3 Stocks to Help Protect Your Portfolio Through 2023

Last year was arduous for the stock market, with high inflation worries and the Federal Reserve tightening monetary policy aggressively. However, the seven rate hikes now appear to bear fruit, as inflation eased for the third consecutive month in December. The final month’s Consumer Price Index (CPI) increased by 6.5% over last year and decreased by 0.1% from the prior month.

However, economists expect this data would not deter the Fed from hiking rates this year, as U.S. jobless claims recently fell to a three-month low, indicating continued tightness in the labor market. Stuart Hoffman, a senior economic advisor at PNC Financial, said, "Right now the labor market is too tight for the Fed, and job growth is too strong."

Furthermore, minutes from the Fed’s policy meeting in December, released earlier this month, showed that the Fed officials expect higher interest rates for some time ahead until inflation is brought down to its 2% target.

Given this backdrop, market volatility is not expected to ease anytime soon. Hence, investors might consider stable and dividend-paying stocks Merck & Co., Inc. (MRK), Elevance Health Inc. (ELV), and Waste Management, Inc. (WM). The dividends paid by these companies should help cushion one’s portfolio through 2023.

Merck & Co., Inc. (MRK)

MRK is a global provider of health solutions through its prescription medicines, vaccines, biological therapies, and animal health products. The company operates through two segments: Pharmaceutical and Animal Health. It offers its products to drug wholesalers, retailers, hospitals, government agencies, and other healthcare providers.

On January 11, the company announced the successful completion of the cash tender offer through a subsidiary for all of the outstanding shares of common stock of Imago BioSciences, Inc. (IMGO). In November 2022, MRK announced the acquisition of IMGO to augment and strengthen its pipeline in the growing field of hematology.

On December 22, 2022, MRK and Kelun-Biotech, a clinical-stage biotech company, collaborated on developing seven investigational preclinical antibody-drug conjugates (ADC) for cancer treatment. This collaboration is expected to strengthen and complement the company’s oncology pipeline.

The company’s annual dividend of $2.92 yields 2.61% at the current price level. Its dividend payouts have increased at a 9.1% CAGR over the past three years and a 9.2% CAGR over the past five years. MRK has a record of 12 years of consecutive dividend growth.

During the third quarter (ended September 30, 2022), MRK’s net sales increased 13.7% year-over-year to $14.96 billion. The company’s non-GAAP net income increased 3.9% year-over-year to $4.70 billion, while its non-GAAP EPS grew 3.9% from the prior-year quarter to $1.85.

Analysts expect MRK’s revenue and EPS to increase 21.4% and 22.8% year-over-year to $59.14 billion and $7.39, respectively, for the fiscal year 2022, which ended in December. MRK surpassed the consensus EPS estimates in each of the trailing four quarters, which is excellent.

Shares of MRK have gained 37.7% over the past year to close the last trading session at $111.77.

MRK’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It has a B grade for Value, Sentiment, and Quality. Out of 166 stocks in the Medical – Pharmaceuticals industry, it is ranked #12.

In addition to the POWR Ratings given above, click here to see MRK’s Growth, Momentum, and Stability ratings.

Elevance Health Inc. (ELV)

ELV operates as a health benefits company. It serves approximately 118 million people through medical, digital, pharmacy, behavioral, clinical, and care solutions.

On November 28, 2022, 21 of ELV’s Medicaid plans became the first in the United States to earn a full three-year accreditation for health equity from the National Committee for Quality Assurance. This vastly adds to the company’s goodwill.

In the same month, ELV agreed with CarepathRx, a portfolio company of Nautic Partners, to acquire BioPlus, a comprehensive specialty pharmacy. This acquisition should deepen ELV’s specialty pharmacy capabilities and help serve its customers better.

ELV pays a $5.12 per share dividend annually, which translates to a 1.1% yield on current prices. Its dividend payouts have increased at a 17% CAGR over the past three years and a 13.7% CAGR over the past five years. The company has a record of 11 consecutive years of dividend growth. ELV paid its shareholders a quarterly dividend of $1.28 per share on December 21, 2022.

For the fiscal third quarter that ended September 30, 2022, ELV’s total operating revenue increased 11.5% year-over-year to $39.63 billion. Its total operating gain rose 10.2% year-over-year to $2.27 billion in the same period. In addition, the company’s adjusted net income and adjusted net income per share came in at $1.82 billion and $7.53, up 9.1% and 10.9% year-over-year, respectively.

Street expects ELV’s EPS and revenue for the quarter ended December 31, 2022, to increase 1.4% and 10% year-over-year to $5.21 and $39.61 billion, respectively. Moreover, it has an impressive earnings history, as it surpassed the consensus EPS estimates in each of the trailing four quarters.

The stock has gained 5.6% over the past year to close the last trading session at $477.08.

It’s no surprise that ELV has an overall A rating, which translates to a Strong Buy in our proprietary rating system. Also, it has a B grade for Growth, Value, Stability, Sentiment, and Quality.

Out of 11 stocks in the A-rated Medical - Health Insurance industry, ELV is ranked first. Click here to see ELV’s rating for Momentum.

Waste Management, Inc. (WM)

WM provides waste management environmental facilities to residential, commercial, industrial, and municipal customers in North America. It offers waste collection and transportation services, material recovery facility (MRF), and owns and operates landfill gas-to-energy facilities and transfer stations.

On December 8, 2022, the company’s Board of Directors approved a 7.7% increase in the planned quarterly dividend rate for 2023 to $0.70 per share. Its annual dividend rate increases from $2.60 to $2.80 per share, marking the 20th consecutive year of a dividend rate increase.

Additionally, it received authorization to repurchase up to $1.5 billion of the company’s common stock. Overall, this reflects the company’s strong cash flows and might boost shareholder returns.

WM currently pays a $2.60 dividend annually, which translates to a yield of 1.70% at prevailing prices. Its four-year average dividend yield is 1.71%, and the current payout ratio is 45.50%. The company has increased its dividends for 19 consecutive years.

On September 13, 2022, WM announced its agreement to acquire a controlling interest in Avangard Innovative’s U.S. business, which would operate as Natura PCR. Through this acquisition, the company expects to deliver new recycling capabilities for its customers and provide commercially used circular solutions for films and clear plastic wrap.

For the third quarter of the fiscal year 2022 (ended September 30), WM’s revenue increased 8.8% year-over-year to $5.08 billion. The company’s adjusted income from operations increased 19.9% year-over-year to $950 million, while its adjusted net income grew 21.7% year-over-year to $645 million. Additionally, WM’s adjusted EPS for the quarter rose 23.8% year-over-year to $1.56.

Analysts expect WM’s revenue and EPS for fiscal 2022 (ended in December) to increase 10.1% and 18.1% year-over-year to $19.74 billion and $5.72, respectively. Moreover, WM’s impressive earnings surprise history is testified by the company surpassing EPS estimates in three of the trailing four quarters.

Over the past six months, the stock has gained marginally to close the last trading session at $152.68.

WM’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, which translates to Buy in our proprietary rating system.

It has a B grade for Stability and Quality. Among 15 stocks in the B-rated Waste Disposal industry, it is ranked #4. Click here to see the other ratings of WM for Growth, Value, Momentum, and Sentiment.

MRK shares were trading at $111.66 per share on Friday afternoon, down $0.11 (-0.10%). Year-to-date, MRK has gained 0.64%, versus a 4.01% rise in the benchmark S&P 500 index during the same period.

Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.

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