2 Stocks to Buy if You're Looking to Make Passive Income

The Fed raised interest rates for the fourth time in a row by 75 basis points, raising the target range to 3.75%-4%, the highest level since January 2008. However, job growth surpassed estimates in October, with nonfarm payrolls growing by 261,000.

President Joe Biden said, "Our economy continues to grow and add jobs even as gasoline prices continue to come down." He added that despite high prices, there are "bright spots" where the country is rebounding.

Despite Biden’s encouraging comments on the economy, concerns over future rate hikes are expected to keep the market volatile. Therefore, investors looking to make passive income could consider adding quality dividend-paying stocks Pfizer Inc. (PFE) and PepsiCo, Inc. (PEP) to their portfolios. Investors' interest in dividend stocks is evident from the SPDR S&P Dividend ETF's (SDY) 3.8% gains over the past month.

Pfizer Inc. (PFE)

PFE discovers, develops, manufactures, markets, distributes, and sells biopharmaceutical products worldwide. The company serves wholesalers, retailers, hospitals, clinics, government agencies, pharmacies, individual provider offices, and disease control and prevention centers.

On November 3, 2022, PFE's investigational cancer immunotherapy, elranatamab, received Breakthrough Therapy Designation from the U.S. Food and Drug Administration (FDA) for treating people with relapsed or refractory multiple myeloma. This is yet another significant achievement for PFE in the field of oncology.

Also, on October 20, PFE and Erasca, Inc. (ERAS) announced a clinical trial collaboration and supply agreement for the CDK4/6 inhibitor palbociclib.

This agreement is expected to fund a clinical proof-of-concept study of ERAS-007, an oral ERK1/2 inhibitor, in combination with palbociclib for treating patients with KRAS- and NRAS-mutant colorectal cancer and KRAS-mutant pancreatic ductal adenocarcinoma. This should benefit PFE by improving therapeutic outcomes.

PFE has paid dividends for 33 consecutive years. Its dividend payouts have increased at a 5.7% CAGR over the past five years. Its current dividend yield is 3.39%, and its four-year average yield is 3.62%.

PFE's income from continuing operations came in at $8.65 billion for the third quarter of 2022, up 5.8% year-over-year. Its net income came in at $8.61 billion, up 5.7% year-over-year, while its EPS came in at $1.51, up 6.3% year-over-year.

Analysts expect PFE's revenue to increase 39.3% year-over-year to $1.08 trillion in 2022. The stock's EPS is estimated to grow 65.5% year-over-year to $69.56 in 2022. It surpassed EPS estimates in three of four trailing quarters. Over the past year, the stock has gained 7.7% to close the last trading session at $47.22.

PFE's POWR Ratings reflect this promising outlook. The company has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

PFE has an A grade for Value and a B for Growth and Quality. Within the Medical - Pharmaceuticals industry, it is ranked #5 out of 163 stocks. Click here for the additional POWR Ratings for Momentum, Stability, and Sentiment for PFE.

PepsiCo, Inc. (PEP)

PEP manufactures, markets, distributes, and sells beverages and convenient foods worldwide. It operates through its seven segments: Frito-Lay North America; Quaker Foods North America; PepsiCo Beverages North America; Latin America; Europe; Africa, Middle East, and South Asia; Asia Pacific, Australia and New Zealand; and China Region.

On November 1, 2022, Frito-Lay unveiled its brand-new product line Frito-Lay Minis, which are bite-sized versions of snacks. The new product line should bolster the revenue stream of the company.

On September 14, 2022, PEP and agriculture company Archer Daniels Midland Co. (ADM) announced a 7.5-year strategic commercial partnership. This collaboration is a commendable step toward sustainable development because it aims to improve regenerative agriculture across the companies' shared North American supply chains.

PEP has paid dividends for 49 consecutive years. Its dividend payouts have increased at a 7.4% CAGR over the past five years. Its current dividend yield is 2.57%, and its four-year average yield is 2.8%.

PEP's net revenue came in at $21.97 billion for the third quarter that ended September 3, 2022, up 8.8% year-over-year. Its gross profit increased 8% year-over-year to $11.66 billion. Also, its operating profit came in at $3.53 billion, up 6.1% year-over-year.  

Analysts expect PEP's revenue to increase 7.1% year-over-year to $85.10 billion in the current year. Its EPS is estimated to grow 8.1% year-over-year to $6.77 in 2022. It has surpassed EPS estimates in all four trailing quarters. Over the past year, the stock has gained 8.8% to close the last trading session at $178.78. 

PEP's overall A rating indicates a Strong Buy in our proprietary rating system. It also has an A grade for Quality and a B for Growth, Stability, and Sentiment. Within the A-rated Beverages industry, it is ranked #9 out of 33 stocks. Click here for the additional POWR Ratings for Value and Momentum for PEP.

PFE shares were trading at $47.20 per share on Monday afternoon, down $0.02 (-0.04%). Year-to-date, PFE has declined -17.47%, versus a -19.14% rise in the benchmark S&P 500 index during the same period.

Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.

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