Fourth-quarter earnings reporting is all but over, and many across Wall Street are watching the quick move higher in interest rates with a high level of anxiety. The two-year Treasury note is trading at a 4.89% yield, the highest since 2006, and with the 10-year note at a 4.07% yield, the wide inversion suggests a recession could emerge soon. With inflation still running hot, it is a good bet at least three more interest rate hikes are on the way, and they may end up being bigger than expected.

It makes sense now, with the market still positive for the year after a large bear market rally, to move from the momentum and meme stocks to more conservative large-cap stocks with dividends. We screened the Dow Jones industrial average looking for the highest-yielding companies in sectors that look to benefit from solid demand and those that can do well even if a severe recession is on tap for 2023.

We only selected stocks that are rated Buy at major Wall Street firms, as one of the highest-yielding companies did 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.

The following stocks are listed in order of the highest yield.

Verizon

This top telecommunications stock offers tremendous value at current levels. Verizon Communications Inc. (NYSE: VZ) provides communications, technology, information and entertainment products and services to consumers, businesses and governmental entities worldwide.

Its Consumer segment provides wireless services across the wireless networks in the United States under the Verizon and TracFone brands and through wholesale and other arrangements. It offers fixed wireless access (FWA) broadband through its wireless networks, and it offers wireline services in the Mid-Atlantic and northeastern United States, as well as the District of Columbia, through its fiber-optic network, Verizon Fios product portfolio and a copper-based network.

The Business segment provides wireless and wireline communications services and products, including data, video, conferencing, corporate networking, security and managed network, local and long-distance voice, network access and various IoT services and products, as well as FWA broadband through its wireless networks.

Investors receive a 6.81% dividend. Cowen has a $55 target price on Verizon Communications stock. The consensus target is $44.84, and the stock ended Thursday trading at $38.41 a share.

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.

Shareholders receive a 5.43% dividend. Loop Capital recently started coverage of Walgreens Boots Alliance stock. Its $45 target price compares with a consensus target of $41.58 and Thursday’s $35.38 closing share price.

IBM

This blue chip giant still offers investors an incredibly solid entry point and a huge dividend. International Business Machines Corp. (NYSE: IBM) is a leading provider of enterprise solutions, offering a broad portfolio of IT hardware, business and IT services and a full suite of software solutions. The company integrates its hardware products with its software and services offerings in order to provide high-value solutions.

IBM operates in five major segments: Cognitive Solutions, Global Business Services, Technology Services & Cloud Platforms, Systems, and Global Financing. The analysts have cited the company’s potential in the public cloud as a reason for their positive outlook going forward.

The company posted a strong fourth quarter, with the cloud and Red Hat (the software giant the firm bought in 2019) proving to be big. Red Hat’s open hybrid cloud technologies are now paired with the unmatched scale and depth of IBM’s innovation and industry expertise and sales leadership in more than 175 countries.

IBM stock comes with a 5.10% dividend. The Stifel price objective is $158, while the consensus target is $146.76 and Thursday’s closing print was $128.93.

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.

The dividend yield is 4.90%. Credit Suisse team has set its price objective at $68. Dow stock has a consensus target of $58.41, about the same as Thursday’s close at $58.44.

Chevron

This integrated giant is a safer way for investors looking to get positioned in the energy sector, and its shares have backed up nicely. Chevron Corp. (NYSE: CVX) engages in integrated energy and chemicals operations worldwide.

The Upstream segment is involved in the exploration, development, production and transportation of crude oil and natural gas; processing, liquefaction, transportation and regasification associated with liquefied natural gas (LNG); transportation of crude oil through pipelines; and transportation, storage and marketing of natural gas, as well as operating a gas-to-liquids plant.

The Downstream segment engages in refining crude oil into petroleum products; marketing crude oil, refined products and lubricants; manufacturing and marketing of renewable fuels; transporting crude oil and refined products by pipeline, marine vessel, motor equipment and rail car; and manufacturing and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives. It is also involved in cash management and debt financing activities, insurance operations, real estate activities and technology businesses.

Chevron posted strong fourth-quarter results, and it remains one of the best ways to play energy safely.

The company pays a 3.76% dividend. The $212 Raymond James is higher than the $193.07 consensus target, and Chevron stock closed on Thursday at $162.56.

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These five top Dow stocks are still offering good entry points and come with lofty and dependable dividends. While it is possible we have more market downside, these companies have survived market and economic downturns in the past and likely will this time as well. Given the recent volatility, it may make sense for investors to scale-buy shares over a 30- to 60-day timeframe, just in case a big sell-off should come our way.

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