Americans who continue to work on the front lines at hospitals, grocery stores and other services deemed essential, are putting their lives on the line every time they step out of their house and go to work. Some companies are raising employee pay; others aren’t. If you’re looking for stocks to buy, investors might want to consider companies that are stepping up for their employees.
Why invest in companies doing the right thing? Because it will make you money, that’s why.
In March 2018, I wrote about seven CEOs who were honest with their shareholders. One of the CEOs was BlackRock’s (NYSE:BLK) Larry Fink, who’s become famous for his annual letter to CEOs.
“To prosper over time, every company must not only deliver financial performance but also show how it makes a positive contribution to society,” wrote Fink in his 2017 letter to CEOs. “Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.”
- CVS (NYSE:CVS)
- Walmart (NYSE:WMT)
- Starbucks (NASDAQ:SBUX)
- Waste Management (NYSE:WMT)
- Kroger (NYSE:KR)
- General Electric (NYSE:GE)
- J.M. Smucker (NYSE:SJM)
- Darden (NYSE:DRI)
- Danone (OTCMKTS:DANOY)
- Workday (NASDAQ:WDAY)
As we continue to battle the novel coronavirus, companies that go the extra mile for their employees will be remembered for those actions. Paying people more to provide services in this environment isn’t just a nice thing to do, it’s the responsible thing. Here are 10 stocks to buy that are stepping up.
Stocks to Buy: CVS (CVS)
Much like grocery stores, pharmacy chains such as CVS have become essential services at a time when most of the nation is living under stay-at-home orders.
CVS has announced that it is hiring 50,000 full-time and part-time staff to handle the increased demand at its pharmacies. That’s great news for people without jobs at the moment and also likely to give CVS stock some added momentum as we make our way through the crises.
In addition to the new jobs, CVS is paying $500 bonuses to anyone working in the stores, including pharmacists, store managers and other store employees. Also, CVS is giving 14 days of paid leave to any employee that needs to self-isolate for 14 days.
Recently, InvestorPlace’s Dana Blankenhorn discussed how CVS CEO Larry Merlo is hiring for the long-term. It’s doing so to be in the driver’s seat once its managed care business model gains traction in a healthcare system where costs are running out of control.
I’ve been bullish on CVS for a while now. The pandemic makes its business model even more attractive. CVS is a long-term buy.
Walmart historically hasn’t been the best employer when it comes to paying its staff. But all that appears to be changing, which I believe makes WMT stock a lot more attractive as a long-term hold.
In March, Walmart announced that it would pay cash bonuses worth $550 million to its hourly staff. Full-timers will get $300 and part-timers $150. In addition, it raised entry wages by $2 for employees working in its e-commerce fulfillment centers. Those employees will receive entry wages between $15 and $19 per hour through May 25.
Lastly, it’s going to hire 150,000 temporary workers through the end of May. These aren’t permanent jobs but every little bit helps.
In my most recent article about Walmart in March, I argued that it’s using innovative thinking to grow its business, and these outside-the-box moves will pay dividends down the road for shareholders.
It’s a buy.
On April 1, Starbucks announced that it would be extending its Covid-19 benefits through May 3. That means that anyone who can’t go to work, whether they have Covid-19, or just don’t feel comfortable doing so, will continue to be paid. In addition, they will continue to receive all the great benefits Starbucks is known to provide.
For anyone who does go to work, they will get an additional $3 per hour for any shifts worked between March 21 and May 3. Also, Starbucks is providing a bunch of mental health resources at no cost to employees. As always, Starbucks does it right.
In March, I suggested that investors ought to wait for SBUX stock to fall below $50 before buying. However, the lowest it got was $56. As I write this, it’s trading around $71. In two to three years, even if you buy at current prices, you’ll make money because very few retailers and hospitality companies treat their employees this nice.
Waste Management (WM)
Waste Management’s Covid-19 benefits are anything but garbage.
