The 2 Best Dow Stocks to Buy in 2023

Inflation cooled again in December, bringing some relief for households and businesses. This marks the sixth consecutive month of easing inflation, which is expected to continue to recede this year.

The favorable inflation data could make the Fed rethink its aggressive interest rate increases. Moreover, the latest jobs report saw wage growth cooling more than expected and workers clocking fewer hours for a second consecutive month. The data will likely allow the Fed to slow its rate hikes.

Given the growing optimism regarding cooling inflation and a resilient economy, the Dow Jones Industrial Average gained more than 16% over the past three months.

Therefore, investing in quality Dow stocks, The Coca-Cola Company (KO), and Cisco Systems, Inc. (CSCO) could be wise now.

The Coca-Cola Company (KO)

KO is a beverage firm that manufactures, markets, and sells non-alcoholic beverages globally. Its segments include Europe, the Middle East, and Africa; Latin America; North America; Asia Pacific; Global Ventures; and Bottling Investments. The company's products are available in more than 200 countries.

On September 29, 2022, KO and Molson Coors Beverage Company (TAP) signed an exclusive agreement to develop and market Topo Chico Spirited, a line of spirits-based, ready-to-drink cocktails.

With unparalleled flavors and a foundation rooted in the storied 125-year-old master brand, the launch is expected to upend the canned cocktail business. It will be launched in more than 20 locations across the nation in 2023, increasing its revenue.

For the fiscal 2022 third quarter ended September 30, 2022, KO’s net operating revenues increased 10.2% year-over-year to $11.06 billion, while its gross profit grew 7.1% from the year-ago value to $6.50 billion. Its operating income rose 6.6% from the prior year’s period to $3.09 billion.

In addition, the company’s consolidated net income increased to $2.82 billion, a 14% increase year-over-year, and its EPS stood at $0.65, a 14% increase from the prior year’s period.

KO has increased its dividends for 60 consecutive years. It pays a $1.76 per share dividend annually, which translates to a 2.83% yield on the current price. Its four-year average dividend yield is 3.07%, and its dividend payments have grown at a CAGR of 3.5% over the past five years.

The consensus EPS estimate of $2.49 for the fiscal year that ended December 2022 indicates a 7.3% year-over-year improvement. Likewise, the consensus revenue estimate of $42.77 billion for the same year reflects a rise of 10.6% from the prior year. Moreover, KO has surpassed its consensus estimates in all four trailing quarters, which is impressive.

Shares of KO have gained 2.6% over the year to close the last trading session at $62.01.

KO’s promising outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

The stock has an A grade for Sentiment and a B for Stability and Quality. In the 36-stock A-rated Beverages industry, it is ranked #17.

Beyond what we stated above, we also have KO’s Growth, Value, and Momentum ratings. Get all KO ratings here.

Cisco Systems, Inc. (CSCO)

CSCO is involved in designing and marketing Internet-related technologies. The business is integrating its cloud, networking, security, collaboration, and application platforms. It operates through three geographical segments, the Americas; Europe, the Middle East, and Africa (EMEA); and Asia Pacific, Japan, and China (APJC).

On December 15, 2022. CSCO partnered with T-Mobile US Inc. (TMUS) to create the world's largest highly scalable and distributed nationwide cloud native converged core gateway. With a shared objective of developing best practices for 5G and the Internet of the Future, co-innovation is the cornerstone of CSCO's strategic cooperation with T-Mobile.

This development will support the most advanced 5G applications for consumers and businesses, assisting CSCO in its expansion.

On December 12, CSCO declared that it was assisting OTEGLOBE with expanding the network's capacity and performance to provide clients with quicker, more effective connections through a comprehensive, 800G-ready infrastructure. The corporations have successfully built a cutting-edge internet architecture to meet the increase in traffic throughout southern and western Europe.

For the fiscal 2023 first quarter ended October 29, 2022, CSCO’s total revenue increased 5.7% from year-over-year to $13.63 billion, while its gross margin grew 3.6% from the previous year’s quarter to $8.35 billion. The company’s operating income rose to $3.54 billion, up 3% from the year-ago value.

In addition, CSCO’s non-GAAP net income increased 2.1% year-over-year to $3.50 billion, while its EPS came in at $0.86, a 4.9% increase from the prior year’s period.

The company has raised its dividends for 11 consecutive years. It pays a $1.52 per share dividend annually, which translates to a 3.11% yield on the current price level. CSCO’s dividend payments have grown at a CAGR of 5.6% over the past five years, and its four-year average dividend yield is 2.98%.

Analysts expect CSCO’s revenue to increase 5.7% year-over-year to $54.50 billion for the current fiscal year ending July 2023. The company’s EPS for the same year is expected to grow 5.6% from the previous year to $3.55. Furthermore, CSCO has surpassed its consensus estimates in all four trailing quarters.

The stock has gained 13.8% over the past six months to close the last trading session at $49.21.

CSCO’s POWR Ratings reflect its strong outlook. The stock has an overall rating of A, equating to Strong Buy in our proprietary rating system.

CSCO has a Quality grade of A and a Stability grade of B. Within the Technology - Communication/Networking industry, it is ranked #4 of 48 stocks.

To see additional POWR Ratings for Growth, Value, Momentum, and Sentiment for CSCO, click here.

KO shares were trading at $61.70 per share on Thursday morning, down $0.31 (-0.50%). Year-to-date, KO has declined -3.00%, versus a 3.47% rise in the benchmark S&P 500 index during the same period.

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.

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