Macroeconomic headwinds such as slow economic growth and recessionary fear are weighing on investor sentiments. Therefore, take a look at quality dividend-paying stocks NuStar Energy L.P. (NS), Spirent Communications plc (SPMYY), and Westlake Chemical Partners LP (WLKP), which could help survive a market downturn.
On Monday, US stocks experienced a decline as investors assessed the impact of the seizure of First Republic Bank, the second-largest bank failure in US history. The timing of the seizure, just before an anticipated interest rate hike by the Federal Reserve, added to the uncertainty.
Moreover, the U.S. economy slowed at the start of the year, suggesting that an aggressive series of interest rate hikes have cooled business activity even as the job market has made gains.
Also, the US Real Gross Domestic Product rose by 1.1% (annualized) during the first quarter of 2023, below the consensus forecast of 2.0% and the Conference Board’s forecast. Consumption came in strong for the quarter, but weak investment and inventory data limited overall economic growth.
Despite surging consumer spending over the first three months of this year, the Conference Board's Leading Economic Index, which broadly tracks business cycles using ten inputs from across manufacturing, unemployment, building permits, and interest rate spreads, among other factors for the US, dropped for the 12th consecutive month in March, signaling that a recession is set to hit in the middle of 2023.
Take a look at the stocks mentioned above:
NuStar Energy L.P. (NS)
NS engages in the transportation, terminalling, and storage of petroleum products and renewable fuels, and the transportation of anhydrous ammonia in the United States and internationally. It operates through Pipeline; Storage; and Fuels Marketing segments.
On April 27, 2023, NS declared a quarterly cash dividend of $0.40 per share, payable on May 12, 2023.
The company pays an annual dividend of $1.60, which translates to a yield of 9.98% at the current price level. It has a four-year average dividend yield of 11.31%.
NS’ trailing-12-month gross profit margin of 49.39% is 9.1% higher than the 45.25% industry average. Its trailing-12-month net income margin of 12.17% is 175% higher than the 4.43% industry average.
During the fiscal fourth quarter ended December 31, 2022, NS’ total revenues increased 3% year-over-year to $429.96 million. Adjusted net income grew 44.6% year-over-year to $75.24 million, while its adjusted net income per common unit increased 142.9% year-over-year to $0.34.
NS’ EPS is expected to come in at $0.14 for the fiscal first quarter that ended March 2023. The company’s revenue for the same quarter is expected to increase 3.3% year-over-year to $441.85 million.
Shares of NS have gained 5% over the past year to close the last trading session at $16.03. Its 24-month beta is 0.61.
NS’ POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a B grade for Quality, Momentum, and Stability. It is ranked #9 out of 31 in the A-rated MLPs - Oil & Gas industry.
Beyond what is stated above, we’ve also rated NS for Value, Growth, and Sentiment. Get all NS ratings here.
Spirent Communications plc (SPMYY)
Headquartered in Crawley, the United Kingdom, SPMYY offers automated test and assurance solutions in the Americas, the Asia Pacific, Europe, the Middle East, and Africa. The company operates in Lifecycle Service Assurance and Networks & Security segments.
On February 20, 2023, SPMYY and Anritsu announced a partnership presenting a full portfolio of O-RAN testing unmatched in today’s market. This collaboration will provide O-RAN component suppliers (RU, DU, CU), system integrators, and carriers with a complete set of O-RAN solutions covering the full breadth of testing needs.
SPMYY’s trailing-12-month asset turnover ratio of 0.87x is 41% higher than the 0.62x industry average. Its trailing-12-month gross profit margin of 71.95% is 42.9% higher than the 50.37% industry average.
On March 9, 2023, SPMYY declared a quarterly cash dividend of $0.20 per share, payable on May 17, 2023.
The company pays an annual dividend of $0.39, which translates to a yield of 4.25% at the current price level. It has a four-year average dividend yield of 2.46%. Its dividend payments have grown at a CAGR of 11.3% over the past three years.
SPMYY's adjusted revenue rose 5.5% year-over-year to $607.50 million in the fiscal year that ended December 31, 2022. The company’s adjusted profit for the year attributable to owners of the parent company increased 13.5% year-over-year to $114.50 million, while its adjusted EPS increased 14% year-over-year to 18.75 cents.
Street expects SPMYY’s revenue for the fiscal year ending December 2023 to increase marginally year-over-year to $600.06 million.
The stock has gained 3.4% over the past month to close the last trading session at $9.25. It has a 60-month beta of 0.38.
SPMYY’s robust prospects are reflected in its POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
SPMYY has an A grade for Quality and Stability and a B for Value. It is ranked #2 out of 41 in Technology - Hardware industry.
Click here for the additional POWR Ratings for SPMYY (Growth, Momentum, and Sentiment).
Westlake Chemical Partners LP (WLKP)
WLKP acquires, develops, and operates ethylene production facilities and related assets in the United States. The company's ethylene production facilities primarily convert ethane into ethylene.
WLKP’s trailing-12-month asset turnover ratio of 1.12x is 46.8% higher than the 0.76x industry average. Its trailing-12-month EBIT margin of 21.82% is 81.6% higher than the 12% industry average.
The company pays an annual dividend of $1.89, which translates to a yield of 8.55% at the current price level. It has a four-year average dividend yield of 8.14%. Its dividend payments have grown at a CAGR of 4.9% over the past five years.
WLKP’s total net sales increased 42.4% year-over-year to $366.84 million in the fourth quarter, which ended December 31, 2022. Net income came in at $91.26 million, while its distributions declared per unit came in at $0.47. Also, its EBITDA amounted to $125.55 million.
Analysts expect WLKP’s revenue for the fiscal first quarter that ended March 2023 to increase 8.7% year-over-year to $394 million. Its EPS is expected to come in at $0.46 for the same quarter. Additionally, it has topped consensus revenue estimates in three of the trailing four quarters, which is impressive.
The stock has gained marginally over the past month to close the last trading session at $22.05. Its 24-month beta is 0.60.
WKLP’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.
WKLP also has an A grade for Quality and a B in Value, Stability, and Sentiment. It is ranked #1 out of 9 in the MLPs - Other industry.
To access additional ratings for WLKP’s Growth and Momentum, click here.
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NS shares were trading at $15.65 per share on Tuesday morning, down $0.38 (-2.37%). Year-to-date, NS has gained 0.16%, versus a 7.36% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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