- Uncertainty over the Federal Reserve’s tightening plans and persistently high inflation continue to affect investor sentiment.
- I’m optimistic about companies with strong fundamentals, reasonable valuations, and rising dividend payouts in the current market environment.
- That’s why I recommend buying AT&T and The Wendy’s Company.
Wall Street stocks are off to a strong start to 2023. January’s rally was helped by recent signs that inflation may have peaked. year-to-date, he’s up more than 10%, and the benchmarks are up 5.8% and 2.4% respectively so far this year.
Despite the strong performance, we expect the economy to weaken significantly in the coming months amid the negative impact of the Federal Reserve’s aggressive rate-hiking cycle.
If that proves to be the case, I recommend buying shares in AT&T (NYSE:) and Wendy’s Company (NASDAQ:) as Wall Street continues its violent rollercoaster ride.
The two stocks, which will easily outperform the market in 2022, offer relatively high dividend yields and still hold attractive value, making them a smart buy in the current market environment. .
- *Year-to-date performance: +8.6%
- *Market cap: $142.1 billion
AT&T is the world’s largest telecommunications company and the leading provider of cellular service in the United States.
T shares have risen almost 38% since falling to a 52-week low of $14.46 in mid-October, the level last seen in March 2003.
The stock, which surged 8.6% in the first four weeks of the new year, closed Thursday’s session at $20, at a valuation of $142.1 billion. The stock will hold up much better than the broader market in 2022, falling less than 1% last year, demonstrating the strength and resilience of the company’s business.
A blue-chip company based in Dallas, Texas has taken drastic measures over the past 18 months as it transitions from a struggling media conglomerate to a more streamlined organization with a cleaner, healthier balance sheet. , back to the roots of telecommunications.
AT&T, which spun off its DirecTV satellite television business in 2021, sold WarnerMedia’s entertainment division last April and merged with Discovery to form a new publicly traded company, Warner Bros. Discovery (NASDAQ:). Now under new management, AT&T is refocusing its efforts on the U.S. wireless and home broadband market, offering a range of his 5G wireless and fiber optic broadband services.
The telecommunications giant has started 2023 with good news after an easy beating, driven by better-than-expected quarterly subscriber additions.
AT&T said it added 656,000 postpaid subscribers as it took advantage of discounts and trade-in offers to win over customers in the highly competitive telecommunications market.
AT&T’s free cash flow for 2022 was $14.1 billion, slightly above management’s previous guidance and above consensus expectations of $13.8 billion.
Going forward, the phone service provider expects full-year adjusted earnings per share to be in the range of $2.35 to $2.45, wireless service revenue growth of “4% or more,” and broadband revenue growth of more than 5%. I’m here. Management also set a free cash flow forecast of $16 billion.
CEO John Stankey said in the earnings call:
“As we enter 2023, I am confident in the trajectory of our business and the ability of our team to deliver profitable and sustainable growth for our shareholders.”
AT&T remains one of the 15 highest-yielding stocks in the S&P 500 despite cutting its dividend following an overhaul of its media and telecoms portfolio.
The mobile operator is currently offering a quarterly dividend of $0.2775 per share. This represents an annual dividend of $1.11 per share at a yield of 5.44%. That’s more than three times the S&P 500’s implied yield of 1.56%.
As a matter of course, InvestingPro AT&T’s stock rose 7.6%, bringing the stock closer to its fair value of $21.51.
- *Year-to-date performance: -3.5%
- *Market cap: $4.6 billion
We believe Wendy’s is well positioned to deliver significant long-term value to shareholders as it continues to deliver solid earnings and sales growth despite a challenging macro environment of increasing pressure and a slowing economy. .
In addition to promising fundamentals, the Dublin, Ohio-based quick-service restaurant is attracting investors in the form of increased cash dividends and share buybacks thanks to a strong balance sheet and expected free cash flow growth. We remain committed to returning additional capital to
WEN closed at $21.83 overnight and hit a 52-week high of $23.78 on Dec 13. At current valuations, Wendy’s market cap is her $4.6 billion. The stock has fallen 1.6% over the past 12 months, compared to her 6.7% decline in the S&P 500.
Wendy’s reported preliminary results for the fourth quarter earlier this month. Revenue is expected at her $536.5 million, up 13.4% from $473.2 million in the same period last year. investment.com consensus.
The fast-food company said it expects global same-store sales to rise 6.4% from the same period last year, beating Street’s forecast of a 4.8% increase.
Wendy’s CEO Todd Penegor said in a statement that profit margins at the company’s restaurants were up about 300 basis points from the first quarter, an encouraging sign.
The company will release audited financial statements and file an annual report on March 1.
Wendy’s board doubled the company’s quarterly dividend to 25 cents per share ($1 annualized), raising the annual yield to 4.53%. This is his one of the highest standards in the restaurant industry. The dividend will be paid on his March 15th to his record shareholders as of March 1st and the ex-dividend date will be his February 28th.
Management also approved a new $500 million share repurchase program that expires in February 2027, supported by a strong liquidity position.
Wall Street remains optimistic about fast-food chain stock prices, surveyed by 28 of 30 analysts. investment.com Rate WEN as Buy or Neutral. The target average price for the stock is about $25, up about 14% from current levels.
Disclosure: As of this writing, I am long the S&P 500 and Nasdaq via the SPDR. S&P 500 ETF (SPY) and Invesco QQQ ETF (QQQ)The Technology Select Sector SPDR ETF is also long (XLK). I regularly recalibrate my portfolio of individual stocks and ETFs based on my ongoing risk assessment of both the macroeconomic environment and the financial condition of the company.
The views expressed in this article are solely those of the author and should not be construed as investment advice.