Dividend-Paying Existing Winners the Place to Be for 2015?

My Expectations for the Stock Market in Early 2015The lull between earnings seasons is always long and the marketplace is clamoring for something from which to trade off.

A number of companies have already reported good numbers and they are a good precursor for what’s to come.

This market is looking pretty tired and it’s been another double-digit year (mostly) after the tremendous performance in 2013. Accordingly, we may see stocks selling off even on earnings that beat consensus.

This happened with NIKE, Inc. (NKE), as the company reported another very solid quarter of growth.

In its second fiscal quarter of 2015, management announced a 15% comparable gain in quarterly sales to $7.4 billion, while diluted earnings per share grew 25% to $0.74.

NIKE’s strong earnings surprised the Street, but the stock sold off mildly. The important metric for this company is what it calls “future orders,” which in this case are global orders for delivery from December 2014 to April 2015.

The seven-percent comparable gain (including currency translation) wasn’t quite as strong as what the Street was looking for. Still, NIKE’s latest earnings report was excellent.

The company bought back 5.1 million of its own shares during its most recent quarter. The stock trended higher for most of 2014 and is fully priced and due for a break.

Oracle Corporation (ORCL) is another important benchmark stock, this time in the technology space. This company always reports its earnings ahead of the pack.

Oracle’s share price soared after the company beat Street expectations. It’s had a hard time delivering meaningful growth to shareholders and the stock had been trading sideways all year.

Total revenues in its most recent quarter grew three percent to $9.6 billion; software and cloud sales grew five percent to $7.3 billion; while GAAP and non-GAAP earnings both improved five percent, excluding currency translation.

The company’s most recent quarter was a bit of a breakout and its financial performance was reflected positively on the stock market.

Also soaring as of late has been Cracker Barrel Old Country Store Inc. (CBRL), which is up some 40% on the stock market since last September.

Institutional investors have been buying the stock because its operating results have been materially stronger. Even lower gas prices are helping this business, which has so many locations on interstate highways. (See “Where You Can Find Value in Stocks Right Now.”)

The company’s first fiscal quarter of 2015 (ended October 31, 2014) was a big success with comparable store restaurant sales improving 3.3% and comparable store retail sales growing 6.1%. Earnings per diluted share came in at $1.42, up substantially from $1.14 in the same quarter of the previous year. Management boosted its full-year sales guidance for fiscal 2015 along with operating income margin and earnings per diluted share.

A number of restaurant stocks have been reporting improved results and it’s a reflection of increased consumer spending.

I think this upcoming earnings season is going to be pretty solid with currency translation being a material negative factor.

Stocks do look tired and it’s no wonder. Dividend-paying existing winners continue to look good on a risk-adjusted basis as we begin 2015.