the stock market under tremendous pressure in the near term. Hence, seniors could consider reliable stocks with a track record of increasing dividend payouts, Coca-Cola (KO), Costco (COST), and Phillips 66 (PSA), as safe investments. Continue reading…

The markets seem locked in a race to the bottom, especially since the Federal Reserve announced its third consecutive interest rate hike of 75 basis points and indicated further aggressive rate hikes until inflation is controlled. The S&P 500 index yesterday dropped to a new low for this year to 3640.47 as investors suffered from a fresh bout of anxiety regarding an imminent global slowdown.

Chris Turner, global head of markets at Dutch bank ING, said, “Central banks remain wholly focused on inflation and taking rates higher, even if that means causing a recession.” Since it seems unlikely that the market will return to stability anytime soon, the most suitable stocks for seniors belong to resilient, time-tested businesses well-placed to provide consistent dividends.

To that end, seniors could consider banking on consistent compounders and reliable dividend yielders, The Coca-Cola Company (KO), Costco Wholesale Corporation (COST), and Phillips 66 (PSX).

The Coca-Cola Company (KO)

KO manufactures, markets, and sells various non-alcoholic beverages worldwide as a world-renowned beverage company. The company operates through six segments: Europe, the Middle East, and Africa; Latin America; North America; Asia Pacific; Global Ventures; and Bottling Investments.

On July 21, KO announced its regular quarterly dividend of $0.44 per common share, payable on October 3. The company pays $1.76 as dividends annually. This translates to a 3.11% yield at the current price, compared to the 4-year average dividend yield of 3.09%. The current payout ratio is an impressive 70.49%, and the company’s dividends have increased for the past 59 years.

On June 21, SmartWater, a premium water brand in KO’s portfolio, announced acclaimed actor and performer Zendaya as its newest global brand ambassador. This move is expected to augment the brand equity of the company.

The same month, KO and Brown Forman Corporation (BF.A, BF.B) announced a global relationship to debut the iconic Jack & Coke cocktail as a branded, ready-to-drink pre-mixed cocktail option. The new product might bolster the company’s revenue stream.

For the second quarter of fiscal 2022 ended July 1, KO’s net operating revenue increased 11.8% year-over-year to $11.33 billion. The company’s non-GAAP gross profit increased 7.2% year-over-year to $6.67 billion, while its non-GAAP net income improved 4.4% year-over-year to $3.06 billion. As a result, non-GAAP net income per common share increased 2.9% from its year-ago value to $0.70.

Analysts expect KO’s revenue for the fiscal (ending December 2022) to increase 9% from the previous year to $42.13 billion, while its EPS is expected to increase 6.2% year-over-year to $2.46. The company has surpassed the consensus EPS estimates in each of the trailing four quarters.

The stock has gained 6.8% over the past year to close its last trading session at $56.57.

KO’s stable outlook has earned it an overall POWR Rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

KO also has a B grade for Stability, Sentiment, and Quality. Within the A-rated Beverages industry, it is ranked #17 out of 33 stocks.

To see additional POWR Ratings for Growth, Value, and Momentum for KO, click here.

Costco Wholesale Corporation (COST)

COST is a global retailer with a chain of membership warehouses and e-commerce websites in the United States, Canada, Mexico, United Kingdom, Korea, Taiwan, Japan, and Australia. The Company offers merchandise in various categories, which include almost everything from dry groceries to automotive care products.

On August 12, COST declared a quarterly cash dividend of $0.90 per share of common stock. The company pays $3.60 annually. This translates to a 0.75% yield at the current price, compared to the 4-year average dividend yield of 1.44%.

COST’s dividends have grown 12.8% CAGR over the previous five years. The company has managed to increase its dividends for the consecutive 17 years.

For the fourth quarter of fiscal 2022 ended August 28, COST’s revenue increased 15% year-over-year to $72.09 billion. During the same period, the operating income and net income attributable to COST increased 9.8% and 11.9% year-over-year to $2.50 billion and $1.87 billion, respectively. Its net income per share came in at $4.20, up 11.7% year-over-year.

Analysts expect COST’s revenue and EPS for fiscal 2023 (ending August 2023) to increase 8.1% and 11.8% year-over-year to $245.32 billion and $14.70, respectively. The company has topped the consensus EPS estimates in each of the trailing four quarters.

COST’s stock has gained 6% over the past year to close the last trading session at $478.98.

COST’s fundamental strength is reflected in its overall POWR Rating of B, which translates to Buy in our proprietary rating system. It also has grade B for Growth and Sentiment. It is ranked #24 out of 38 stocks in the A-rated Grocery/Big Box Retailers industry.

Click here to see the additional POWR Ratings of COST for Value, Momentum, Stability, and Quality.

Phillips 66 (PSX)

PSX is involved in energy manufacturing and logistics. The company operates through four segments: Midstream; Chemicals; Refining; and Marketing and Specialties (M&S). Its offerings include transportation, processing, marketing, and selling crude oil, refined petroleum products, natural gas, and natural gas liquids (NGL).

On September 1, PSX paid a quarterly dividend of $0.97 per share of common stock. The company pays $3.88 annually as dividends. This translates to a 4.81% yield at the current price, compared to a 4-year average yield of 4.18%. The current payout ratio is 26.11%, and the company’s dividends have grown for the past two years.

On August 17, PSX announced the submission of an offer to acquire outstanding publicly held DCP Midstream LP units for a proposed consideration of $34.75 per unit. This announcement concurs with PSX’s earlier statement of the realignment of economic and government interest in DCP Midstream.

On August 12, PSX announced the launch of an expansion open season on its Seminoe Pipeline system to solicit shipper commitments for services from Billings, Montana, to Casper, Wyoming. The expansion open season will allow interested shippers to secure long-term refined product transportation under binding transportation services agreements.

PSX’s revenue increased 72.5% year-over-year to $46.58 billion in the fiscal 2022 second quarter ended June 30. The company’s pre-tax income rose 742% from the year-ago value to $4.23 billion. Its adjusted earnings came in at $3.29 billion, up 898.5% year-over-year. Furthermore, its adjusted earnings per share of common stock grew 814.9% from the prior-year period to $6.77.

PSX’s consensus EPS estimate of $15.95 for the fiscal year 2022 (ending December 2022) represents a 179.8% improvement year-over-year. The consensus revenue estimate of $165.81 billion for the ongoing year represents a 44.4% increase from the last year. The company has an impressive earnings surprise history, as it has topped the consensus EPS estimates in each of the trailing four quarters.

Shares of PSX have gained 6.5% year-over-year to close the last trading session at $80.63.

PSX’s stable outlook is reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. PSX has an A grade for Momentum and a B for Growth and Quality. Among the 94 stocks in the B-rated Energy - Oil & Gas industry, it is ranked #12.

Click here to see the additional POWR Ratings for PSX (Value, Stability, and Sentiment).

KO shares were trading at $56.37 per share on Friday afternoon, down $0.20 (-0.35%). Year-to-date, KO has declined -2.67%, versus a -23.29% rise in the benchmark S&P 500 index during the same period.

About the Author: Santanu Roy

Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.


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