While it is becoming clear that inflation is dropping, November’s consumer price index came in up 7.1% year over year (versus expectations for 7.3%), the reality is that costs for essential items like food remain very high. In addition, one reason for the declining inflation numbers is that the price of oil has fallen dramatically this year, but with inventories dangerously low, many in the energy sector think we could see $120 a barrel or more later next year.
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Though investors are hopeful that Tuesday’s rally is the beginning of a new bull market, the truth is that layoffs are accelerating, inflation is still sky-high and, most importantly, the year-long interest rate increases will continue in the first quarter. When the terminal or ending target is reached, it is likely to be in the 5.00% to 5.25% range after the latest 50-basis-point increase and another in January.

Federal Reserve Chair Powell has made it clear that when the terminal rate level is attained, it will remain, as the mantra goes, “higher for longer.” That means any cut in the federal funds rate is unlikely until 2024. More importantly, the effect of interest rate increases is always lagging, so they will really start to be felt next year.

We screened our 24/7 Wall St. research universe search for Buy-rated stocks that pay at least a 5% dividend, and we found five top companies that look like incredible year-end bargains. 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 gets sorted out, it is a good bet that investors will still receive an 8.01% dividend. Stifel has a $50 target price on Altria stock. The consensus target is $48.73, and shares closed on Tuesday at $46.81.

The top master limited partnership is a very safe way for investors looking for energy exposure and income. Energy Transfer L.P. (NYSE: ET) owns and operates one of the largest and most diversified portfolios of energy assets in the United States, with a strategic footprint in all the major domestic production basins.
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This publicly traded limited partnership has core operations that include complimentary natural gas midstream, intrastate and interstate transportation and storage assets; crude oil, natural gas liquids (NGLs) and refined product transportation and terminaling assets; NGL fractionation; and various acquisition and marketing assets.

After the purchase of Enable Partners last December, Energy Transfer now owns and operates more than 114,000 miles of pipelines and related assets in all the major U.S. producing regions and markets across 41 states, further solidifying its leadership position in the midstream sector.

The completion of the transaction was immediately accretive to Energy Transfer and furthers Energy Transfer’s deleveraging efforts. It also adds significant fee-based cash flows from fixed-fee contracts. Additionally, the combined operations of the two companies are expected to generate annual run-rate cost and efficiency synergies of more than $100 million, excluding potential financial and commercial synergies.

Through its ownership of Energy Transfer Operating, formerly known as Energy Transfer Partners, the company also owns Lake Charles LNG, as well as the general partner interests, the incentive distribution rights and 28.5 million common units of Sunoco, as well as the general partner interests and 39.7 million common units of USA Compression Partners.

Energy Transfer stock investors receive a 9.28% distribution. Citigroup started covering the stock last week and has set a $16 price target. The consensus target is $16.24, and shares closed on Tuesday at $11.91.

Intel

This legacy leader in semiconductors has been 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 last 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 5.09% dividend. The Needham price target is $32, while the consensus target is $31.13. Intel stock closed on Tuesday at $28.73.
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ONEOK

The solid price of natural gas over the past year has helped to lift this top energy stock. ONEOK Inc. (NYSE: OKE) primarily engages in natural gas transportation, storage and natural gas and NGLs gathering, processing and fractionation in the Bakken, Mid-Continent and Permian.

The company has a strong presence in the Oklahoma SCOOP/STACK (NGL gathering/takeaway system, G&P), the Williston Basin (G&P, NGL takeaway) and the Permian Basin (NGL gathering, NGL takeaway, natural gas takeaway), which analysts feel provides high-return growth opportunities.

Many on Wall Street remain positive on the company’s primarily fee-based earnings, which account for 90% of total earnings.

The dividend yield here is 5.67%. ONEOK stock has a $78 price target at Truist Financial. The $68.06 consensus target is closer to Tuesday’s final share price of $66.96.

Rio Tinto

Shares of this mining company could explode higher when the world economy rebounds strongly. Rio Tinto PLC (NYSE: RIO), the world’s second-largest mining company, has operations in Australia, Africa, the Americas, Europe and Asia. It is the world’s largest producer of aluminum, second largest producer of iron ore, and a top five producer of alumina, uranium, mined copper, export thermal and coking coal, and diamonds.

In addition, Rio Tinto is also involved in alumina production; primary aluminum smelting; bauxite mining; alumina refining; and ilmenite, rutile and zircon mining, as well as the provision of gypsum.

Rio Tinto has a strong balance sheet and low-cost iron ore assets, as well as copper and aluminum assets, that offer leverage to an eventual cyclical recovery. Some on Wall Street believe that iron ore may continue to surprise to the upside in 2023.

Rio Tinto stock comes with a 9.62% dividend. Credit Suisse has set a $75 price target (in U.S. dollars). The consensus target is $71.19, and Tuesday’s close was at $71.61.

Shares of this leading company have been pounded and are offering the best entry point since last year, and it is a strong idea for investors looking to play the commercial real estate subsector. Simon Property Group Inc. (NYSE: SPG) invests in real estate markets across the globe, engaging in investment, ownership, management and development of properties. The company primarily invests in regional malls, premium outlets, mills and community/lifestyle centers to create its portfolio.
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Through its subsidiary partnership, Simon Property owns or has an interest in about 230 properties in the United States and Asia. The company also has a 28.9% interest in Klepierre, a European real estate investment trust with over 260 shopping centers in 13 countries.

Shareholders receive a 6.07% distribution. Morgan Stanley’s price target of $131 is well above the $122.47 consensus target for Simon Property Group stock. Shares ended trading on Tuesday at $120.24.

Verizon

This top telecommunications stock offers tremendous value 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 6.88% dividend. The Raymond James price target is $51, and the consensus target is $45.30. Verizon Communications stock closed most recently at $37.86.

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While the two-month bear market rally has been stunning, and now it is being boosted by seasonality and marginally better incoming economic data, the reality is layoffs are growing and inflation may not ever abate to the Fed’s 2% target. Plus, with Republicans taking back control of the House of Representatives in January, the profligate government spending likely will come to a screeching halt with the national debt at $31 trillion.

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