• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing
  3. / Stocks

When Times Are Tough, These 3 Mega-Caps Should Deliver the Dividends

Here's why in recessions and bear markets, the right mega-cap stocks can offer security -- and good yields.
By BOB CIURA
Jun 24, 2022 | 01:00 PM EDT
Stocks quotes in this article: VZ, PFE, AVGO

In tough economic times, mega-cap stocks -- stocks with market capitalizations above $200 billion -- can have advantages. The right ones typically have more stable business models and more reliable dividends during recessions than their smaller-cap counterparts. We sifted through the roughly 20 mega-cap stocks on the market and spotted three to consider during a bear market:

Call Up Verizon

Verizon (VZ) is one of the largest communications companies in the country. Wireless contributes three-quarters of all revenues, and broadband and cable services account for about a quarter of sales. The company's network covers around 300 million people and 98% of the U.S.

In the 2022 first quarter, Verizon's revenue grew 2.1% to $33.6 billion, in line with expectations. Adjusted earnings per share of $1.35 compared favorably to $1.31 in the prior year and was also in line with estimates. The company had a net loss of 36,000 wireless postpaid phone during the quarter, but wireless revenue grew 9.5% to $18.3 billion. Total retail connections of 143 million was the best figure for the first quarter since 2018. Wireless activations improved 11%. Average revenue per account also increased 2.6%.

For 2022, the company now expects that adjusted earnings per share will be at the low end of its previous guidance of $5.40 to $5.55 for the year. Still, Verizon offers a very high and stable dividend yield of 5.2%.

Verizon's key competitive advantages include that it is often considered the best wireless carrier in the U.S. This is evidenced by the company's wireless net additions and very low churn rate. This reliable service allows Verizon to maintain its customer base as well as give the company an opportunity to move customers to higher-priced plans. Verizon is also in the midst of rolling out 5G service, which will give it an advantage over other carriers. Another advantage for Verizon is the stock's ability to withstand a downturn in the market.

Good Medicine: Pfizer

Pfizer (PFE) is a global pharmaceutical company that focuses on prescription drugs and vaccines. Pfizer's top products are Eliquis, Ibrance, Prevnar, Enebrel (international), Sutent, Xtandi, Vyndaqel/ Vyndamax, Inlyta, Xeljanz, Plaxlovid, and Comiranty. Pfizer had revenue of $81.3 billion in 2021.

In the 2022 first quarter, Pfizer's revenue rose 77% to $25,661 billion from $14,516 million and adjusted diluted earnings per share rose 72% to $1.62 vs. $0.95 on a year-over-year basis. Diluted unadjusted earnings per share rose 59% to $1.37 from $0.86 in comparable quarters.

Pfizer maintained revenue guidance at $98 billion to $102 billion and lowered adjusted diluted earnings per share to $6.25 - $6.45 for 2022.

Pfizer's current product line is expected to produce top line and bottom-line growth out to 2027 because of significant R&D and acquisitions. Its hospital products and biosimilars are all posting robust sales growth, as are its drugs and vaccines such as Eliquis (cardiovascular), Ibrance (oncology), Xtandi (oncology), Comirnaty (Covid-19 vaccine), Vyndaqel/Vyndamax (transthyretin stabilizers), Inlyta (renal cell carcinoma), Prevnar family (pneumococcal vaccine). New launch, Paxlovid (antiviral), is also growing rapidly.

Future growth will come from increasing sales for approved indications, extensions, R&D, and bolt-on acquisitions. Pfizer has a strong pipeline in oncology, inflammation & immunology, rare diseases, and vaccines.

Pfizer is one of the largest pharmaceutical companies in the world. As such, it has scale in R&D, manufacturing, regulatory affairs, distribution, and marketing around the world. This gives Pfizer the ability to bring new therapies to market, partner with smaller companies, or acquire entire companies outright. The current pipeline is robust, and some will likely be blockbuster drugs even after attrition. As a pharmaceutical company, Pfizer is thought to be recession resistant.

Pfizer stock yields 3.3%.

