The pandemic-era investing of trading fun and games is long over. Like last year, 2023 may be another year when the tab comes due, and it could be expensive. Gone are all the savings that were stored up in personal accounts. Also gone is the government largesse in the form of zero interest rates, quantitative easing and multiple rounds of stimulus checks. Credit card debt is rising, and if interest rate inversions are any indication, we will be wrapped in a recession at some point this year.
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With conditions deteriorating, what are beleaguered investors to do this year after an appalling 2022 that saw the S&P 500 drop close to 20% and the tech-heavy Nasdaq tumble a stunning 34%? Top strategists are suggesting the same course as last year, that investors should focus on energy, consumer staples and additional defensive sectors like utilities, health care and defense.

We screened those sectors looking for 2023 ideas and found 10 companies that pay big and reliable dividends and their stocks are Buy rated and offer shell-shocked investors the best path to generate positive total return in 2023. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Consumer Staples

Kraft Heinz

Even in bad times, everybody has to eat, and this company always stands to benefit. Kraft Heinz Co. (NASDAQ: KHC) was formed via the merger of H.J. Heinz and Kraft Foods. The company is a leading global food company, with $29 billion in annual revenues generated by such well-known brands as Kraft, Heinz, Oscar Meyer and Maxwell House. Warren Buffett holds a big position in the stock at Berkshire Hathaway.

It is the third-largest food and beverage manufacturer in North America, deriving 76% of revenues from that market and 24% internationally. Additional brands include Oscar Meyer, Maxwell House, Capri Sun, Classico, Jell-O, Kool-Aid, Lunchables, Ore-Ida, Oscar Mayer, Philadelphia, Planters, Plasmon, Quero, Weight Watchers Smart Ones and Velveeta.

Shareholders are paid a very solid 3.76% dividend. Deutsche Bank has a $49 price target on Kraft Heinz stock. The consensus target is $42.52, and the shares closed on Tuesday at $42.33.

Procter & Gamble

The company offers a very solid dividend as well as a host of recognizable products. Procter & Gamble Co. (NYSE: PG) is one of the world’s largest consumer products companies and one of the oldest in the Fortune 500. Its many brands include Pampers, Tide, Bounty, Charmin, Gillette, Oral B, Crest, Olay, Pantene, Head & Shoulders, Ariel, Gain, Always, Tampax, Downy and Dawn.

The company sells its products through mass merchandisers, e-commerce, grocery stores, membership club stores, drug stores, department stores, distributors, wholesalers, baby stores, specialty beauty stores, high-frequency stores and pharmacies. The company has been very innovative in its product development process and uses that to help ensure future growth and cash flow. This should provide investors with years of steady growth and dividends.

Procter & Gamble stock investors receive a 2.43% dividend. The Raymond James price objective of $165 is well above the $149.47 consensus target. The shares closed on Tuesday at $151.898.

Lockheed Martin

This top aerospace and defense stock still offers investors looking to buy shares a solid entry point. Lockheed Martin Corp. (NYSE: LMT) researches, designs, develops, manufactures, integrates, operates and sustains advanced technology systems, products and services. It also provides a wide range of defense electronics products and IT services.
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Being the Pentagon’s prime contractor, Lockheed Martin offers a diverse portfolio of global aerospace, defense, security and advanced technologies. Its leveraged presence in the Army, Air Force, Navy and IT programs guarantees a steady inflow of follow-on orders, not only from the U.S. government but also from many foreign allies of the nation.

Over the past several years, Lockheed Martin’s backlog has substantially outgrown the rest of the industry, supporting the growth outlook for the foreseeable future. The company has exposure to Defense Department priority buckets and consistently executes well. Even if the end market growth rate slows, continued strong fundamentals can be expected, with compounding earnings and cash flows.

The dividend yield here is 2.55%. Citigroup’s $546 price objective compares with a consensus target for Lockheed Martin stock of $483.41 and the most recent close at $462.29.