On April 1, Yahoo Finance’s Brian Sozzi detailed how Waste Management CEO Jim Fish has stepped up for the company’s 45,000 employees during this time of crisis. WM has indefinitely guaranteed every worker will be paid for a 40-hour workweek, whether they work those hours or not.
“We are putting this 40-hour backstop behind them. What I didn’t want is to have our employees worrying how they were going to pay rent or put food on the table. This kind of takes a huge weight off of their shoulders so they can do their jobs as well as they can,” Fish told Sozzi.
In addition, to help the company’s smaller customers, it is giving them a month’s free service, something that will hit the company’s bottom line in the short term, but pay significant loyalty dividends in the long run.
I haven’t covered Waste Management for a while, but I can see why former InvestorPlace contributor James Brumley put WM on his December 2019 list of the 10 Best Stocks to Buy and Hold Forever.
I’m sure Larry Fink would approve of Waste Management’s actions. I know I do.
WM stock is a big buy.
You would think one of the few areas of strength during the coronavirus outbreak would be the grocery store industry. It’s one of the few businesses that’s getting consistent traffic during this work-at-home world we’re temporarily living.
However, Growth Investor editor Louis Navellier isn’t so sure that this kind of marketplace is helping Kroger that much. And that’s despite Navellier’s Portfolio Grader giving the company an “A” rating and suggesting it’s a strong buy.
“[The] Kroger grocery chain reiterated its earnings guidance for 2020, but basically warned us against getting overenthusiastic about 2020 sales. While it did raise first-quarter guidance, it also ‘expects volatility in sales throughout the year as the impact of COVID-19 on the consumer evolves,’” Navellier wrote April 7.
Kroger is generally quite conservative in its guidance; I wouldn’t read too much into it. In the meantime, Kroger is going to continue to push innovation to grow its business. Any time KR stock drops below $28; I’d be a buyer.
As for Kroger’s pay policies, it has upped hourly pay by $2 per hour for work performed between March 29 and April 18. It’s paid weekly to provide employees with additional cash. In addition, it has hired 30,000 people in March to handle business during the coronavirus.
General Electric (GE)
General Electric is a company that doesn’t inspire employee loyalty like it once did.
On March 23, the company announced that it would cut 2,600 jobs from its aviation division. In addition, it will furlough about half its employees at its U.S. maintenance, repair and overhaul unit. Those moves are expected to save GE as much as $1 billion in 2020.
It’s not hard to understand why the aviation unit is cutting employees. The grounding of the Boeing 737 MAX has put a significant dent in its business.
However, the company recently delivered a dose of good news, announcing that employees at its GE Appliances plant in Kentucky would receive “appreciation pay” of $2 per hour on top of their regular pay. New employees at the plant start at $14 an hour, which I would imagine is a good wage in Kentucky.
“The additional pay is our way of saying ‘Thank You’ for their efforts during this challenging time in our world,” the company said in a statement.
Recently, I changed my tune on GE stock, calling it a buy for those prepared to hold two to three years. The bump in pay assures shareholders that despite being in the middle of a turnaround, it understands that it’s got to do right by those employees who remain on the job.
J.M. Smucker (SJM)
I’ve been a fan of Smucker’s for a long time. The company’s diversification into coffee and pet food diversified its revenue streams. That’s why in January, I said SJM stock was one of the best food stocks to buy now.
Smucker’s stock hasn’t delivered for shareholders in recent years. It’s got a five-year annualized total return of 2.2%, one-third the return of the entire U.S. markets.
However, some of its Covid-19 benefits remind me why I’ve always liked the family-run business.
On March 24, the company said that it would continue to pay employees whose facilities have closed for 12 weeks. That includes full benefits. In addition, the 5,700 people who are still working will get a $1,500 hardship award for showing up in this time of difficulty.
For those who must take care of a loved one who has Covid-19, or those who have the virus, they’ve been given 14 days of paid sick leave. In addition, the company is paying 100% of Covid-19 testing for employees. Lastly, it has set up a $100,000 fund to help employees impacted by the coronavirus.
