Investing

5 of the Highest-Yielding S&P 500 Stocks Have Explosive Potential If Santa Claus Rally Is on Time

Lee Jackson

Published: November 25, 2022 7:01 am

Last Updated: November 29, 2022 6:54 am

There has been a glimmer of hope on the horizon for stock investors recently, and while the all-clear rally flag is not being waved, it does appear that some of the worst is behind us. The consumer and producer-price-index numbers for October seem to indicate that we may have hit “peak inflation,” and are starting to come down. If that is indeed the case, brighter days may indeed be ahead.

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While many feel that the recent rally is of the bear market variety, toss in the potential for the Santa Claus rally, which tends to be the ultimate seasonality play, and investors might be able to make some hay while the sun shines the balance of 2022.

We screened our S&P 500 equity research database looking for companies offering the biggest and most dependable dividends, are Buy rated, and offer solid total return potential. We avoided mortgage REITs and variable dividend energy companies. Five companies look like outstanding ideas for concerned investors and pay among the highest dividends in the venerable S&P 500 index. It’s important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Coterra Energy

This company was formed by the closing of the $17 billion merger of Cabot Oil & Gas Corp. and Cimarex Energy Company in 2021. Coterra Energy Inc. (NASDAQ: CTRA) is an independent oil and gas company, engaged in the development, exploration and production of oil, natural gas, and natural gas liquids in the United States. It primarily focuses on the Marcellus Shale, with approximately 177,000 net acres in the dry gas window of the play located in Susquehanna County, Pennsylvania.

The company also holds Permian Basin properties with approximately 306,000 net acres; and Anadarko Basin properties located in Oklahoma with approximately 182,000 net acres. In addition, it operates natural gas and saltwater disposal gathering systems in Texas. The company sells its natural gas to industrial customers, local distribution companies, oil and gas marketers, major energy companies, pipeline companies, and power generation facilities.

As of December 31, 2021, it had proved reserves of approximately 2,892,582 thousand barrels of oil equivalent, which include 189,429 thousand barrels of oil and other liquid hydrocarbons, 14,895 billion cubic feet of natural gas, and 220,615 thousand barrels of natural gas liquids.

Coterra shareholders are paid a strong 9.05% dividend. Stifel has a Buy rating and a $40 target price. The consensus is posted at a much lower $36.13. Coterra shares were last seen Wednesday at $27.54.

Altria

This maker of tobacco products offers value investors a great entry point now and was hit recently as cigarette sales have slowed. Altria Group Inc. (NYSE: MO) is the parent company of Philip Morris USA (cigarettes), UST (smokeless), John Middleton (cigars), Ste. Michelle Wine Estates, and Philip Morris Capital Corp. PMUSA enjoys a 51% share of the US cigarette market, led by its top cigarette brand Marlboro.

Altria also owns over 10% of Anheuser-Busch InBev, the world’s largest brewer. In March 2008, it spun off its international cigarette business to shareholders.

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Last month the company, Juul, which at the height of its popularity dominated the market with its sweet vape flavors, agreed to pay $438.5 million in a settlement with 33 states and one territory over marketing its product to teens. Altria announced recently they were looking to end their non-compete agreement with Juul to compete more aggressively in the vape space.

While this gets sorted out, it’s a good bet that investors will still receive a giant 8.33% dividend. Stifel has a Buy rating on the shares and a $50 target price. The consensus target on Wall Street is posted even higher at $48.73. The shares closed Wednesday at $45.02.

Verizon Communications

This is a top telecommunications company that offers tremendous value at current levels. Verizon Communications, Inc (NYSE: VZ) is one of the largest US 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. Verizon’s 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 delivers integrated business solutions to customers worldwide.

Verizon investors are paid a massive 6.66% dividend. Raymond James has an Outperform rating to go with a $51 target price. The consensus price target across Wall Street is set lower at $45.30. Verizon closed Wednesday’s trading session at $38.92.

Simon Property Group

This leading company has been pounded and is offering the best entry point since last year, and is a very strong idea for investors looking to play the commercial real estate sector. Simon Property Group Inc. (NYSE: SPG) invests in the real estate markets across the globe. It engages in investment, ownership, management, and development of properties. The company primarily invests in regional malls, premium outlets, mills, and community/lifestyle centers to create its portfolio.

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Through its subsidiary partnership, it owns or has an interest in about 230 properties in the US and Asia. The company also has a 28.9% interest in Klepierre, a European REIT with over 260 shopping centers in 13 countries.

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Shareholders are paid a strong 6.03% distribution. The Morgan Stanley team has an Overweight rating and a strong price target of $131. The consensus price target on Wall Street is $122.07. The shares ended trading Wednesday at $119.61.

ONEOK

The solid price of natural gas over the last year has helped to lift this top energy company. ONEOK, Inc. (NYSE: OKE) primarily engages in natural gas transportation, storage, and natural gas and natural gas liquids (NGLs) gathering, processing, and fractionation in the Bakken, Mid-Con, and Permian. The company recently closed the roll-up of its underlying Master limited partnership ONEOK Partners.

The company has a strong presence in the Oklahoma SCOOP/STACK (NGL
gathering/takeaway system, G&P), the Williston Basin (G&P, NGL takeaway), and the Permian Basin (NGL gathering, NGL takeaway, natural gas takeaway), which the RBC team feels provides high-return growth opportunities.

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Many on Wall Street remain very positive on the company’s primarily fee-based earnings, which account for 90% of the total earnings.

Investors are paid a massive 5.72% dividend. The Raymond James team has an Outperform rating and a $65 price target. That compares with the higher consensus target of $67.88. The shares closed trading on Wednesday at $65.62.

Five top companies that pay massive dividends are solid leaders in their respective sectors and look like value gems as we head toward 2023. Plus, with dependable dividends, investors can be patient if it takes a while for some of them to come back into favor.