The Dow, S&P 500, and Nasdaq all climbed Monday to help them bounce back from a tough Friday and a rough week. Clearly, coronavirus worries seem set to linger over global markets as investors wait for clarity about the spread and potential impact on economic growth.
Despite coronavirus fears, U.S. markets could be poised to expand this year, given the strong backdrop. Fourth quarter earnings season has been solid so far, driven by giants such as Apple AAPL and Amazon AMZN. And overall corporate earnings were already projected to bounce back in 2020.
Plus, the Fed recently maintained low interest rates, U.S. unemployment rests near 50-year lows, and the U.S. economy is expected to expand by at least 2% in 2020 (also read: Should You Buy the Dip?).
With all that said, we found three dividend-paying stocks that investors might want to buy to help combat coronavirus-based market pullback fears…
Coca-Cola KO
Coca-Cola topped our quarterly earnings and revenue estimates last week, with Q4 sales up 16% and fiscal 2019 revenue up 9%. The historic beverage giant has spent the last several years focusing on expanding beyond sugary drinks to adapt to changing consumer habits. Coca-Cola’s portfolio now includes potential Starbucks SBUX rival Costa Coffee, investment in upstart Gatorade challenger BodyArmor, a new Coke-branded energy drink, and more.
The Atlanta-headquartered firm also bought Topo Chico in 2017 to help give it exposure to the growing seltzer water craze. Plus, it is set to launch its own sparkling water brand AHA in March 2020. And KO’s transition has seemed to pay off so far. Last week, KO executives said they were confident about hitting their 2020 targets and analysts have upped their earnings estimates for fiscal 2020 and 2021 since then. This helps KO earn a Zack Rank #2 (Buy) at the moment.
Coca-Cola also holds a “B” grade for Growth in our Style Scores system and its industry rests in the top 26% of our more than 250 Zacks industries. Our estimates call for KO’s sales to climb 4.7% in 2020 and another 4.4% in 2021. Coca-Cola’s adjusted earnings are projected to pop 7.1% and 7.4%, respectively, during this same stretch. Meanwhile, KO shares have climbed 10% in the past three months and over 30% in the last two years to top the S&P 500’s 21% expansion. This run helps make Coca-Cola’s 2.74% dividend yield, which tops rival PepsiCo, Inc. PEP and the 10-year U.S. Treasury’s 1.5%, all the more impressive. And KO has consistently raised its quarterly payout.
IBM IBM
IBM topped our quarterly earnings estimates in January and reported surprise Q4 revenue growth, which came after it had posted five straight quarters of declining sales. Analysts upped their longer-term earnings estimates for IBM since its report, which helps it earn a Zacks Rank #2 (Buy). Shares of IBM are now up 9% in the last month and 6% since its January 21 release. This recent positivity might help IBM rebound after a rough couple of years, with the stock now up 8% in the past 12 months.
Our estimates call for the company’s adjusted fiscal 2020 EPS figure to pop 4%, with 2021 projected to climb 6.2% higher. The company also rocks an “A” grade for Value in our Style Scores system and trades at a solid discount against its industry’s average in terms of forward 12-month Zacks earnings estimates (10.7X vs. 18.3X). Plus, IBM’s dividend yield sits at 4.51%. This payout easily tops Qualcomm’s QCOM 2.91% yield, Cisco’s CSCO 3.05%, and Intel’s INTC 1.97%.
IBM’s cloud computing revenue surged 21% last quarter to account for over 30% of total sales. Looking ahead, the historic tech giant hopes to compete alongside industry powers like Microsoft MSFT, as it continues to invest in “higher-value growth areas.” Alongside cloud, Red Hat’s revenue soared 24% in Q4 to help justify why IBM acquired the open-source software firm for $34 billion. And the firm has already reduced its debt by $10 billion since closing the Red Hat acquisition in July 2019.
Pfizer Inc. PFE
Pfizer is one of the largest pharmaceutical firms in the world, but it’s trying to transform into a smaller operation aimed at big growth. PFE plans to achieve this by focusing more on patent-protected drugs for diseases such as cancer, which often offer more growth upside. “2020 is expected to be an exciting year for Pfizer with the close of the Upjohn-Mylan transaction anticipated by mid-year, leaving New Pfizer positioned to deliver revenue and Adjusted diluted EPS growth that is expected to be among the industry leaders,” CEO Albert Bourla said in prepared Q4 remarks.
“New Pfizer will be a smaller, science-based company with a singular focus on innovation while also continuing to allocate significant capital directly to shareholders, primarily through dividends.” Pfizer’s patent-protected medicine sales popped 7% in the fourth quarter. And the company’s strong fiscal 2020 and 2021 earnings revision activity helps it earn a Zacks Rank #1 (Strong Buy) right now. PFE also holds an “A” grade for Value and a “B” for Growth.
Shares of PFE are down 11% in the last year, as investors try to make sense of the transition. Peeking back, the stock is up 16% in the past three years, which tops the Drug Market’s 1% average climb. Plus, Pfizer returned $16.9 billion to shareholders during fiscal 2019, mostly through buyback and dividends. And Pfizer’s 4.08% dividend yield tops Eli Lilly’s LLY 1.85% and Bristol-Myers Squibb’s BMY 2.86%.
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