With inflation cooling considerably in the last two months, investors had been hopeful that signs of economic softness could translate to a dovish pivot from the Federal Reserve, but those hopes were dashed when the central bank downgraded its economic outlook and warned to keep raising interest rates.

In the wake of persistent monetary tightening, economists have projected a 70% chance of U.S. recession in 2023. The stock market is in shambles, with the S&P 500 declining over 19.8% year to date, while the tech-heavy Nasdaq and the Dow lost 40.1% and 9.1% year-to-date, respectively.

However, the long-term market outlook is optimistic, with the S&P 500 estimated to rise to 4,243 over the next year. Chief investment strategist John Stoltzfus remains decidedly bullish on the long-term perspective of the U.S. economy. He opined, “Once inflation begins to moderate, U.S. growth should begin to recover, supported by consumer demand and business investment.”

Given the ongoing market uncertainties, one should invest in high-quality, fundamentally strong stocks that deliver solid returns over the long term.

Therefore, investors looking to generate long-term returns could invest in The Coca-Cola Company (KO), Elevance Health Inc. (ELV), and Weis Markets, Inc. (WMK). In addition, these stocks pay out steady dividends, boosting passive income.

The Coca-Cola Company (KO)

KO is a beverage company that manufactures, markets, and sells various non-alcoholic beverages globally. It sells its products under brands: Coca-Cola, Sprite, Fanta, Diet Coke, Coca-Cola Zero Sugar, Thumbs Up, Aquarius, fairlife, Minute Maid Pulpy, and Simply, among others.

On September 29, KO and Molson Coors Beverage Company (TAP) entered an exclusive agreement to develop and commercialize Topo Chico Spirited, a line of spirit-based, ready-to-drink cocktails inspired by the bright and refreshing taste of tequila and vodka-based beverages. It will be launched in more than 20 markets across the country in 2023 and should boost the company’s revenue significantly.

The company paid its shareholders a quarterly dividend of 44 cents per share on December 15, 2022. KO’s four-year average dividend yield is 3.07%, and its forward annual dividend of $1.76 translates to a 2.78% yield. Its dividend has grown at a 3.2% CAGR over the past three years and a 3.5% CAGR over the past five years. Also, it has a record of 60 consecutive years of dividend growth.

KO’s net operating revenue increased 10.2% year-over-year to $11.06 billion in the third quarter that ended September 30, 2022. Its gross profit grew 7.1% from the year-ago value to $6.50 billion, while its net income attributable to shareowners increased 14.3% year-over-year to $2.83 billion. The company’s EPS increased 14% from its year-ago value to $0.65.

Analysts expect KO’s EPS and revenue to increase 1.2% and 4% year-over-year to $0.46 and $9.85 billion, respectively, in the fourth quarter ending December 31, 2022. It surpassed the consensus EPS estimates in each of the trailing four quarters.

Over the past year, the stock has gained 8.9% to close the last trading session at $63.34.

KO’s solid prospects are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It has an A grade for Sentiment and a B for Stability and Quality. The stock is ranked #16 of 33 stocks in the A-rated Beverages industry.

To see additional POWR Ratings of KO for Growth, Value, and Momentum, click here.

Elevance Health Inc. (ELV)

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

On November 28, 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 deepens ELV’s specialty pharmacy capabilities and should help serve its customers better.

ELV pays a $5.12 per share dividend annually, which translates to a 1% yield on the current price. Its dividend payouts have increased at a 16.9% CAGR over the past three years and a 13.6% CAGR over the past five years. The company has a record of 11 consecutive years of dividend growth. ELV paid a quarterly dividend of $1.28 per share to its shareholders on December 21, 2022.

For the fiscal third quarter 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 ending December 31, 2022, to increase 1.4% and 9.8% year-over-year to $5.21 and $39.55 billion, respectively. Moreover, it has an impressive earnings history as it surpassed the EPS estimate in each of the trailing four quarters.

Shares of ELV have gained 12.4% over the past year to close the last trading session at $510.06.

ELV has an overall rating of A, which translates to 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, it is ranked first.

Click here to see ELV’s ratings for Momentum as well.

Weis Markets, Inc. (WMK)

WMK is a food retailer that engages in the retail sale of food through a chain of supermarkets. The company operates primarily under the Weis Markets name and Weis, Weis Great Meals Start Here, Weis Gas-n-Go, and Weis Nutri-Facts brands.

On November 21, WMK paid a quarterly dividend of $0.34 per share, indicating a 6.3% increase from the previous quarter. The company’s four-year average dividend yield is 2.43%, and its current dividend translates to a 1.65% yield. Its dividends have grown at a 1.6% CAGR each over the past three and five years.

WMK’s net sales increased 8.2% year-over-year to $1.15 billion in the fiscal third quarter ended September 24, 2022. The company’s net income rose marginally from its prior-year quarter to $28.66 million. Also, its earnings per share came in at $1.07, compared to $1.06 in the previous-year quarter.

Over the past year, the stock has gained 27.8%, closing the last trading session at $82.62.

WMK’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

It has an A grade for Stability and Quality. Within the A-rated Grocery/Big Box Retailers industry, it is ranked #15 of the 39 stocks.

Beyond what we’ve stated above, we have also given WMK grades for Growth, Value, Momentum, and Sentiment. Get all WMK ratings here.

KO shares were trading at $63.63 per share on Friday morning, up $0.29 (+0.46%). Year-to-date, KO has gained 10.64%, versus a -18.37% 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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