Wide Coverage With Broadcom

Broadcom (AVGO) designs, develops and sells semiconductors under the following business units: Wired infrastructure, wireless communication, enterprise storage and industrial. Its offerings include data center chips, factory automation, energy systems and power generation, broadband access, and home connectivity. Broadcom is a fabless semiconductor company, which means that the products it designs are manufactured by other companies/foundries.

Broadcom reported its first quarter (fiscal 2022) earnings results on March 3, showing the company generated revenues of $7.7 billion during the quarter. This represents an increase of 16% compared to the prior year's quarter. The strong revenue growth performance was possible thanks to beating estimates in the semiconductor solutions unit, while its Infrastructure software business generated solid growth as well. Broadcom reported earnings per share of $8.39 for the first quarter, which was ahead of the analyst consensus estimate.

Broadcom's profitability has exploded over the last decade. Indeed, its earnings-per-share rose tenfold between 2011 and 2020. This earnings growth was driven by a significant amount of M&A, the most important one being the merger between Broadcom and Avago Technologies.

These acquisitions naturally have impacted Broadcom's growth tremendously, so what we see in the above table is not purely the result of Broadcom's organic growth rate. By moving towards acquisitions in the software industry with its CA takeover, Broadcom has found a new way of generating inorganic growth.

Broadcom's biggest market is wireless communication, where the company owns a strong connectivity portfolio that includes advanced LTE, Bluetooth 5.x, Wi-Fi, GNSS (GPS, Galileo, etc.), and so on. Broadcom is also well positioned in the enterprise storage market, where it provides switching and other connectivity solutions and storage products such as SSD controllers.

These markets will continue to grow, and even without any major acquisitions, Broadcom's revenues should continue to grow, as well. The combination of acquisitions and organic growth should result in solid revenue growth and increasing tailwinds for profitability stemming from improving economics of scale.

Broadcom stock yields 3.3%.

As the S&P 500 Index officially entered bear market territory, it's a good time for risk-averse investors to consider safer dividend stocks, such as these three mega-cap stocks that have recession-resistant earnings and dividends.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Ciura had no position in any security mentioned.

TAGS: Dividends | Investing | Investing basics | Stocks | Pharmaceuticals | Telecommunications | Telecom Services

More from Stocks

Life Goes on With Covid in the U.K., While in Hong Kong It Withers

Alex Frew McMillan
Aug 10, 2022 7:30 AM EDT

I'm in Britain for the first time in years, where it's pretty much business as usual now. The contrast with repressive, quarantine-addicted Hong Kong couldn't be starker.

Market Weakness, July CPI, Charting Fed Economic Data, Trading Disney

Stephen Guilfoyle
Aug 10, 2022 7:18 AM EDT

Understand that recent spending plans passed in the Senate will work to counteract measures being taken by the Fed to gain the upper hand on inflation.

This Market Could Get Bumpy, So Sit Tight

Helene Meisler
Aug 10, 2022 6:00 AM EDT

Apparently Wall Street didn't get the memo about a lazy August. Let's see why volatility could make investors sweat a little bit, look at new lows and check on weakening momentum.

This Market Calls for Short-Term Plans

James "Rev Shark" DePorre
Aug 9, 2022 4:44 PM EDT

Looming price data and expected volatility could offer opportunities for very short-term traders, but building longer-term positions is a tougher task.

These 3 ETFs Offer Yield-Hungry Investors Some 'Options'

Mark Abssy
Aug 9, 2022 2:00 PM EDT

As our appetite expands to 'take what we can get' investments, let's look at three funds from Global X and see how they stack up against major index funds.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 01:44 PM EDT STEPHEN GUILFOYLE

    This Holding Lights Up With Strong Earnings

    Check out the latest from TheStreet's Stocks Under...
  • 09:24 AM EDT PETER TCHIR

    Jobs Report Reaction: Incredibly Strong, But Questions to Ask

    An incredibly strong July jobs report. Not only d...
  • 08:54 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    The Secret to Dealing With FOMO
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login