Likely, 2023 will be known as the year artificial intelligence became a permanent part of the investing lexicon. The excitement AI has generated helped drive the Nasdaq to the best first half in over 40 years, and many across Wall Street feel the tech rally has legs. The problem is that 10 stocks have driven the lion’s share of the gains, not only for the Nasdaq but the S&P 500 as well. So, it may be time to take some profits and reinvest the principal in dividend ideas.
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Some good news for investors looking to own the index? In its 52-year history, the Nasdaq has had two down years in a row only twice, and it is a good bet that this year will continue that trend by closing higher. In 1973 and 1974, during the Arab oil embargo, and in 2000 to 2002, when the index fell three years in a row after the dot-com collapse, and adding fuel to the fire were the devastating attacks on 9/11.
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 that they all have some solid defensive qualities, and they also are offering among the best entry points that each has provided in some time. Of course, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Stocks are listed in order of the highest yield. We avoided the energy stocks in the Nasdaq as they pay variable dividends based on commodity pricing and production.
Walgreens Boots Alliance
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.
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.
Investors receive a 6.6% dividend. Cowen has a $41 target price on Walgreens Boots Alliance stock. That compares with the $35.40 consensus target and Monday closing share price of $29.02.
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 eight years ago via the merger of H.J. Heinz Company and Kraft Foods Group. The company is a leading global food company, with $25 billion in annual revenues generated by such well-known brands as Kraft, Heinz, Oscar Meyer and Maxwell House. Warren Buffett holds 325 million shares in the Berkshire Hathaway portfolio.
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Kraft Heinz is one of America’s most trusted food and drink brands. 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.
Shareholders receive a 4.57% dividend. The BofA Securities price target is $50, and Kraft Heinz stock has a $42.83 consensus target. The shares closed on Monday at $35.81.
American Electric Power
This industry-leading utility is also a solid dividend-paying company. American Electric Power Co. Inc. (NYSE: AEP) is one of the largest electric utilities in the United States, delivering electricity to more than 5.4 million customers in 11 states.
The company ranks among the nation’s largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the United States. It also owns the nation’s largest electricity transmission system, a more than 40,000-mile network that includes more 765-kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined.
Many on Wall Street feel that the stock trades at a discount to its utility peers, and they feel it deserves a premium. Top analysts also think the company may sell generating assets and buy back shares with the proceeds, which also will be accretive.
American Electric Power stock comes with a 4.07% dividend. The $98 Goldman Sachs price target is near the consensus target of $98.32. Shares closed on Monday at $85.32 apiece.
Gilead Sciences
This stock is trading at 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.
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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.
Investors are happy to take a 3.94% dividend to the bank every quarter. BMO Capital Markets has set a $100 price objective, one of the highest on Wall Street. The consensus target is $91.38, and Gilead Sciences stock closed at $76.71 on Monday.
24/7 Wall St.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:
- Enbrel to treat plaque psoriasis, rheumatoid arthritis and psoriatic arthritis
- Neulasta reduces the chance of infection due to 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
Shareholders receive a 3.79% dividend. Amgen stock has a $290 target price at Oppenheimer. The consensus target is lower at $258.29, while Monday’s final trade was for $253.51 a share.
The highest-yielding stocks in the Nasdaq offer a contrarian angle for the rest of 2023, with two big biotechnology stocks (which have been under pressure so far this year), a quality and very conservative utility stock, 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).
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