It is almost hard to believe that at this time last year interest rates were still near zero. But with spiraling inflation threatening to totally derail the economy, the Federal Reserve has raised rates in an almost unprecedented fashion, and it is all but assured they will raise them again tomorrow. The difference this time is that after four straight 75-basis-point increases, the Fed is expected to lift the benchmark federal funds rate by only 50 basis points.
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One group of stocks that generally fares well during a rising rate period is those in the value category. Value stocks are those trading at levels that are perceived to be below their intrinsic fundamentals. Characteristics of value stocks include high dividend yields and low price-to-book and low price-to-earnings metrics. In addition, value stocks typically have a bargain price, as investors see the company as unfavorable in the marketplace.
After a big fall rally, and with winter right around the corner, it makes sense now to look for value stocks with healthy dividends. With just over two weeks left in 2022, now is the time for tax-loss selling and to move those proceeds to some value winners that will be solid portfolio additions in 2023.
We screened our 24/7 Wall St. research database looking for top value ideas rated Buy across Wall Street that pay solid and dependable dividends. The following stocks hit our screens and look like top plays for 2023. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
AbbVie
This is a top pharmaceutical stock pick across Wall Street. AbbVie Inc. (NYSE: ABBV) is a global, research-based biopharmaceutical company formed in 2013 following separation from Abbott Laboratories. The company develops and markets drugs in areas such as immunology, virology, renal disease, dyslipidemia and neuroscience.
One of the biggest concerns with AbbVie is what might happen eventually with anti-inflammatory therapy Humira, which has some of the largest sales for a drug ever recorded. The company was concerned, so in June of 2019 it announced that it has agreed to pay $63 billion for rival drugmaker Allergan, the latest merger in an industry in which some of the biggest companies have been willing to pay a high price to resolve questions about their future growth. The purchase officially closed in May of 2020.
The bad news for shareholders is that AbbVie may be nearing the limits of how far it can boost Humira’s price as cheaper competitors come to market, a problem Allergan is already grappling with as more alternatives to Botox emerge.
Shareholders receive a 3.63% dividend. Morgan Stanley’s $182 Wall Street high target price is well above the consensus target of $159.83. The shares ended Monday trading at $165.32 apiece.
24/7 Wall St.AT&T
The legacy telecommunications company has been going through a long restructuring, has lowered its dividend and has sold off or merged underperforming assets. AT&T Inc. (NYSE: T) provides telecommunications, media and technology services worldwide.
AT&T’s Communications segment offers wireless voice and data communications services and sells handsets, wireless data cards, wireless computing devices with carrying cases and hands-free devices through its own company-owned stores, agents and third-party retail stores.
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The company also provides data, voice, security, cloud solutions, outsourcing and managed and professional services, as well as customer premises equipment for multinational corporations, small and midsized businesses, and governmental and wholesale customers. In addition, it offers broadband fiber and legacy telephony voice communication services to residential customers.
It markets its communications services and products under the AT&T, Cricket, AT&T Prepaid and AT&T Fiber brand names. The company’s Latin America segment provides wireless services in Mexico and video services in Latin America. This segment markets its services and products under the AT&T and Unefon brand names.
AT&T stock investors receive a 5.81% dividend. A $24 price objective accompanies the Strong Buy rating at Raymond James. The consensus target is $20.28, and the stock closed at $19.30 on Monday.
Cisco
Investors who are more conservative may want to consider this mega-cap tech leader, which recently posted outstanding quarterly results. 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.
Cisco 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.
Shareholders receive a 3.15% dividend. Credit Suisse has set its target price on Cisco Systems stock at $67. The consensus target is just $55.10, and Monday’s close was at $49.30 a share.
Citigroup
This top bank stock has bounced nicely off the lows, and Warren Buffett bought a massive $2.5 billion worth of shares back in the summer. Citigroup Inc. (NYSE: C) is a leading global diversified financial service company that provides consumers, corporations and governments a broad range of financial products and services.
Citigroup offers services such as consumer banking and credit, corporate and investment banking, securities brokerage, transaction services and wealth management. It operates and does business in more than 160 countries and jurisdictions in North America, Latin America, Asia and elsewhere.
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Trading at a still cheap 8.98 times estimated 2023 earnings, this stock looks very reasonable in what remains a volatile stock market and in a sector that has dramatically lagged.
The dividend yield here is 4.55%. Oppenheimer’s $79 price target is a Wall Street high. The consensus target is $56.89, and Citigroup stock closed on Monday at 45.77.
24/7 Wall St.Walgreens
This huge drugstore chain operator is a safe retail play for investors looking to add health care now. Walgreens Boots Alliance Inc. (NASDAQ: WBA) operates as a pharmacy-led health and beauty retail company. It operates through three segments.
The Retail Pharmacy USA segment sells prescription drugs and an assortment of retail products, including health, wellness, beauty, personal care, consumable, and general merchandise products through its retail drugstores. It also provides specialty pharmacy services and mail services; this segment operates nearly 10,000 retail stores under the Walgreens and Duane Reade brands in the United States; and six specialty pharmacies.
The Retail Pharmacy International segment sells prescription drugs and health and wellness, beauty, personal care and other consumer products through its pharmacy-led health and beauty stores and optical practices, as well as online and an integrated mobile application. This segment operated 4,428 retail stores under the Boots, Benavides and Ahumada in the United Kingdom, Thailand, Norway, the Netherlands, Mexico and elsewhere, and 550 optical practices, including 165 on a franchise basis.
The Pharmaceutical Wholesale segment engages in the wholesale and distribution of specialty and generic pharmaceuticals, health and beauty products, and home health care supplies and equipment, as well as provides related services to pharmacies and other health care providers.
Walgreens Boots Alliance stock comes with a 4.75% dividend. The $54 Cowen target price compares with the $42.24 consensus target and Monday’s closing share price of $41.06.
Shares of these five top companies are trading at very reasonable levels, come with solid dividends and, most of all, are solid value plays in a market that looks poised to trade lower after a big run over the past eight weeks. They should not only hold up if the selling does indeed return but offer outstanding total return potential in 2023.
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