After a dreadful 2022, many stock investors will be looking at their year-end statements and trying to make some decisions on where to reallocate assets in 2023. With fourth-quarter earnings reports right around the corner, and the potential for some disappointing results and forward guidance, it makes sense to look at companies that have stood the test of time and can hold their own in what could be a very challenging environment, at least for the first half of the new year.
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One group of stocks that may fit the bill nicely is those in the Dow Jones industrial average, one of the oldest and most commonly followed equity indexes. Legacy companies in a variety of sectors that pay dependable and big dividends are likely among the best ideas to outperform in 2023. We screened the index looking for the highest-yielding companies in sectors that look to benefit from solid demand and can do well even if a severe recession is on tap for 2023.

We only selected stocks that are rated Buy, as two of the highest-yielding companies do not have a single analyst with a Buy rating. If nobody likes a stock, it likely has trouble below the surface. It is important to remember though 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.

Verizon

This top telecommunications stock offers tremendous value at current levels, and Berkshire Hathaway owns a stunning 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.

Verizon stock investors receive a 6.80% dividend. Cowen’s $55 target price on the shares is well above the $35.25 consensus target. The stock closed over 2% higher on Tuesday at $39.25 a share.

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 almost a year ago that 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.
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Shareholders receive a 5.60% dividend. Needham has a $32 price target on Intel stock. That compares with the $31.13 consensus target and Tuesday’s closing share price of $25.94.

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 5.51% dividend. The Wells Fargo price objective is $55. Dow stock has a consensus target of $51, while Tuesday’s close was at $51.19 per share.

IBM

This blue-chip giant still offers investors an incredibly solid entry point as well as a massive dividend. International Business Machines Corp. (NYSE: IBM) provides integrated solutions and services worldwide. The company operates through four business segments.

The 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.
IBM’s 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.
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The Financing segment offers lease, installment payment, loan financing and short-term working capital financing services.

For the third quarter, IBM posted revenue of $14.1billion, up 6% from a year ago and better than Wall Street’s consensus forecast. With a focus on artificial intelligence and hybrid cloud computing, the legacy technology giant could be poised for strong growth going forward.

IBM stock comes with a 4.66% dividend. The $145 BofA Securities price target compares with a $141.66 consensus target and Tuesday’s closing print of $142.42.

Cisco

Investors who are more conservative may want to consider this mega-cap tech leader, which recently posted outstanding quarterly results. 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 networking giant posted very grim numbers this year and the stock has taken a big hit, but the juicy dividend will pay investors to wait for the turnaround.

The dividend yield here is 3.20%. BofA Securities has set its target price at $52. The consensus target is higher at $55.50, but Cisco Systems stock closed on Tuesday at $47.53.

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These five top Dow stocks are still offering excellent entry points, are all paying dependable dividends, and three are legacy technology giants that have all been hit hard. While it’s possible we have more market downside, all of these companies have survived market and economic downturns in the past, and likely will this time as well.

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