For years, analysts and portfolio managers have anticipated the return of value stocks as the market has moved higher. And for years they have continued to underperform growth stocks. However, that appears to be changing in 2023, as almost every metric from valuations to earnings for the growth arena has started to roll over in a big way.
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Wall Street is perpetually bullish, because the wheels have to keep grinding so the big banks and brokerage firms make money. Top strategists at many of the big firms we cover are stressing that value remains the best place to be until the final bottom for the bear market is put in, and this could happen later this year as the financial contagion brings in more victims and commercial real estate rolls over.

Value stocks are typically defined as shares of a company with solid fundamentals that are priced below those of its peers, based on analysis of price-to-earnings ratio, yield and other factors. We screened our 24/7 Wall St. value leaderboard for dividend-paying value stocks that will hold up well for the rest of 2023 and found seven top ideas for worried investors. While all are rated Buy across Wall Street, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Citigroup

This top bank stock has rallied nicely off the lows, and Warren Buffett bought $2.5 billion worth of the shares last summer. Citigroup Inc. (NYSE: C) is a leading global diversified financial service company that provides consumers, corporations and governments a broad range of financial products and services.

The company offers services such as consumer banking and credit, corporate and investment banking, securities brokerage, transaction services and wealth management. And it operates and does business in more than 160 countries and jurisdictions in North America, Latin America, Asia and elsewhere.

Trading at a still very cheap 7.3 times estimated 2023 earnings, Citigroup stock looks very reasonable in what remains a volatile stock market and in a sector that has dramatically lagged.

Investors receive a 4.83% dividend. Oppenheimer’s $75 price target on Citigroup stock is a Wall Street high. The consensus target is $57.75, and shares closed on Friday at $43.11.

Equity Residential

This apartment-focused real estate investment trust (REIT) owns properties in high-growth U.S. cities. Equity Residential Inc. (NYSE: EQR) is an S&P 500 company focused on the acquisition, development and management of high-quality apartment properties in top U.S. growth markets in and around dynamic cities that attract high-quality long-term renters.
Equity Residential owns or has investments in 305 properties, consisting of 78,568 apartment units located in Boston, New York, the District of Columbia, Seattle, San Francisco, southern California and Denver.

Investors receive a 4.78% yield. Truist Securities recently upgraded the shares and has a $70 price target. Equity Residential stock has a consensus target of $69.20. The stock closed on Friday at $55.19.
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Honda

This popular car maker remains one of the top value ideas, and it pays an outstanding dividend as well. Honda Motor Co. Ltd. (NYSE: HMC) develops, manufactures and distributes motorcycles, automobiles, power products and other products in Japan, North America, Europe and elsewhere. It operates through four segments.

The Motorcycle Business segment produces motorcycles, including sports, business and commuter models, as well as various off-road vehicles, such as all-terrain vehicles and side-by-sides.

The Automobile Business segment offers passenger cars, light trucks and mini vehicles.

The Financial Services Business segment provides various financial services, including retail lending and leasing services to customers, as well as wholesale financing services to dealers.

The Life Creation and Other Businesses segment manufactures and sells power products, such as general purpose engines, generators, water pumps, lawnmowers, riding mowers, robotic mowers, brush cutters, tillers, snow blowers, outboard marine engines, walking assist devices, and portable battery inverter power sources. This segment also offers HondaJet aircraft.

The company also sells spare parts and provides after-sale services through retail dealers directly, as well as through independent distributors and licensees.

Honda Motor stock comes with a 5.63% dividend. The BofA Securities target price is $29.83, and the consensus target is $30.62. The stock closed at $25.70 on Friday.

LyondellBasell Industries

This top chemical company with a sterling balance sheet is a solid buy for conservative investors. LyondellBasell Industries N.V. (NYSE: LYB) manufactures chemicals and polymers, refines crude oil, produces gasoline blending components and develops and licenses technologies for production of polymers.
Over half of earnings are generated in the company’s Olefins and Polyolefins Americas segment, where costs are linked to the price of cheap natural gas in the United States, while selling prices are correlated with the price of oil. The company has pursued a strategy of low-cost, high-return on invested capital debottlenecks coupled with cash returns to shareholders.
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Note that debottlenecking is the process of identifying specific areas or equipment in oil and gas facilities that limit the flow of product (known as bottlenecks) and optimizing them so that overall capacity in the plant can be increased.

Investors receive a 5.55% dividend. The $100 Deutsche Bank price target compares to a consensus target of $97.40. LyondellBasell Industries stock closed on Friday at $86.57.

Pfizer

This top pharmaceutical stock was one of the biggest winners in the COVID-19 vaccine sweepstakes. Pfizer Inc. (NYSE: PFE) discovers, develops, manufactures, markets, distributes and sells biopharmaceutical products worldwide.

The company 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

The dividend yield here is 4.08%. Pfizer stock has a $62 price objective at Goldman Sachs. The $50.97 consensus target also compares with Friday’s $40.39 closing share price.

Starwood Property Trust

This high-yielding REIT is run by real estate legend Barry Sternlicht and offers big-time total return potential. Starwood Property Trust Inc. (NYSE: STWD) operates in the United States, Europe and Australia through the following segments.
The Commercial and Residential Lending segment originates, acquires, finances and manages commercial first mortgages, non-agency residential mortgages, subordinated mortgages, mezzanine loans, preferred equity, commercial mortgage-backed securities (CMBS) and residential mortgage-backed securities, as well as other real estate and real estate-related debt investments, including distressed or nonperforming loans.
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The Infrastructure lending segment originates, acquires, finances and manages infrastructure debt investments. The Property segment engages primarily in acquiring and managing equity interests in stabilized commercial real estate properties, such as multifamily properties and commercial properties subject to net leases, that are held for investment.

Starwood’s Investing and Servicing segment manages and works out problem assets; acquires and manages unrated, investment grade and non-investment grade rated CMBS comprising subordinated interests of securitization and resecuritization transactions; originates conduit loans for the primary purpose of selling these loans into securitization transactions; and acquires commercial real estate assets that include properties acquired from CMBS trusts.

Starwood Property Trust stock investors receive an 11.62% distribution. J.P. Morgan has set its price target at $23, shy of the $23.57 consensus figure. Friday’s final trade was for $16.85 a share.

Verizon Communications

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. Verizon’s 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.

Shareholders receive a 6.98% dividend. Oppenheimer’s $46 target price is higher than the $44.43 consensus target, and Verizon Communications stock ended last week at $37.66.

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While none of these stocks will likely turn up on Reddit’s WallStreetBets, they are very well suited for what could be a very ugly rest of the year. These companies should hold their ground much better in an inflationary and recessionary stretch like the one we are in now and likely will remain in for some time to come.

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