The stock market has entered a slump. The Federal Reserve continues its campaign to limit inflation. In doing so, interest rates have soared which is likely to hurt the housing market and consumer spending. Given the uncertainty, investors have been trimming positions in vulnerable stocks.
The sell-off, however, is creating an opportunity. Particularly for these three cheap Dow Jones stocks to buy, the current economic headwinds are setting up an excellent buy-the-dip situation.
Johnson & Johnson (JNJ)
Johnson & Johnson (NYSE:JNJ) is one of the world’s largest pharmaceutical and medical device companies. Earlier this year, it spun off its consumer wellness division as Kenvue (NYSE:KVUE), which gives investors in Johnson & Johnson more exposure to the firm’s faster-growing pharma and medical device divisions.
JNJ stock has slipped to 52-week lows in recent weeks, and the firm’s stock price return is only marginally positive over the past five years. That comes even as the company has continued to grow the business and earnings adjusted for the Kenvue spin-off.
And J&J is known for giving its investors an annual dividend hike as well. With the recent share price decline, JNJ stock now yields more than 3% and is selling for just 15 times forward earnings. That’s a great entry point for one of the best sleep well at night healthcare stocks out there.
Coca-Cola (KO)
Famed investor Warren Buffett has made a fortune with his firm’s long-running investment in Coca-Cola (NYSE:KO). Buffett prizes companies with strong brands that can delight customers. And investors can make money following in Buffett’s footsteps.
KO stock dropped nearly 20% in recent months due to worries about higher interest rates. The GLP-1 weight loss drugs phenomenon further damaged sentiment across the food and beverage space.
The selloff has caused Coca-Cola shares — which usually trade at a high P/E multiple — to slide to just 20 times forward earnings. That plus the company’s reliable and generous dividend make this a strong blue chip Dow Jones stock to buy today.
Verizon (VZ)
Leading telecom company Verizon (NYSE:VZ) has been under fire over the past 18 months. Shares collapsed from $60 to the low $30s amid rising competition, challenges from higher interest rates, and a slow payback on the firm’s heavy 5G investments. Worries about legal liabilities related to lead in telephone cables further dragged down sentiment.
However, it appears that Verizon has now turned the corner. Shares surged following a Q3 report that was much better than expected. Not only did the company top expectations, it also increased its free cash flow outlook and signaled that the newfound business momentum is likely to continue into 2024.
While shares did jump nearly 10% on the strong earnings report, they are still at a massive discount. VZ stock goes for just 7 times forward earnings and offers an 8% dividend yield. With the worst of the industry slump now behind it, Verizon is set for a substantial comeback. This makes it one of the best cheap Dow Jones stocks to buy today.
On the date of publication, Ian Bezek held a long position in VZ and JNJ stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
