3 Must-Have Dividend Stocks for 2023


January’s robust job report is raising concerns about how long the Fed will keep interest rates high. Market experts are now expecting a higher terminal interest rate. As uncertainty clouds over, quality stocks Gilead Sciences (GILD), Valero Energy (VLO), and ARC Document (ARC) that pay stable dividends might be ideal buys for 2023. Read on.

While the stock market witnessed a solid start to this year, surprisingly strong jobs data is raising concerns about aggressive Federal Reserve action. U.S. job growth accelerated sharply in January, with nonfarm payrolls surging by 517,000 jobs, well above the estimate of 185,000. The unemployment rate hit a more than 50-year low of 3.4%.

According to Morgan Stanley’s latest research note, the Federal Reserve will likely raise interest rates by another 25 basis points at the March policy meeting. The firm also raised the peak Fed funds rate to 4.875% from a previous estimate of 4.75% and sees the first rate cut in December 2023.

Moreover, Reuters markets analyst John Kemp said in a column that US manufacturers “probably entered a recession” in the fourth quarter of last year, based on the new results of the monthly Institute for Supply Management Report.

While the manufacturing industry has avoided widespread layoffs thus far, Kemp attributed this in part to “labor hoarding,” or a hesitancy from businesses to let workers go after having a difficult time attracting labor over the prior year.

As uncertainty is expected to remain, stocks that offer high and stable dividends, Gilead Sciences, Inc. (GILD), Valero Energy Corporation (VLO), and ARC Document Solutions, Inc. (ARC), might be ideal buys for 2023.

Gilead Sciences, Inc. (GILD)

GILD, a biopharmaceutical company, discovers, develops, and commercializes medicines in the areas of unmet medical need in the United States, Europe, and internationally.

On February 03, GILD announced the U.S. Food and Drug Administration (FDA) had approved Trodelvy for the treatment of adult patients’ breast cancer who have received endocrine-based therapy and at least two additional systemic therapies in the metastatic setting.

Trodelvy is also recommended as a Category 1, preferred treatment for metastatic HR+/HER2- breast cancer by the National Comprehensive Cancer Network(NCCN) as defined in the Clinical Practice Guidelines in Oncology. This marks a significant achievement for the company.

On February 02, GILD announced an increase of 2.7% in the company’s quarterly cash dividend, resulting in a quarterly dividend of $0.75 per share of common stock, payable on March 30.

GILD pays $3.00 annually as dividends. This translates to a yield of 3.55% at the current price, compared to the 4-year average dividend yield of 4.00%. Its dividend payments have grown at a CAGR of 5% and 7% over the past three and five years, respectively. Also, it has paid dividends for seven consecutive years.

GILD’s total revenues increased 2% year-over-year to $7.39 billion in the fourth quarter, which ended December 31, 2022. The company’s non-GAAP net income increased 143.2% year-over-year to $2.11 billion, while non-GAAP EPS rose 142% year-over-year to $1.67.

Analysts expect GILD’s revenue for the fiscal second quarter ending June 2023 to be $6.48 billion, indicating a 3.6% year-over-year growth. The company’s EPS is expected to increase 8.3% from the prior-year quarter to $1.71 for the same quarter. Additionally, it has topped consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.

The stock has gained 41.2% over the past nine months to close the last trading session at $86.36.

GILD’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

GILD also has an A grade for Value and B for Quality. It is ranked #5 of 401 stocks in the Biotech industry.

To access additional ratings for GILD’s Growth, Stability, Sentiment, and Momentum, click here.

Valero Energy Corporation (VLO)

VLO manufactures, markets, and sells transportation fuels and petrochemical products in the United States, Canada, the United Kingdom, Ireland, and internationally. The company operates through three segments: Refining; Renewable Diesel; and Ethanol.

On January 31, VLO and Darling Ingredients Inc. (DAR) announced that the companies had made the final investment decision on a Sustainable Aviation Fuel (SAF) project at the Diamond Green Diesel (DGD) Port Arthur plant, which is owned and operated by Diamond Green Diesel Holdings LLC, a 50/50 joint venture between VLO and DAR.

With the completion of this project, DGD port is expected to be one of the largest SAF manufacturers in the world.

On January 31, VLO announced an increase in the company’s regular quarterly cash dividend on common stock from $0.98 per share to $1.02 per share. The dividend is payable on March 16.

VLO pays a $4.08 per share dividend annually, which translates to a 3.10% yield on the current price. Its dividend payments have grown at a CAGR of 2.9% and 7% over the past three and five years. The company has a four-year average dividend yield of 5.03%. Also, it has paid dividends for 25 consecutive years.

For the fiscal fourth quarter ended December 31, 2022, VLO’s revenue increased 16.3% year-over-year to $41.75 billion. Adjusted net income attributable to VLO grew 227% year-over-year to $3.23 billion, while its adjusted EPS increased 250.6% year-over-year to $8.45.

VLO’s revenue is expected to rise 2.1% year-over-year to $39.34 billion for the current quarter ending March 2023. The company’s EPS for the same quarter is expected to increase 184% year-over-year to $6.56.

Shares of VLO have gained 22% over the past six months to close the last trading session at $128.09.

VLO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.

The stock has an A grade for Momentum and a B for Growth, Quality, and Value. Within the B-rated Energy – Oil & Gas industry, it is ranked #4 out of 93 stocks.

Beyond what is stated above, we’ve also rated VLO for Stability and Sentiment. Get all VLO ratings here.

ARC Document Solutions, Inc. (ARC)

ARC, a digital printing company, provides digital printing and document-related services in the United States. It provides managed print services that places, manages, and optimizes print and imaging equipment in customers’ offices, job sites, and other facilities; and cloud-based document management software and other digital hosting services.

On December 8, 2022, ARC declared a quarterly cash dividend of $0.05 per share, payable February 28. The company pays a $0.20 dividend annually, which translates to a yield of 5.87% at the current price, higher than the 4-year average dividend yield of 2.17%.

ARC’s net sales rose marginally year-over-year to $73.14 million in the third quarter that ended September 30, 2022. The company’s adjusted EPS increased 12.5% year-over-year to $0.09, while its adjusted net income increased 15.6% year-over-year to $3.70 million.

The stock has gained 39.6% over the past three months to close the last trading session at $3.63.

ARC’s robust prospect is reflected in its POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.

ARC has an A grade for Value, Sentiment, and Quality. It is ranked first among 42 stocks in the B-rated Outsourcing – Business Services industry.

Click here to see the additional POWR Ratings for ARC (Growth, Momentum, and Stability).

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GILD shares . Year-to-date, GILD has gained 0.59%, versus a 7.16% rise in the benchmark S&P 500 index during the same period.


About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor’s degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.

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