7 Dividend Stocks That Will Be Big Winners in 2023
With the shifting of market fortunes over the past year, we’ve seen a major rotation. Growth stocks are out. Meanwhile, investors have gravitated to value and dividend stocks. That’s an entirely logical reaction, as these sorts of stocks tend to hold up better during bear markets and recessions. However, the rush of money into these safe havens has made a lot of former value stocks less attractive.
There is good news, however. Not all value and dividend stocks have gotten bid up yet. In fact, there are still considerable opportunities out there if you know where to look.
The seven dividend stocks below all offer a yield of at least 3%, and all these companies saw their share prices decline by around 30% or more over the past year. After such declines, there is room for considerable share price appreciation when market sentiment becomes more favorable.
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Canadian Imperial Bank of Commerce
Walgreens Boots Alliance
Dividend Stocks to Buy: Intel (INTC)
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Semiconductor giant Intel (NASDAQ:INTC) has had a rough go of it lately, with shares down nearly 43% over the past 12 months. The company has lost market share in recent years to key rivals such as Advanced Micro Devices (NASDAQ:AMD). Adding to that, demand for computing chips plummeted in 2022 as the pandemic-era surge in demand for laptops and tablets abruptly ended.
Despite the litany of bad news in 2022, however, Intel shares appear to have bottomed. Shares are up more than 20% since hitting a low below $25 in mid-October despite continuing weak earnings guidance and pessimistic rumblings out of the semiconductor sector. The fact that Intel shares have rallied on bad news speaks to the fundamental value in the semiconductor giant.
After all, Intel is still the titan in computing and data center chips. It spends more than $15 billion annually on research and development, which will refresh and improve Intel’s product offerings. And Intel’s big investments in new American manufacturing facilities will give it a strong competitive position in the coming years.
Even amid the current earnings slump, shares still go for just 17.6 times forward earnings while offering a 4.8% dividend yield. Just be aware that the company is scheduled to report fourth-quarter and full-year earnings on Jan. 26. Risk-averse investors may want to wait until after the announcement to jump in.
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3M (NYSE:MMM) is one of America’s largest and most high-profile manufacturing companies. The firm, which started out as Minnesota Mining and Manufacturing more than a century ago, has become a wide-ranging enterprise. The company makes tens of thousands of products including adhesives, Post-It notes, safety gear, dental equipment and cleaning supplies.
After decades of outperformance, 3M has struggled in recent years with shares losing a third of their value over the past 12 months. The stock has been weighed down by several sets of product liability lawsuits, along with broader concerns around the economy and profit margins.
Shares fell around 6% today after the company’s fourth-quarter earnings missed estimates and management delivered a bearish forecast for 2023. In response to weaker consumer demand for its products and Covid-19-related disruptions in China, 3M said it will cut 2,500 manufacturing jobs, or around 2.6% of its workforce.
However, with companies looking to move their supply chains closer to home, this reshoring effort should play right into 3M’s strengths as more American industrial firms need adhesives, safety equipment, cleaning supplies and so on from 3M.
Historically, MMM stock has often traded around 20 times forward earnings. With its underperformance in recent years, though, shares are now going for less than 12 times forward earnings. The company, which has raised its dividend 64 years in a row, has long been a stalwart of many conservative investors’ portfolios. Shares currently yield 4.9%.
Dividend Stocks to Buy: Ford Motor (F)
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Ford Motor (NYSE:F) is one of the world’s largest automobile companies, generating more than $150 billion in revenue over the past 12 months. The company is also highly profitable, earning $9 billion in net income over the past year.
Despite Ford’s business success, shares have lost roughly half their value since their peak in early 2022. This came about as the boom in the automobile market started to lose steam after a record 2021.
It’s not all bad news, though. For one thing, the semiconductor shortage has started to clear up, which should help normalize automobile supply chains. For another thing, Ford is a leader in developing electric vehicles with an attractive lineup of makes and models set to be released over the next couple of years. Meanwhile, with the decline in F stock over the past year, shares now go for less than 7 times forward earnings.
