While the first third of 2023 has been a pleasant change from the dreadful results of 2022, only a handful of big tech stocks are responsible for most of the gains in the S&P 500 this year. Two of those stocks, Alphabet and Microsoft, posted solid results this week, and their results helped to keep the Nasdaq higher Wednesday, while both the Dow Jones industrial average and the S&P 500 closed lower.
Investors are worried, and the data shows it, especially after the Dallas Fed manufacturing index hit a nine-month low earlier this week. With the potential for yet another bank failure at First Republic Bank, and deposits fleeing commercial banks for Treasury debt and money markets, the scenario for the rest of 2023 looks somewhat grim. Given all that, now is the time to take profits and move to safer stocks that pay big dependable dividends.
We screened our 24/7 Wall St. research universe and found eight top companies that look like outstanding ideas for nervous investors. While they all are Buy rated 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.
Altria
This maker of tobacco products offers value investors a great entry point now as it has been hit as cigarette sales have slowed. Altria Group Inc. (NYSE: MO) is the parent company of Philip Morris USA (cigarettes), UST (smokeless), John Middleton (cigars), Ste. Michelle Wine Estates and Philip Morris Capital. PMUSA enjoys a 51% share of the U.S. cigarette market, led by its top cigarette brand Marlboro.
Altria also owns over 10% of Anheuser-Busch InBev, the world’s largest brewer, which some feel is worth more than $10 billion and may be a segment of the company that could be sold. When Altria posted outstanding fourth-quarter results, it also announced a shareholder-friendly $1 billion stock buyback plan.
Altria stock investors receive an 8.00% dividend. Stifel’s $52 target price compares with a $49.62 consensus target and Wednesday’s $46.69 closing share price.
Energy Transfer
The top master limited partnership is a safe way for investors looking for energy exposure and income. Energy Transfer L.P. (NYSE: ET) owns and operates one of the largest and most diversified portfolios of energy assets in the United States, with a strategic footprint in all the major domestic production basins.
Energy Transfer is a publicly traded limited partnership with core operations that include complimentary natural gas midstream, intrastate and interstate transportation and storage assets; crude oil, natural gas liquid (NGL) and refined product transportation and terminaling assets; NGL fractionation; and various acquisition and marketing assets.
After the purchase of Enable Partners in 2021, Energy Transfer owns and operates more than 114,000 miles of pipelines and related assets in all the major U.S. producing regions and markets across 41 states, further solidifying its leadership position in the midstream sector.
Through its ownership of Energy Transfer Operating (formerly known as Energy Transfer Partners), the company also owns Lake Charles LNG, as well as the general partner interests, the incentive distribution rights and 28.5 million common units of Sunoco and the general partner interests, and 39.7 million common units of USA Compression Partners.
Investors receive a 9.74% distribution. Morgan Stanley has set its price target on Energy Transfer stock at $17. The consensus target is $16.87, and shares closed on Wednesday at $12.48.
IBM
This blue chip legacy tech giant is still offering investors a solid entry point and it posted solid first-quarter results. 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.
As mentioned, the company posted solid first-quarter numbers. The cloud proved to be big in the earnings reports, as did Red Hat, the software giant the firm bought in 2019. 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. Analysts have cited the company’s potential in the public cloud as a reason for their positive outlook going forward.
Shareholders receive a 5.27% dividend. Stifel has a $140 price objective, while IBM stock has a $142.07 consensus target. Wednesday’s closing print was $125.85.
Kohl’s
This top retail stock still offers an excellent entry point and a big dividend. Kohl’s Corp. (NYSE: KSS) operates department stores in the United States. The company offers private label, exclusive and national brand apparel, footwear, accessories, beauty and home products to children, men and women customers. The company also sells its products online.
With the economy struggling, consumers increasingly are turning to discount retailers for clothes, food and many additional items, and Kohls has a legendary following of value-seeking customers that shop at the retailer through good and bad times. When the use of privately branded credit cards rises, so does the bottom line at the company.
Some top analysts feel that the bankruptcy at Bed Bath & Beyond will be a positive for the company as bargain-hunting shoppers look to retailers like Kohl’s. Note though that there is the potential for the company to lower its dividend.
Kohl’s stock comes with an 8.70% dividend. The price target at Guggenheim is $38, well above the $27.17 consensus target. The stock closed on Wednesday at $21.53.
LyondellBasell
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.
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.
The dividend yield here is 5.23%. The $100 Deutsche Bank price target compares to the consensus target of $98.36. LyondellBasell Industries stock closed at $90.60 on Wednesday.
Prudential Financial
Shares of this top financial services and insurance company are cheap at current trading levels. Prudential Financial Inc. (NYSE: PRU) provides insurance, investment management and other financial products and services in the United States and internationally.
The company offers investment management services and solutions related to public fixed income, public equity, real estate debt and equity, private credit and other alternatives, and multi-asset class strategies to institutional and retail clients, as well as its general account. It also provides a range of retirement investment, and income products and services to retirement plan sponsors in the public, private, and not-for-profit sectors; and group life, long-term and short-term group disability, and group corporate-, bank- and trust-owned life insurance in the United States, primarily to institutional clients for use in connection with employee and membership benefits plans. It also sells accidental death and dismemberment, and other supplemental health solutions, and it provides plan administration services in connection with its insurance coverages.
In addition, Prudential Financial develops and distributes individual variable and fixed annuity products, principally to the mass affluent and affluent markets, and individual variable, term and universal life insurance products to the mass middle, mass affluent and affluent markets in the United States. Further, it provides third-party life, health, Medicare, property and casualty, and term life products to retail shoppers through its digital and independent agent channels. The company offers its products and services to individual and institutional customers through its proprietary and third-party distribution networks.
Shareholders receive a 5.82% dividend. Recently, J.P. Morgan upgraded Prudential Financial stock, and its $114 price target is higher than the $91.86 consensus target. The shares closed on Wednesday at $83.70.
Starwood Property Trust
This high-yielding real estate investment trust 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.
Starwood’s 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.
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.
The 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.
Investors receive an 11.37% distribution. Starwood Property Trust stock has a $19.50 price target at Keefe Bruyette. The consensus target is higher at $23.21, but Wednesday’s close was at $17.07.
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.
The Verizon Consumer Group provides wireless services across the wireless networks in the United States under the Verizon and TracFone brands and through wholesale and other arrangements, and it offers fixed wireless access (FWA) broadband through its wireless networks. It also 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 Verizon Business Group 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.
The dividend yield is 7.00%. Oppenheimer has a $46 target price. The consensus target is $44.27. Verizon Communications stock ended Wednesday at $36.92 a share.
These eight top companies all pay dependable dividends and should continue to fare well despite what is sure to be at least one more 25-basis-point rate increase in May, and possibly even one in July. Despite being able to avoid interest rate risk, the problem now is market risk, as we could be headed much lower. So, it makes sense to scale buy these ideas over the next month or so.
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