Following October’s favorable inflation data, the Fed is expected to slow down its rate hike aggression. While there’s a surge in investors’ optimism, uncertainty remains. Therefore, investors looking to strengthen their retirement portfolio could consider buying quality dividend-paying stock Kroger (KR). However, fundamentally weak Carvana (CVNA) might be avoided. Keep reading….
The stock market has been volatile this year, as is evident from the CBOE Volatility Index’s 18.6% year-to-date gains, as high prices, and consequent rate hikes continue to concern the broader markets.
However, October’s favorable inflation data has garnered substantial optimism among investors. As the central bank is making progress, a slower pace of rate hikes is expected in the coming months.
Moreover, CNBC’s Jim Cramer believes that the S&P 500 will witness a December Rally. He said, “The charts, as interpreted by the legendary Larry Williams, suggest that the Santa Claus rally is coming to town next month and you’ve got to get ready for it, or else you may be left behind.”
While uncertainty remains, investors’ interest in dividend stocks is evident from the SPDR S&P Dividend ETF’s (SDY) 12% gains over the past month. Therefore, investors looking for investments for their retirement portfolio might consider The Kroger Co. (KR), which possesses a solid dividend-paying record. However, fundamentally weak Carvana Co. (CVNA) might be best avoided now.
Stock to Buy:
The Kroger Co. (KR)
KR operates as a retailer in the United States. The company operates combination food and drug stores, multi-department stores, marketplace stores, and price-impact warehouses.
On October 14, 2022, KR and Albertsons Companies, Inc. (ACI) entered a definitive agreement. This collaboration is expected to vastly expand customer reach while aiming to deliver fresh and affordable food to nearly 85 million households.
KR has paid dividends for 16 consecutive years. Its dividend payouts have increased at 16.1% CAGR for the past three years. Its current dividend yield is 2.17%, and its four-year average dividend yield is 1.97%.
For the second quarter that ended August 13, 2022, KR’s sales came in at $34.64 billion, up 9.3% year-over-year. Its net earnings came in at $731 million, up 56.5% year-over-year. Also, its adjusted EPS came in at $0.90, up 12.5% year-over-year.
Analysts expect KR’s revenue to increase 7.5% year-over-year to $148.20 billion in 2023. Its EPS is expected to increase 10.6% year-over-year to $4.07 in 2023. It surpassed EPS estimates in all four trailing quarters. Over the past month, the stock has gained 9.7% to close the last trading session at $47.84.
KR’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.
KR has a B grade for Value and Quality. It is ranked #6 out of 39 stocks in the A-rated Grocery/Big Box Retailers industry. Click here for the additional POWR Ratings for Growth, Momentum, Stability, and Sentiment for KR.
Stock to Avoid:
Carvana Co. (CVNA)
CVNA and its subsidiaries operate an e-commerce platform for buying and selling used cars in the United States.
On November 4, 2022, Former Attorney General of Louisiana, Charles C. Foti, Jr., Esq., a partner at the law firm of Kahn Swick & Foti, LLC, announced an investigation into CVNA. The investigation has been initiated to discover if CVNA’s officers and/or directors breached their fiduciary duties to its shareholders or violated state or federal laws.
CVNA’s net sales and operating revenues came in at $3.39 billion for the third quarter that ended September 30, 2022, down 2.7% year-over-year. Its net loss came in at $283 million, up 784.4% year-over-year, while its loss per share came in at $2.67, up 602.6% year-over-year.
CVNA’s revenue is expected to decrease 14.5% year-over-year to $3.21 billion for the quarter ending December 2022. Its EPS is expected to decrease 102.9% year-over-year to negative $2.07 for the same period. It missed EPS estimates in all four trailing quarters. Over the past month, the stock has lost 43% to close the last trading session at $8.12.
CVNA’s POWR Ratings reflect its poor prospects. The stock has an overall F rating, equating to a Strong Sell. It has an F grade for Stability, Sentiment, and Quality and a D for Growth.
KR shares were trading at $48.55 per share on Friday morning, up $0.71 (+1.48%). Year-to-date, KR has gained 9.38%, versus a -14.23% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master’s degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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