My Top Pick for 2023 for a more growth-oriented idea is Intuit (INTU); the company has a strong mix of businesses and platforms that few other companies can replicate, suggests Prakash Kolli, editor of Dividend Power.
However, the stock price is down about 39% year-to-date on recession fears. That said, Intuit beat Q1 2023 revenue and earnings per share estimates. Despite a weakened outlook for 2023 because of Credit Karma, Intuit is a market leader with a solid long-term view because of its unique platforms.
Intuit is the company behind the TurboTax software. It also owns Quickbooks. Both are market-leading businesses. TurboTax has high retention rates, while QuickBooks has an estimated 80% market share of small business accounting. Intuit has used its market leadership to acquire and expand into new platforms.
The company bought Credit Karma in late 2020 and followed that up with MailChimp in late 2021. Total revenue was around $12 billion in the fiscal year 2022 and about $13 billion in the last twelve months.
Besides recession fears, Intuit has an overhang because it may lose customers to free tax-filing options with the U.S. Internal Revenue Service. However, the number of users of free services is relatively small.
Moreover, Intuit is now more exposed to higher interest rates and a slowing economy through its Credit Karma business. Hence, during economic slowdowns, consumers may not need as many credit cards, loans, insurance, or other personal finance products.
Intuit is focused on growth. It is in the unique position of offering small businesses and self-employed tax, accounting, and marketing software platforms. Although a recession may hinder growth, long-term demand should be resilient.
Furthermore, Intuit seeks to grow through B2B bill payments and bill pay functionality. The firm is even exploring offering its platforms to third parties, such as other enterprises.
Surprisingly, Intuit is a dividend growth stock with a Dividend Contender Status. The growth rate is in the teens, but the dividend yield is low at ~0.81%. The stellar payout ratio of around 25% provides confidence about future increases and dividend safety.
Intuit is rarely undervalued, often trading at a P/E ratio of 30X to 40X. But now, it is relatively cheap, with an earnings multiple of 28X. Investors are getting a market leader that will likely grow at a solid clip over the long term.