The Nasdaq had a dreadful 2022, down a stunning 33% for the year. While the tech-heavy index has started off 2023 much better, up 5.9% as of the close Thursday, many investors are extremely nervous, especially given the recent uncertainty with the banking industry.
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Some good news for investors looking to own the index? In its 50-year history, the Nasdaq has only had two down years in a row twice. The first was in 1973 and 1974 during the Arab oil embargo. The other was from 2000 to 2002, when the index fell three years in a row after the dot-com collapse, with the devastating attacks on 9/11 adding fuel to the fire.
Given that historical perspective, investors should feel somewhat better about owning the companies that make up the index. We decided to screen the index, looking for the highest-yielding stocks, and found these five have some solid defensive qualities and are offering among the best entry points in some time.
Stocks are listed in order of the highest yield.
Diamondback Energy
This red-hot energy play looks poised to press higher again. Diamondback Energy Inc. (NASDAQ: FANG) is an independent oil and natural gas company focused on the acquisition, development, exploration and exploitation of unconventional and onshore oil and natural gas reserves in the Permian Basin in West Texas and New Mexico.
Diamondback Energy primarily focuses on the development of the Spraberry and Wolfcamp formations of the Midland basin, as well as the Wolfcamp and Bone Spring formations of the Delaware basin, which are part of the Permian Basin.
The company also owns, operates, develops and acquires midstream infrastructure assets, including 770 miles of crude oil gathering pipelines, natural gas gathering pipelines and an integrated water system in the Midland and Delaware Basins.
Investors receive an 8.60% dividend, which is of the variable variety, meaning it could change depending on production and profits. Piper Sandler has a $207 target price on Diamondback Energy stock. The consensus target is $178.18, and the closing share price on Thursday was $125.53.
Walgreens
This huge drugstore chain operator is a safe retail play for investors looking to add health care now, and it trades at a cheap 7.5 times 2023 earnings expectations. 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.
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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.
Shareholders receive a 5.72% dividend. The Cowen target price is $54, and Walgreens Boots Alliance stock has a consensus target of just $41.58. The shares closed on Thursday at $33.41.
Kraft Heinz
Even in bad times, everybody has to eat, and this company always stands to benefit. Kraft Heinz Co. (NASDAQ: KHC) was formed almost six years ago in the merger of H.J. Heinz and Kraft Foods. The company is a leading global food company, with $29 billion in annual revenues generated by such well-known brands as Kraft, Heinz, Oscar Meyer and Maxwell House. Buffett holds a big position in the stock at Berkshire Hathaway.
The company is the third largest food and beverage manufacturer in North America and derives 76% of revenues from that market and 24% from overseas. The company’s other brands include ABC, Capri Sun, Classico, Jell-O, Kool-Aid, Lunchables, Ore-Ida, Oscar Mayer, Philadelphia, Planters, Plasmon, Quero, Weight Watchers Smart Ones and Velveeta.
Kraft Heinz stock comes with a 4.20% dividend and is on the BofA Securities US 1 list of top picks. The firm’s $48 price target is above the $42.83 consensus target, and shares closed on Thursday at $38.18.
Gilead Sciences
This stock is trading a very reasonable 11 times estimated 2023 earnings and has big-time upside potential. Gilead Sciences Inc. (NASDAQ: GILD) is a research-based biopharmaceutical company that discovers, develops and commercializes medicines in the areas of unmet medical need in the United States, Europe and elsewhere.
The company provides Biktarvy, Genvoya, Descovy, Odefsey, Truvada, Complera/Eviplera, Stribild and Atripla products for the treatment of human immunodeficiency virus (HIV) infection; Veklury, an injection for intravenous use, for the treatment of coronavirus disease 2019; and Epclusa, Harvoni, Vosevi, Vemlidy and Viread for the treatment of liver diseases. It also offers Yescarta, Tecartus, Trodelvy and Zydelig products for the treatment of hematology, oncology and cell therapy patients.
In addition, Gilead provides Letairis, an oral formulation for the treatment of pulmonary arterial hypertension; Ranexa, an oral formulation for the treatment of chronic angina; and AmBisome, a liposomal formulation for the treatment of serious invasive fungal infections.
Gilead has collaboration agreements with Arcus Biosciences, Pionyr, Tizona, Tango Therapeutics, Jounce Therapeutics, Galapagos, Janssen, Japan Tobacco, Gadeta, Bristol-Myers Squibb, Merck and Novo Nordisk.
Shareholders receive a 3.77% dividend. The $101 Mizuho price objective is the highest across Wall Street. The consensus target is $89.92, and Gilead Sciences stock closed at $79.85 on Thursday.
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Amgen
This biotech giant remains a safer way to play the massive potential growth in biosimilars. Amgen Inc. (NASDAQ: AMGN) discovers, develops, manufactures and delivers human therapeutics worldwide. It focuses on inflammation, oncology/hematology, bone health, cardiovascular disease, nephrology and neuroscience.
The company’s products include the following:
- Enbrel to treat plaque psoriasis, rheumatoid arthritis and psoriatic arthritis
- Neulasta reduces the chance of infection due a low white blood cell count in patients with cancer
- Prolia to treat postmenopausal women with osteoporosis
- Xgeva for skeletal-related events prevention
- Otezla for the treatment of adult patients with plaque psoriasis, psoriatic arthritis and oral ulcers associated with Behcet’s disease
- Aranesp to treat a lower-than-normal number of red blood cells and anemia
- Kyprolis to treat patients with relapsed or refractory multiple myeloma
- Repatha, which reduces the risks of myocardial infarction, stroke and coronary revascularization
Investors receive a 3.65% dividend. Amgen stock has a $294 target price at Oppenheimer. The consensus target is $258.29, and Thursday’s close was at $234.57.
The highest-yielding stocks in the Nasdaq offer a contrarian angle for 2023, with two big biotechnology stocks, which have been under pressure in 2023; a top energy play, with oil trading at the lowest level since late 2021; a consumer defensive packaged food giant; and the world’s largest pharmacy chain, which for better or worse always has demand, especially with an aging population. These are five strong choices for growth and income investors looking for a way forward on what could be a rocky road.
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