It might be a bit of a contrarian buy, but I like SJM at $112 or lower.
Restaurants, historically, have some of the worst benefit packages among large companies. Except for Starbucks, they’re generally nonexistent. That is why Darden’s March 10 announcement about sick pay stands out.
Effective immediately, Darden’s hourly employees get one hour of paid sick leave for every 30 hours worked. It was retroactive to an employee’s last 26 weeks of work. So, for example, if an employee worked 30 hours per week over the past 26 weeks, they would immediately have 3.25 paid sick days. They can carry over 40 hours from one year to the next with a maximum balance of 60 hours, which means Darden is encouraging its employees to stay home when they’re sick.
While the company’s in-store sales have dropped by more than 34% in the fourth quarter as a result of its dining rooms being closed since mid-March, its to-go business is booming with 99% of its locations open for business.
On April 6, DRI stock jumped by more than 11% on analyst comments that the Covid-19 crisis could be over sooner than anticipated.
Whatever happens, the move to provide permanent paid sick leave, when 33 million Americans don’t have this benefit, is a huge deal for employees. Not to mention, it will definitely help with recruiting.
Kudos to management. DRI stock is a buy.
Stocks to Buy: Danone (DANOY)
While it’s widely known that European companies tend to treat their employees better than here in America, what Danone is doing is quite extraordinary.
Here in North America, its 2,600 manufacturing workers are getting a 15% pay premium on top of their hourly pay until April 30. In addition, if an employee has to stay home as a result of contracting the virus, they will continue to be paid. Also, eligible employees will qualify for up to 80 hours of childcare support through the end of April.
In addition, the head office has said that it will protect the wages of all 100,000 employees worldwide, until June 30. In addition, it will pay bonuses for anyone working on-site and not from home.
In February, Danone reported its fourth-quarter results for 2019. For all of 2019, it grew sales by 2.6% to 25.3 billion euros, with a 12.5% increase in free cash flow to 2.5 billion euros.
In 2019, Danone rolled out its “One Person, One Share” program that gave a single share to all 100,000 employees at the company and provided additional incentives for employees to buy more of its stock.
“We also believe that further fostering an ownership mindset for all our employees is the best way to align everyone’s interests in the long-term. All people at Danone will therefore become shareholders of the company next year,” Danone CEO Emmanuel Faber stated in April 2018.
I wish more American companies were this generous about rewarding employees at all levels and not just in the executive ranks.
On a GAAP basis, Workday is the only stock on this list that doesn’t make money. However, if you’re willing to accept non-GAAP financials, the provider of cloud-based human resources and accounting software, made $463.4 million in 2019, 42.8% higher than a year earlier.
In early January, I discussed three reasons why Microsoft (NASDAQ:MSFT) could buy Workday. Although it hasn’t happened through the first four months of 2020, thanks to the coronavirus correction, WDAY stock is 20% cheaper than where it ended the year.
As for the company itself, InvestorPlace’s Laura Hoy isn’t quite as bullish as I am about its stock. She believes there are better buys in bigger names at the moment. Hoy recommends investors wait for a better entry point.
However, the fact Workday management has agreed to pay all employees below the Vice President level the equivalent of two weeks pay — a move that will cost it $80 million in the first quarter of 2020 — suggests that it’s very confident in its ability to survive and thrive during the Covid-19 crisis.
“With schools and support services moving to virtual experiences or being temporarily suspended, we know our employees need the additional financial support and flexibility. We hope this additional pay will help alleviate some of the pressures,” the company’s March 16 blog post stated.
Cynics would say that moves like this prevent the company from hitting profitability sooner. I would counter it is this kind of gesture that will keep employees engaged through this challenging time while also attracting top-notch talent.
That’s a win/win in my books.
While it’s unlikely that Microsoft would make any significant acquisitions while most of the globe is in some sort of stay-at-home order, I still believe Workday makes sense. Under $150, it’s a long-term buy.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing, he did not hold a position in any of the aforementioned securities.