I’m not the only one seeing considerable value in Ford shares today. Morningstar analyst David Whiston pegs the stock’s fair value at $24, which represents 88% upside from today’s price. Whiston is optimistic about Ford’s efforts to focus the business on light trucks while also investing in its EV fleet.
Canadian Imperial Bank of Commerce (CM)
Canadian Imperial Bank of Commerce (NYSE:CM), or CIBC for short, is one of Canada’s five large banks. Canadian banks have historically achieved outsized returns. This is thanks to limited competition in the market, along with a strong real estate market in Canada, which has bolstered the banking industry’s outlook.
However, the Canadian banking sector saw a significant decline in 2022. This came as the Canadian housing market finally slowed down and investors questioned the strength of Canada’s overall economy.
CM stock fell more than most, as it has the most exposure to the Canadian mortgage market of the big five Canadian banks. However, CIBC has started to diversify internationally, acquiring U.S. regional bank PrivateBancorp in 2016. Additionally, while Canadian housing prices have turned downward, most mortgages are backstopped by the Canadian government, which greatly limits liability for the banks themselves.
With shares down 31% over the past year, the stock now trades at just 8.5 times forward earnings. Meanwhile, the bank is offering a generous 5.7% dividend yield.
Dividend Stocks to Buy: Walgreens Boots Alliance (WBA)
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Walgreens Boots Alliance (NASDAQ:WBA) is one of America’s largest pharmacy chains. Traditionally, Walgreens has been an exceptional business. It has delivered strong earnings growth and 47 consecutive years of dividend increases.
However, the firm’s hot streak has slowed over the past few years. The rise of e-commerce has affected sales in the convenience retail part of the business. While online pharmacies haven’t really taken off yet, that is another potential threat. Additionally, Walgreens’ venture into the UK market failed to achieve the desired results.
Yet, even taking into account these negatives, investors have grown too pessimistic on WBA stock, which is down 32% over the past year. The company is still very profitable, and it is refocusing its efforts to provide a more complete health ecosystem for its customers.
Shares currently trade for less than 8 times forward earnings and offer a 5.4% dividend yield.
Dell Technologies (DELL)
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Dell Technologies (NYSE:DELL) is not the glamorous investment that it used to be. Twenty-five years ago, computer vendors like Dell enjoyed high valuations and seemingly promising outlooks. Nowadays, investors hate the computing hardware sector. Investors, somewhat justifiably, view it as a field riddled with excessive competition and rock-bottom profit margins.
But here’s the thing: Dell is actually doing quite well. In its most recently reported quarter, the company delivered record operating income despite a 6% year-over-year decline in revenue. It’s true that the company’s Q4 forecast fell short of Wall Street’s expectations. However, consider the fact that analysts are forecasting Dell will generate over $100 billion in revenue for the current fiscal year while the stock has a market cap of just $29 billion.
Dell shares are trading at 6.6 times forward earnings after a 27% drop in the stock over the past year. In addition to the low P/E ratio, the company began paying a dividend again in April, announcing a 33-cent payout for a forward annual yield of 3.2%.
Dividend Stocks to Buy: AvalonBay Communities (AVB)
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AvalonBay Communities (NYSE:AVB) is a real estate investment trust focused on luxury apartment buildings with 275 apartment communities containing more than 82,000 individual units.
AVB stock plunged 28% over the past year as investors fretted over a falling housing market. Rising interest rates and slumping housing prices, in theory, will lower the value of AvalonBay’s apartment buildings. In addition, AvalonBay will likely see lower rent increases in the coming years as the housing market sags. Indeed, while year-over-year single-family rental price gains of 7.5% for November were respectable, this was down significantly from a few months ago.
Regardless, the market has overreacted. Shares’ 33% drop from their 52-week high more than makes up for a moderate amount of weakness in the outlook for rent levels going forward. And, taking a longer-term perspective, favorable demographics and a lack of housing supply should support demand for luxury apartment rentals in coming years. Plus, AVB stock yields 3.7%, making it an attractive dividend play.
On the date of publication, Ian Bezek held a long position in INTC, MMM, WBA, and CM stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.
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