Raytheon Technologies

This top aerospace and defense idea has a diversified mix of businesses. Raytheon Technologies Corp. (NYSE: RTX) is an industry leader in defense, government electronics, space, information technology and technical services.

With a history of innovation spanning 97 years, Raytheon provides state-of-the-art electronics, mission systems integration, C5I products and services, sensing, effects and mission support for customers in more than 80 countries.

In 2019, United Technologies and Raytheon agreed to merge their businesses and spin off the Carrier and Otis divisions to create a new aerospace and defense powerhouse. The merger was completed in April of 2020.

Shareholders receive a 2.18% dividend. Morgan Stanley has set a $119 price objective. The consensus target is $106.96. Raytheon Technologies stock closed at $99.92 on Tuesday.

Energy

Canadian Natural Resources

This north-of-the-border energy giant offers a big dividend and growth potential. Canadian Natural Resources Ltd. (NYSE: CNQ) acquires, explores for, develops, produces, markets and sells crude oil, natural gas and natural gas liquids (NGLs). It operates primarily in western Canada, the United Kingdom portion of the North Sea and offshore Africa.
Canadian Natural Resources offers synthetic crude oil, light and medium crude oil, bitumen (thermal oil), primary heavy crude oil and Pelican Lake heavy crude oil. Its midstream and refining assets include two crude oil pipeline systems and a 50% working interest in an 84-megawatt cogeneration plant at Primrose.
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As of December 31, 2020, the company had total proved crude oil, bitumen, and NGLs reserves were 10,528 million barrels (MMbbl); total proved plus probable crude oil, bitumen and NGLs reserves were 13,271 MMbbl; proved SCO reserves were 6,998 MMbbl; total proved plus probable SCO reserves were 7,535 MMbbl; proved natural gas reserves were 12,168 billion cubic feet (Bcf); and total proved plus probable natural gas reserves were 20,249 Bcf.

Canadian Natural Resources stock comes with a 4.62% dividend. The $64 Goldman Sachs price target is less than the $67.38 consensus target, but the shares closed on Tuesday at $55.39.

Phillips 66

This extremely diversified energy company has a long and successful operating history, and it is a longtime Goldman Sachs Conviction List member. Phillips 66 (NYSE: PSX) operates through four segments: Midstream, Chemicals, Refining, and Marketing and Specialties. The company holds many of these assets within its MLP, Phillips 66 Partners.

The company benefits from the tax-advantaged structure while still operating a more diversified operating business that also contains many assets that are not ideal MLP assets, such as its fast-growing chemical manufacturing business and its super-profitable refined products marketing business.

Phillips 66 is the top idea within refining coverage at Goldman Sachs, which continues to see headroom for incremental capital returns this year. The analysts are constructive on a positive rate of change at Refining in 2022. In addition, they continue to see attractive non-refining value in the other segments.

The dividend yield is 3.77%. Phillips 66 stock has a $123 price target at Goldman Sachs. The consensus target is $121.93, and shares ended Tuesday trading at $101.57.

Health Care

Pfizer

This top pharmaceutical stock was one of the biggest winners in the COVID-19 vaccine sweepstakes, and it is on the BofA Securities US 1 list of top stock ideas. Pfizer Inc. (NYSE: PFE) discovers, develops, manufactures, markets, distributes and sells biopharmaceutical products worldwide.
Pfizer offers medicines and vaccines in various therapeutic areas, including the following:

• Cardiovascular metabolic and women’s health under the Premarin family and Eliquis brands
• Biologics, small molecules, immunotherapies and biosimilars under the Ibrance, Xtandi, Sutent, Inlyta, Retacrit, Lorbrena and Braftovi brands
• Sterile injectable and anti-infective medicines and oral COVID-19 treatment under the Sulperazon, Medrol, Zavicefta, Zithromax, Vfend, Panzyga and Paxlovid brands.
• Pneumococcal disease, meningococcal disease, tick-borne encephalitis and COVID-19 under the Comirnaty/BNT162b2, Nimenrix, FSME/IMMUN-TicoVac, Trumenba and the Prevnar family brands
• Biosimilars for chronic immune and inflammatory diseases under the Xeljanz, Enbrel, Inflectra, Eucrisa/Staquis and Cibinqo brands
• Amyloidosis, hemophilia and endocrine diseases under the Vyndaqel/Vyndamax, BeneFIX and Genotropin brands

