3 Passive Income Stocks That Could Help You Retire Early

With the July CPI data showing a decline in inflation from the multi-decade high level, the stock market rallied. The decline in inflation, a red-hot job market, and improved consumer sentiment have driven the benchmark indexes higher over the past few days.

However, the current level of inflation is still uncomfortable, which could prompt further interest rate hikes. “Rates still have to move higher even though in the very short run the market is reacting positively… Inflation is a bit more moderate, but inflation has not disappeared as a problem as yet,” said Chuck Lieberman, chief investment officer at Advisors Capital Management.

Moreover, the tensions between China and Taiwan could dampen the market’s prospects. Thus, we think investing in quality stocks that pay a handsome dividend could be wise. Here are three fundamentally sound stocks that could help generate a consistent income stream: Valero Energy Corporation (VLO), Cummins Inc. (CMI), and Hubbell Incorporated (HUBB).

Valero Energy Corporation (VLO)

VLO manufactures, markets, and sells transportation fuels and petrochemical products in the United States, Canada, the United Kingdom, Ireland, and internationally. The company operates through three segments: Refining; Renewable Diesel; and Ethanol.

The company’s $3.92 annual dividend yields 3.4% at its current share price. It paid its quarterly dividend of $0.98 on June 7, 2022. Its dividend payouts have increased at a 4.9% CAGR over the past three years and an 8.6% CAGR over the past five years.

VLO’s revenues increased 86.1% from the prior-year quarter to $51.64 billion in the fiscal quarter ended June 30, 2022. Operating income for the quarter came in at $6.22 billion, reflecting an increase of 1,121.8% year-over-year, while the net income stood at $4.77 billion, up 1,532.9% year-over-year. The company’s EPS was $11.58, reflecting an increase of 2,869.2% year-over-year.

The consensus EPS estimate of $7.13 for the fiscal quarter ending September 2022 represents a 484.4% improvement year-over-year. The consensus revenue estimate of $43.80 billion for the same quarter represents a 48.4% increase from the same period last year. It has an impressive earnings surprise history, as it topped Street EPS estimates in each of the trailing four quarters.

VLO’s shares have gained 69% over the past year to close the last trading session at $111.95. The stock has gained 26.5% over the past six months.

Its strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

VLO also has an A grade in Growth and Momentum and a B in Value and Quality. It is ranked #4 of 97 stocks in the B-rated Energy - Oil & Gas industry.

Beyond what is stated above, we’ve also rated VLO for Stability and Sentiment. Get all the VLO ratings here.

Cummins Inc. (CMI)

CMI designs, manufactures, distributes, and services diesel and natural gas engines, electric and hybrid powertrains, and related components worldwide. It operates through five segments- Engine; Distribution; Components; Power Systems; and New Power. 

The company’s $6.28 annual dividend yields 2.8% at its current share price. Its quarterly dividend of $1.57 is payable on September 1, 2022. Its dividend payouts have increased at an 8.4% CAGR over the past three years and a 7.2% CAGR over the past five years.

On August 9, CMI partnered with Elevat, a leading off-highway OEM solutions provider, to integrate its Cummins Connected Diagnostics application with the Elevat Machine Connect IoT platform to deliver next-generation IoT connected services. This strategic collaboration should enable customers to access diagnostic messages and real-time alerts for CMI’s engines and Elevat’s data in a single dashboard.

On August 3, CMI announced that it had completed its acquisition of Meritor, Inc., a leading global supplier of electric powertrain solutions for commercial vehicle and industrial markets. This should position CMI as a significant provider of integrated powertrain solutions across internal combustion and electric power applications and present attractive growth opportunities for it.

CMI’s net sales increased 7.8% year-over-year to $6.59 billion in the fiscal quarter ended June 30, 2022. Operating income came in at $897 million, up 22% year-over-year, while its net income grew 17% from the year-ago value to $702 million. The company’s EPS stood at $4.94 in the same period.

Analysts expect CMI’s revenue for the fiscal quarter ending September 2022 to come in at $6.98 billion, indicating an increase of 16.9% year-over-year. Also, the company’s EPS is expected to grow 31.4% year-over-year to $4.85 in the same period.

CMI has gained 17.5% over the past month to close the last trading session at $230.74.

CMI has an overall A rating, which equates to Strong Buy in our proprietary rating system. The company has a B grade in Quality, Value, and Sentiment. Out of the 79 stocks in the B-rated Industrial - Machinery industry, CMI is ranked #1.

Click here to get CMI’s Momentum, Stability, and Growth ratings.

Hubbell Incorporated (HUBB)

HUBB designs, manufactures, and sells electrical and electronic products in the United States and internationally. It operates through two segments, Electrical Solution and Utility Solution. 

The company’s $4.20 annual dividend yields 1.9% at its current share price. Its quarterly dividend of $1.05 is payable on September 15, 2022. Its dividend payouts have increased at a 7.9% CAGR over the past three years and an 8.6% CAGR over the past five years.

For the fiscal quarter ended June 30, 2022, HUBB’s net sales came in at $1.26 billion, up 19.1% year-over-year. Its gross profit was $383.20 million, up 28.4% year-over-year, while its EPS came in at $2.26, up 29.9% year-over-year. Also, its operating income was $190.60 million in the same period.

HUBB’s revenue is expected to be $4.84 billion in 2022, representing a 15.3% year-over-year rise. The company’s EPS is expected to increase 21.8% year-over-year to $9.81 in the same period.

HUBB has gained 19.2% over the past six months to close the last trading session at $220.92.

It is no surprise that HUBB has an overall A rating, which equates to Strong Buy in our proprietary rating system. The company has a B grade for Stability, Quality, and Sentiment. HUBB is ranked #9 out of the 90 stocks in the Industrial - Equipment industry.

Click here to see the additional POWR Ratings for HUBB (Growth, Value, and Momentum).

VLO shares were trading at $114.11 per share on Tuesday afternoon, up $2.16 (+1.93%). Year-to-date, VLO has gained 56.27%, versus a -8.95% rise in the benchmark S&P 500 index during the same period.

Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.

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