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February’s inflation report brought the Consumer Price Index (CPI) to a higher-than-expected 3.2% on an annual basis. That makes two consecutive months in which inflation outpaced the consensus estimate, pointing to sticky inflation.

Previously, markets had responded negatively to such news, expecting a response from the Federal Reserves. However, Fed Chair Jerome Powell noted last Thursday that the monetary policy is “in the right place.”

“We’re waiting to become more confident that inflation is moving sustainably at 2%. When we do get that confidence, and we’re not far from it, it’ll be appropriate to begin to dial back the level of restriction,”

Fed Chair Jerome Powell before the Senate Banking Committee on March 7th, 2024

Considering this signal, fed fund futures still price June’s first interest rate cut at 68.96% probability. In this macro landscape, uncertainty about inflation favors companies that can adjust on the fly. Here are the three stocks investors can feel comfortable with.

Hartford Financial Services Group (Nasdaq: HIG)

Founded in 1810, Hartford covers all insurance needs from individuals to financial institutions. Year-to-date, HIG stock significantly outpaced the S&P 500 (SPX) at 21% vs 8.8%, respectively. Having the ability to adjust to shifting monetary conditions by raising premiums, insurance companies can gradually tweak their pricing.

Moreover, the demand for insurance stays steady even during sticky inflation. In the latest Q4 2023 earnings delivered in February, Hartford reported a 30% year-over-year increase in net income to $766 million. The company’s Property & Casualty (P&C) written premiums tracked 10% YoY growth, alongside the increase in Commercial Lines and Personal Lines premiums at 10% and 8%, respectively, for the full year.

In addition to one of the safest insurance exposures, investors can expect an increase in dividend yields. Presently, Hartford offers a dividend yield of 1.92% at a $1.88 annual payout per share. In Q4 alone, the company returned $479 million to shareholders via dividends and $350 million in stock buybacks.

Based on 21 analyst inputs pulled by Nasdaq, the average HIG price target is $101.83 vs. the current $98.73. The high estimate is $132 twelve months ahead vs. the low forecast of $77 per share.

Walmart Inc. (Nasdaq: WMT)

The dominant budget-friendly retail chain has made several changes in 2024. Those locations prone to theft will no longer have self-checkout lanes. To counter potential negative sentiment, buy-now-pay-later (BNPL) will be available across 4,500 Walmart locations.

To compete against Amazon, Walmart is adding parcel stations nationwide as delivery hubs, facilitated by the company’s Private Fleet division. Online ordering (eCommerce) has become Walmart’s strong point, having recorded 23% growth in the latest Q4 FY24 report, delivering $100 billion in sales for the whole year.

As customers seek affordable essentials from Walmart’s streamlined goods machine, the company also increased its annual dividend payout by 9%. Now at 3.76% dividend yield, Walmart pays out $2.28 per share annually. Seeing Walmart’s continued flexibility, investors responded positively as WMT stock jumped 15% YTD.

Based on 33 analyst inputs pulled by Nasdaq, the average WMT price target is $85.55 vs. the current $61.24. The high estimate is $228 vs. the low forecast of $58.99, just below the present price level.

Duke Energy Corporation (Nasdaq: DUK)

Utility companies easily weather sticky inflation as they automatically adjust rates. Duke Energy provides electricity needs for 8.2 million customers across the Southeast and Midwest US and 1.6 million natural gas clients. For the full year 2023, Duke reported $7 billion operating income, a 16.6% increase from 2022.

Likewise, Duke’s net income increased by 11.4% to $2.8 billion. Alongside strong financials, the 124-year-old company gives generous (and rising) dividends at a 4.28% dividend yield and $4.10 annual dividend payout per share. 

Over one year, DUK stock broke even at a positive 0.90% return. Based on 19 analyst inputs pulled by Nasdaq, the average DUK price target twelve months ahead is $103 vs. the current $95. The high estimate is $118 vs. the low forecast of $96, lower than the present price level.

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