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Jan. 23, 2022, 2:34 p.m. EST

This sector of the S&P 500 is expected to show the fastest sales and dividend growth in 2022 and 2023

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By Philip van Doorn

Which sector of the S&P 500 do you think will post the best sales growth this year and in 2023? You might be surprised at what analysts expect — and rapid sales growth might be tied to some lucrative stock investments.

Below is a screen of all sectors of the S&P 500 Index /zigman2/quotes/210599714/realtime SPX -0.58% , then narrower stock screens within the “winning” sector by sales projections.

So far this year, investors have been jittery because of the Federal Reserve’s policy reversal, to fighting inflation by raising interest rates rather than doing anything it could to spur economic growth during the pandemic.

In a strategy report for clients on Jan. 17, analysts at BCA Research wrote: “We subscribe to the view that expansions are more likely to be murdered by the Fed than die of old age. It’s hard to envision a plausible scenario in which the Fed could hike rates enough in 2022 to kill this one, though, and even the first half of 2023 would be a reach.”

We have already seen that the prospect of rising interest rates has pressured stocks that have higher valuations to earnings. The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP -0.26% , which is heavily weighted toward technology stocks, just suffered its first correction (a decline of 10% of more) since March.

Getting back to the BCA comment, the U.S. economy is so large that it isn’t easily cooled-down by the Fed. Investors who flee the stock market in an effort to time their return after rising interest rates have their effect, risk returning too late and missing significant growth in the meantime.

S&P 500 sector projections

The following projections are based on consensus estimates among analysts polled by FactSet, weighted by market capitalization. (The S&P 500 is cap-weighted.) The projections are broken into three tables showing expected changes in sales per share, earnings per share and dividends paid per share. The estimates are for calendar years, as scores of S&P 500 companies have fiscal years that don’t match the calendar.

Sales growth

First, here are projected changes in sales per share through 2023, with the sectors in alphabetical order and the full index at the bottom:

S&P 500 sector Est. sales growth – 2022 Est. sales growth – 2023 2-year est. sales CAGR Est. sales per share – 2021 Est. sales per share – 2022 Est. sales per share – 2023
Communication Services 8.1% 8.0% 8.0% $69.99 $75.63 $81.67
Consumer Discretionary 13.6% 10.7% 12.1% $541.52 $615.23 $680.86
Consumer Staples 4.0% 3.8% 3.9% $510.86 $531.14 $551.21
Energy 5.5% -1.4% 2.0% $388.53 $409.98 $404.21
Financials 2.3% 5.5% 3.9% $228.50 $233.64 $246.52
Health Care 6.7% 3.5% 5.1% $798.76 $852.39 $881.86
Industrials 11.5% 5.8% 8.6% $373.50 $416.31 $440.34
Information Technology 8.5% 8.5% 8.5% $399.25 $433.33 $470.24
Materials 4.1% -0.2% 1.9% $243.32 $253.18 $252.79
Real Estate 8.9% 6.1% 7.5% $33.75 $36.74 $38.99
Utilities 0.6% 2.7% 1.6% $119.08 $119.82 $123.01
Full S&P 500 7.3% 5.6% 6.5% $1,557.78 $1,672.20 $1,765.40
Source: FactSet

The consumer discretionary sector is expected to show the most rapid increases in sales per share this year and in 2023, and to have the best two-year compound annual growth rate (CAGR) for sales.

Earnings growth

Leaving the sectors in the same order, here are projections for earnings per share:

S&P 500 sector Est. EPS growth – 2022 Est. EPS growth – 2023 2-year est. EPS CAGR Est. EPS – 2021 Est. EPS – 2022 Est. EPS – 2023
Communication Services 6.9% 14.7% 10.7% $11.99 $12.81 $14.70
Consumer Discretionary 33.0% 23.2% 28.0% $36.80 $48.95 $60.29
Consumer Staples 6.0% 7.8% 6.9% $34.85 $36.94 $39.83
Energy 27.2% -5.6% 9.6% $30.81 $39.19 $36.99
Financials -9.5% 12.9% 1.1% $49.00 $44.35 $50.09
Health Care 8.2% 1.2% 4.6% $88.52 $95.75 $96.89
Industrials 34.5% 17.7% 25.8% $31.86 $42.85 $50.45
Information Technology 9.9% 11.6% 10.8% $98.72 $108.47 $121.10
Materials 5.3% -4.4% 0.3% $32.35 $34.07 $32.56
Real Estate 7.1% 7.4% 7.2% $12.42 $13.30 $14.28
Utilities 5.0% 7.1% 6.0% $16.64 $17.47 $18.70
Full S&P 500 9.0% 10.1% 9.6% $203.75 $222.15 $244.59
Source: FactSet

The industrial sector is expected to achieve the best EPS growth this year, trailed closely by the consumer discretionary sector, which is expected to take the lead in 2023 and have the best two-year EPS CAGR.

Dividend increases

Again leaving the sectors in alphabetical order, here are projections for dividend increases through 2024:

S&P 500 sector Est. dividend growth – 2022 Est. dividend growth – 2023 2-year est. dividend CAGR Est. dividends per share – 2021 Est. dividends per share – 2022 Est. dividends per share – 2023
Communication Services 3.4% 7.2% 5.3% $2.07 $2.14 $2.29
Consumer Discretionary 16.8% 13.4% 15.1% $7.89 $9.21 $10.45
Consumer Staples 4.9% 5.1% 5.0% $18.46 $19.36 $20.36
Energy -1.6% 3.0% 0.7% $17.54 $17.26 $17.78
Financials 11.8% 8.6% 10.2% $11.35 $12.69 $13.78
Health Care 7.0% 6.0% 6.5% $22.81 $24.41 $25.87
Industrials 8.7% 10.1% 9.4% $12.15 $13.20 $14.54
Information Technology 7.7% 7.2% 7.4% $22.71 $24.45 $26.20
Materials 7.0% 3.8% 5.4% $9.49 $10.15 $10.53
Real Estate 10.0% 6.1% 8.1% $7.20 $7.93 $8.41
Utilities 2.4% 5.9% 4.1% $10.59 $10.84 $11.48
Full S&P 500 7.1% 7.1% 7.1% $59.62 $63.87 $68.43
Source: FactSet

The consumer discretionary sector is expected to show the highest dividend growth, by far, among S&P 500 sectors through 2023.

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