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Shareholders receive a 3.30% dividend. The Goldman Sachs price objective is $60, while the consensus target was last seen at $55.49. Pfizer stock ended Tuesday’s session at $47.62 a share.

Walgreens

This huge drugstore chain operator is a safe retail play for investors looking to add health care now. 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.

Walgreens Boots Alliance stock investors enjoy a 5.46% dividend. The $54 target price at Cowen compares with the $41.62 consensus target and Tuesday’s close at $36.70.

Utilities

Duke Energy

This large-cap utility leader is always a solid idea when the going gets tough. Duke Energy Corp. (NYSE: DUK) is an energy company in the United States that operates through the following segments.
Duke Energy’s Electric Utilities and Infrastructure segment generates, transmits, distributes and sells electricity generated from coal, hydroelectric, natural gas, oil, renewable generation and nuclear fuel. It also engages in the wholesale of electricity to municipalities, electric cooperative utilities and load-serving entities. This segment serves approximately 8.2 million customers in six states in the Southeast and Midwest regions of the United States, covering a service territory of approximately 91,000 square miles, and it owns approximately 50,259 megawatts (MW) of generation capacity.
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The Gas Utilities and Infrastructure segment distributes natural gas to residential, commercial, industrial and power generation natural gas customers, and it owns, operates and invests in pipeline transmission and natural gas storage facilities. It has approximately 1.6 million customers, including 1.1 million customers in North Carolina, South Carolina and Tennessee, as well as 550,000 customers in southwestern Ohio and northern Kentucky.

The Commercial Renewables segment acquires, owns, develops, builds and operates wind and solar renewable generation projects, including non-regulated renewable energy and energy storage services to utilities, electric cooperatives, municipalities and corporate customers. It has 23 wind, 178 solar and two battery storage facilities, as well as 71 fuel cell locations, with a capacity of 3,554 MW across 22 states.

Investors receive a 3.90% dividend. BMO Capital Markets analysts have a $110 price target for Duke Energy stock. The consensus target is $106.06. Tuesday’s close at $105.43.

Southern Company

This large-cap utility leader makes sense for very conservative investors. Southern Company (NYSE: SO) engages in the generation, transmission and distribution of electricity. It constructs, acquires, owns and manages power generation assets, including renewable energy and battery energy storage projects. and sells electricity in the wholesale market.

The company distributes natural gas in Illinois, Georgia, Virginia and Tennessee, as well as provides gas marketing services, wholesale gas services and gas pipeline investments operations. It constructs, operates, and maintains 75,924 miles of natural gas pipelines and 14 storage facilities with total capacity of 157 Bcf to provide natural gas to residential, commercial and industrial customers.

It serves approximately 8.6 million electric and gas utility customers. It also owns or operates 30 hydroelectric generating stations, 24 fossil fuel generating stations, three nuclear-generating stations, 13 combined cycle/cogeneration stations, 44 solar facilities, 13 wind facilities, one fuel cell facility and one battery storage facility. And it provides products and services in the areas of energy efficiency and utility infrastructure. In addition, the company offers digital wireless communications and fiber optics services.

Shareholders receive a 3.86% dividend. The Wolfe Research price target is $76. The consensus target is $71.81. Southern Company stock closed at $71.11 on Tuesday.

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These are 10 companies from five sectors that are poised to not only survive what could be another difficult year but offer all of the components for a big total return potential. Remember that total return is the increase in the price of a stock plus any dividends paid in the course of the holding period.

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