While we have seen a monster rally run into some trouble in November, the reality is that the Federal Reserve likely will raise interest rates by yet another 75 basis points, which will lift the federal funds to 3.75% to 4.00%. The good news for investors is that many across Wall Street see the final or terminal rate at 4.75 to 5.00%. That likely would mean another 50-basis-point hike in December, one in the first quarter of 2023, and hopefully that will be the end of it.
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While bonds and some sectors tend to get hurt in a rising-rate scenario, financials and others tend to prosper. We decided to screen our 24/7 Wall St. research universe for blue chip companies that, for whatever reason, have been ignored or abandoned and offer some strong total return potential for 2023 and big payouts for shareholders. Six made the cut, and all pay at least a 5% dividend and are Buy rated.

While all are rated Buy on Wall Street, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Altria

This maker of tobacco products offers value investors a great entry point now as it has been hit 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. PMUSA enjoys a 51% share of the U.S. 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. In December 2018 it acquired 35% of Juul Labs, but the stock was pounded last summer when the FDA announced a ban on all sales of Juul vape pens.

In October, the company, which at the height of its popularity dominated the market with its sweet flavors, agreed to pay $438.5 million in a settlement with 33 states and one territory over marketing its Juul product to teens. Altria announced recently that it is looking to end its noncompete agreement with Juul to compete more aggressively in the vape space on its own.

While this finally gets sorted out, it is a good bet that investors still will receive that 8.13% dividend. Stifel has a $50 target price, and the consensus target is $48.97. Altria stock closed on Tuesday at $46.14 a share.

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.

Its 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.
AT&T 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.
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The company 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.

Shareholders receive a 6.09% dividend. The Raymond James price objective on AT&T stock is $24. The consensus target is $20.28, and the stock closed at $18.35 on Tuesday.

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. As of December 31, 2021, the company’s total acreage position was approximately 524,700 gross acres in the Permian Basin, and estimated proved oil and natural gas reserves were 1,788,991 thousand barrels of crude oil equivalent.

The company also holds working interests in 5,289 gross producing wells, as well as royalty interests in 6,455 additional wells. In addition, the company owns mineral interests in approximately 930,871 gross acres and 27,027 net royalty acres in the Permian Basin and Eagle Ford Shale, and it owns, operates, develops and acquires midstream infrastructure assets, including 866 miles of crude oil gathering pipelines, natural gas gathering pipelines, and an integrated water system in the Midland and Delaware Basins of the Permian Basin.

Diamondback Energy stock comes with a 7.96% dividend. The $209 Piper Sandler target price is well above the $174.80 consensus target and Tuesday’s closing share price of $158.63.

Intel

This legacy leader in semiconductors has been absolutely hammered, and while some feel it is a value trap, it is hard to count out the company that defined the semiconductor revolution. Intel Corp. (NASDAQ: INTC) designs, manufactures and sells integrated digital technology platforms worldwide.

The platforms are used in various computing applications, comprising notebooks, two-in-one systems, desktops, servers, tablets, smartphones, wireless and wired connectivity products, wearables, retail devices and manufacturing devices, as well as for retail, transportation, industrial, buildings, home use and other market segments.
Intel announced back in January it would invest significantly to build potentially the world’s largest chip-making complex in Ohio, looking to boost capacity as a global shortage of semiconductors affects everything from smartphones to automobiles. Intel says the 1,000-acre “mega-site” northeast of Columbus has room for as many as eight plants, known as “fabs.” The company estimates it would require a $100-billion investment to fully build and equip those plants.

Shareholders receive a 5.14% dividend. Needham has set a $32 price target, just shy of the $32.23 consensus target for Intel stock. Tuesday’s close was at $28.30.
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Vale

This very solid commodity play is one of the best ideas during a recession. Vale S.A. (NYSE: VALE) produces and sells iron ore and iron ore pellets for use as raw materials in steelmaking in Brazil and internationally.

The company operates through Ferrous Minerals and Base Metals segments. The former segment produces and extracts iron ore and pellets, manganese, ferroalloys and other ferrous products, as well as providing related logistic services. The latter segment produces and extracts nickel and its by-products, such as gold, silver, cobalt, precious metals and others, as well as copper.

Last week, the company confirmed it has hired advisors to assess “long term value-unlocking alternatives,” after the Financial Times reported the company was looking to sell a stake in its metals business. Vale added in a securities filing, however, that no decision has been reached yet on any potential transaction. Financial Times also reported that Vale was in talks to sell a $2.5 billion minority stake in its metals business, citing people familiar with the matter.

The dividend yield here is 11.17%. Vale stock has a $16 target price at BMO Capital Markets. The consensus target is higher at $17.23. The stock closed almost 4% higher on Tuesday at $13.43, after mixed earnings results were posted earlier this week.

Verizon

This top telecommunications company offers tremendous value and passive income at current levels. 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 6.98% dividend. The Cowen target price is $55. The consensus target was last seen at $45.30, and Verizon Communications stock closed at $37.37 on Tuesday.

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Six top companies that for a variety of reasons are trading incredibly cheaply and offering investors very timely entry points. That noted, it still may be very prudent to start with buying partial positions, as the market still has a plethora of issues to deal with, not the least of which is the ongoing inflation burden and a continuing rise in interest rates. However, for long-term investors searching for stability and passive income, all six look like solid ideas for the rest of the quarter and 2023.

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