Just when the risk-on crowd was warmed up and ready to party, and everybody was cheering what many thought was dovish commentary from Federal Reserve Chair Jay Powell, the January job report dropped a bomb when it was announced Friday a stunning 517,000 jobs were added, versus expectations for 180,000.
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While at the margin, it would seem like job additions are positive, the reality is there are currently two jobs open for every one job seeker, a situation that can ratchet up wage inflation fast as companies compete for employees. What this might translate to for investors is more rate hikes, likely 25 basis points in March and May, and then a protracted period in which the federal funds rate stays at 5.25% well into next year.

The bottom line is we think it is smart to sell this likely bear market rally and use the proceeds to buy stocks that pay good dividends and can act as a hedge against further downside. That means defensive companies. We screened our 24/7 Wall St. research database and found seven top stocks that are Buy rated, pay those good dividends and look well situated if the selling returns. 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 top tobacco company posted outstanding fourth-quarter results and still offers value investors an excellent entry point. Altria Group Inc. (NYSE: MO) manufactures and sells smokable and oral tobacco products in the United States.

The company provides cigarettes primarily under the Marlboro brand; cigars and pipe tobacco principally under the Black & Mild brand; and moist smokeless tobacco products under the Copenhagen, Skoal, Red Seal and Husky brands. It also provides on! oral nicotine pouches. The company sells its tobacco products primarily to wholesalers, including distributors, and large retail organizations, such as chain stores.

Altria also owns over 10% of Anheuser-Busch InBev, the world’s largest brewer. That position is worth over $10 billion dollars.

In addition to the outstanding results for the latest quarter, the company announced a huge $1 billion share buyback.

Investors receive a 7.91% dividend. Stifel has a $50 target price on Altria stock. The consensus target is $49.33, and the stock closed on Friday at $46.91.

Coterra Energy

This company was formed by the closing of the $17 billion merger of Cabot Oil & Gas and Cimarex Energy in 2021. Coterra Energy Inc. (NASDAQ: CTRA) is an independent oil and gas company engaged in the development, exploration and production of oil, natural gas and natural gas liquids (NGLs) in the United States. It primarily focuses on the Marcellus Shale, with approximately 177,000 net acres in the dry gas window of the play located in Susquehanna County, Pennsylvania.
Coterra also holds Permian Basin properties with approximately 306,000 net acres and Anadarko Basin properties located in Oklahoma with approximately 182,000 net acres. In addition, it operates natural gas and saltwater disposal gathering systems in Texas. The company sells its natural gas to industrial customers, local distribution companies, oil and gas marketers, major energy companies, pipeline companies and power-generation facilities.
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As of December 31, 2021, it had proved reserves of approximately 2,892,582 thousand barrels of oil equivalent, which include 189,429 thousand barrels of oil and other liquid hydrocarbons, 14,895 billion cubic feet of natural gas and 220,615 thousand barrels of NGLs.

Shareholders receive a 10.15% dividend. The Stifel target price of $40 compares with a $36.00 consensus target, and Coterra Energy stock closed on Friday at $24.26.

EPR Properties

This real estate investment trust (REIT) invests in some of the most popular entertainment companies and pays one of the biggest monthly dividends. EPR Properties Inc. (NYSE: EPR) is a leading experiential net lease REIT, specializing in select enduring experiential properties in the real estate industry.

The company is focused on real estate venues that create value by facilitating out-of-home leisure and recreation experiences in which consumers choose to spend their discretionary time and money. It has nearly $6.7 billion in total investments across 44 states. EPR Properties adheres to rigorous underwriting and investing criteria centered on key industry-, property- and tenant-level cash flow standards, and it believes a very focused approach provides a competitive advantage and the potential for stable and attractive returns.

EPR Properties stock comes with a 7.73% distribution. The $45 Raymond James target price accompanies a Strong Buy rating. The consensus target is $43.71, and the shares closed at $42.69 on Friday.

Franchise Group

This way-off-the-radar idea could be a total return home run for investors. Franchise Group Inc. (NYSE: FRG) owns and operates franchised and franchisable businesses.

The Vitamin Shoppe segment operates as an omnichannel specialty retailer of vitamins, minerals, herbs, specialty supplements, sports nutrition and other health and wellness products under the BodyTech, True Athlete, The Vitamin Shoppe, ProBioCare, Fitfactor Weight Management System and Vthrive The Vitamin Shoppe brands.

The Pet Supplies Plus segment operates as an omnichannel retail chain and franchisor of pet supplies and services that includes premium brands, proprietary private labels and specialty products, as well as offers grooming, pet wash and other services.
The Badcock segment operates as a specialty retailer of furniture, appliances, bedding, electronics, home office equipment, accessories and seasonal items in a showroom format. It offers multiple and flexible payment solutions and credit options through its consumer financing services.

The American Freight segment operates a retail chain that provides in-store and online access to furniture, mattresses, new and out-of-box home appliances, and home accessories. It also serves as a liquidation channel for appliance vendors.
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The Buddy’s segment operates as a specialty retailer of consumer electronic, residential furniture, appliances and household accessories through rent-to-own agreements.

The Sylvan segment establishes and grows as a franchisor of supplemental education for Pre-K-12 students and families in the United States and Canada.

The dividend yield here is 8.09%. The target price at B. Riley Securities is $49, and Franchise Group stock has a consensus target of $48.00. Friday’s final trade was for $32.48 a share.

FS KKR Capital

This very well-known name on Wall Street is offering a solid entry point at current levels. FS KKR Capital Corp. (NASDAQ: FSK) is a business development company specializing in investments in debt securities. It seeks to purchase interests in loans through secondary market transactions or directly from the target companies as primary market investments.

The company also seeks to invest in first lien senior secured loans, second lien secured loans and, to a lesser extent, subordinated or mezzanine loans. In connection with the debt investments, the firm also receives equity interests, such as warrants or options, as additional consideration. It also seeks to purchase minority interests in the form of common or preferred equity in our target companies, either in conjunction with one of the debt investments or through a co-investment with a financial sponsor.

On an opportunistic basis, the fund may invest in corporate bonds and similar debt securities. The fund does not seek to invest in start-up companies, turnaround situations or companies with speculative business plans. It seeks to invest in small and middle-market companies based in the United States. The fund seeks to invest in firms with annual revenue between $10 million and $2.5 billion. It seeks to exit from securities by selling them in a privately negotiated over-the-counter market.

The company posted stellar results for the most recent quarter and announced a continuation of a huge stock buyback.

Shareholders receive a 13.09% dividend. Of 15 Wall Street firms that cover FS KKR Capital stock, only Jefferies has a Buy rating. Its $25 price target is greater than the $22.81 consensus figure, as well as the most recent close at $20.

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.
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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 Communications stock investors receive a 6.98% dividend. The $51 Raymond James target price compares with a $45.30 consensus target and Friday’s close at $53.73.

Walgreens

This huge drugstore chain operator is a safe retail play for investors looking to add health care now, and it trades at a cheap 7.5 times 2023 earnings expectations. 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.

Investors receive a 5.16% dividend. Walgreens Boots Alliance stock has a Wall Street high $54 target price at Cowen. The consensus target is $41.32, and shares were last seen trading at $37.09 apiece.

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For a variety of reasons, shares of these seven top companies are trading incredibly cheaply and offering investors timely entry points. Yet, it still may be prudent to start with buying partial positions, as the market still faces a plethora of issues, not the least of which is the ongoing inflation burden and the continuing rise in interest rates.

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