With third-quarter earnings reporting seasons in full swing and the stock market catching a likely bear market rally, investors have seen, at least so far, reasonably good reports. With this week having another deluge of reports, including some big-tech numbers, all eyes remain focused on forward guidance. Given the big rally over the past few trading days, investors need to stay nimble, as many across Wall Street are expecting another leg down.
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It makes sense now with stocks in rally mode to move from the momentum and meme stocks to more conservative large-cap stocks that pay dividends. We screened the Dow Jones industrials looking for the highest-yielding companies in sectors that look to benefit from solid demand, those that can do well even if a severe recession is on tap for 2023.
We only selected stocks that are rated Buy, as two of the highest-yielding stocks do not have a single analyst with a Buy rating. If nobody likes a stock, it likely has trouble below the surface. The ones we did select are rated Buy at major Wall Street firms. It is important to remember though that no single analyst report should be used as a sole basis for any buying or selling decision.
Stocks are listed from highest to lowest yield.
Verizon
This top telecommunications company offers tremendous value and passive income at current levels. Verizon Communications Inc. (NYSE: VZ) is one of the largest U.S. telecom companies. It provides wireless and wireline service to retail, enterprise and wholesale customers.
The company’s wireless network serves approximately 120 million mobile connections with 115 million postpaid subscribers. Its wireline business has undergone a period of secular decline due to wireless substitution and cable competition.
Verizon also provides converged communications, information and entertainment services over America’s most advanced fiber-optic network, and it delivers integrated business solutions to customers worldwide.
Verizon Communications stock investors receive a 7.38% dividend. Cowen has a $55 target price. The consensus target is $49.85, and shares ended Monday’s session trading at $35.97.
Dow
This stock certainly offers investors growth and income potential. Dow Inc. (NYSE: DOW) is a leading materials science company and was formed from the merger of Dow and DuPont in 2017 and the subsequent spin-off 2019. The company is organized into three principal divisions: Performance Materials & Coatings (23% of EBITDA), Industrial Intermediates & Infrastructure (27%) and Packaging & Specialty Plastics (51%).
Dow’s segments include Agricultural Sciences, which is engaged in providing crop protection and seed/plant biotechnology products and technologies, urban pest management solutions and healthy oils. The Consumer Solutions segment consists of Consumer Care, Dow Automotive Systems, Dow Electronic Materials and Consumer Solutions-Silicones businesses.
The Infrastructure Solutions segment consists of Dow Building & Construction, Dow Coating Materials, Energy & Water Solutions, Performance Monomers and Infrastructure Solutions-Silicones businesses. Performance Materials & Chemicals consists of Chlor-Alkali and Vinyl, Industrial Solutions and Polyurethanes businesses. The Performance Plastics unit consists of Dow Elastomers, Dow Electrical and Telecommunications, Dow Packaging and Specialty Plastics, Energy and Hydrocarbons businesses.
Investors receive a 6.23% dividend. Wells Fargo’s $55 price objective on Dow stock compares to the consensus target of $49.61 and a Thursday close at $47.04 a share.
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Intel
This legacy leader in semiconductors has been absolutely hammered, and while some feel it is a value trap, it is hard to count out the company that defined the semiconductor revolution. Intel Corp. (NASDAQ: INTC) designs, manufactures and sells integrated digital technology platforms worldwide.
The platforms are used in various computing applications, comprising notebooks, two-in-one systems, desktops, servers, tablets, smartphones, wireless and wired connectivity products, wearables, retail devices and manufacturing devices, as well as for retail, transportation, industrial, buildings, home use and other market segments.
The company announced in January it would invest up to $100 billion to build potentially the world’s largest chip-making complex in Ohio, looking to boost capacity as a global shortage of semiconductors affects everything from smartphones to automobiles. Intel says the 1,000-acre “mega-site” northeast of Columbus has room for as many as eight plants, known as “fabs.”
Shareholders receive a 5.41% dividend. Needham’s $32 price target is less than the $34.74 consensus target for Intel stock. The closing share price on Monday was $27.18.
24/7 Wall St.IBM
This blue-chip giant still offers investors an incredibly solid entry point as well as a massive dividend. International Business Machines Corp. (NYSE: IBM) provides integrated solutions and services worldwide. The company operates through four business segments.
The Software segment offers hybrid cloud platform and software solutions, such as Red Hat, an enterprise open-source solutions; software for business automation, AIOps and management, integration and application servers; data and artificial intelligence solutions; and security software and services for threat, data, and identity. This segment also provides transaction processing software that supports clients’ mission-critical and on-premise workloads in banking, airlines and retail industries.
IBM’s Consulting segment offers business transformation services, including strategy, business process design and operations, data and analytics, and system integration services; technology consulting services; and application and cloud platform services.
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The Infrastructure segment provides on-premises and cloud-based server and storage solutions for its clients’ mission-critical and regulated workloads; and support services and solutions for hybrid cloud infrastructure, as well as remanufacturing and remarketing services for used equipment.
The Financing segment offers lease, installment payment, loan financing and short-term working capital financing services.
For the third quarter, IBM posted revenue of $14.1billion, up 6% from a year ago and better than Wall’s Street’s consensus forecast. With a focus on artificial intelligence and hybrid cloud computing, the legacy technology giant could be poised for strong growth going forward.
Investors receive a 5.08% dividend. The $145 BofA Securities price target is well above the $139.26 consensus target and Wednesday’s $132.69 closing print for IBM stock.
24/7 Wall St.Cisco
Investors who are more conservative may want to consider this mega-cap tech leader. Cisco Systems Inc. (NASDAQ: CSCO) designs, manufactures and sells internet protocol (IP) based networking products and services related to the communications and information technology industry worldwide.
The company provides switching products, including fixed-configuration and modular switches, and storage products that provide connectivity to end users, workstations, IP phones, wireless access points and servers, as well as next-generation network routing products that interconnect public and private wireline and mobile networks for mobile, data, voice and video applications.
Its cybersecurity products give clients the scope, scale and capabilities to keep up with the complexity and volume of threats. Putting security above everything helps corporations innovate while keeping their assets safe.
The networking giant posted very grim numbers this year and the stock has taken a big hit, but the juicy dividend will pay investors to wait for the turnaround.
Shareholders receive a 3.55% dividend. Cisco Systems stock has a $54 target price at Jefferies. The consensus target is $54.78, and Monday’s close at $43.54 was up almost 2% for the day.
Five of Wall Street’s top stocks from the venerable Dow Jones industrial average still offer good entry points and come with dependable dividends. Three are legacy technology giants that have all been hit hard. While it is possible we have more market downside, all these companies have survived market and economic downturns in the past and likely will this time as well.
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