Many investors will be more than glad to forget 2022 once it finally ends. Back-to-back dreadful consumer and producer price index reports this week show inflation printing new highs not seen since 1981. While those reports are trailing, and the price of oil has dropped dramatically over the past 90 days, the price of food remains stubbornly high. The “peak inflation” narrative may offer some hope, but the reality is it will take a dramatic drop in prices to turn sentiment around.

The Dow Jones industrial average stocks, while on a much smaller index than the Nasdaq or the S&P 500, have performed better overall. Both the Nasdaq and the S&P 500 are in bear market territory, or down 20% or more from highs printed last November. The Dow Jones industrials are down just shy of 16%.

While this is hardly a banner year, the stocks in this venerable index appear to be holding up better. We screened the Dow stocks looking for the highest-yielding companies and found five that look like great ideas now. All five are rated Buy at major Wall Street firms, but it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Chevron

This integrated giant is a safer way for investors looking to get positioned in the energy sector, as it has a solid position when it comes to natural gas. Chevron Corp. (NYSE: CVX) engages in integrated energy and chemicals operations worldwide.

The Upstream segment is involved in the exploration, development, production and transportation of crude oil and natural gas; processing, liquefaction, transportation and regasification associated with liquefied natural gas (LNG); transportation of crude oil through pipelines; and transportation, storage and marketing of natural gas, as well as operating a gas-to-liquids plant.

The Downstream segment engages in refining crude oil into petroleum products; marketing crude oil, refined products and lubricants; manufacturing and marketing of renewable fuels; transporting crude oil and refined products by pipeline, marine vessel, motor equipment and rail car; and manufacturing and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives. It is also involved in cash management and debt financing activities, insurance operations, real estate activities and technology businesses.

Chevron stock comes with a 4.18% dividend. Credit Suisse has a $202 target price on the shares. The consensus target is $179.23, and shares closed on Thursday at $135.94.

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.
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.

The stock took a big hit when the networking giant posted very grim numbers, but the juicy dividend will pay investors to wait for the turnaround.

Shareholders receive a 3.59% dividend. The BofA Securities target price for Cisco Systems stock is $52, and the consensus target is $54.30. Thursday’s close was at $42.33 a share.

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 5.73% dividend. The $74 Jefferies target price is higher than the $68.05 consensus target. Dow stock closed on Thursday at $48.90.

IBM

This blue-chip giant still offers investors a very solid entry point. International Business Machines Corp. (NYSE: IBM) provides integrated solutions and services worldwide through these four business segments.
IBM’s 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.

The 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.

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.

The dividend yield here is 4.75%. Credit Suisse’s $166 price target compares with the $143.63 consensus target on IBM stock and Thursday’s closing print of $139.06.

Verizon

This top telecommunications stock offers tremendous value at current levels, and Berkshire Hathaway owns 158.8 million shares. 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.

Investors receive a 5.07% dividend. The target price on Verizon Communications stock at BofA Securities is $64. The consensus target is $60.64, and the shares closed at $50.49 on Thursday.

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These top companies have been around for decades and will still be here long after the current inflation nightmare is contained. Given that earnings reports for the second quarter are starting to come out fast and furious, it makes sense to buy partial positions now and wait for the results. The advantage to quality blue chips like the stocks mentioned here is investors are paid handsomely to wait out the bear market.

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