Looking for dividend stocks yielding 3% or more might seem pretty specific. Remember, though, the logic behind investing in underrated stocks is straightforward: Buy low and sell high in order to see a healthy return on your investment.
Making smart investments is sometimes as easy as that. Add in dividend income and the potential returns get even higher.
Investors have to discern what a healthy investment looks like. The higher a given dividend’s yield, the riskier the underlying asset. Generally speaking, yields between 2-5% are healthy.
Most of these firms are household names, and all are dividend stocks yielding 3% or more.
AbbVie (ABBV)
AbbVie (NYSE:ABBV) is a pharmaceutical stock that continues to face downward pressure that is undeserved.
That downward pressure is primarily a result of declining revenues from Humira, its leading drug.
The evidence suggests that concerns were overblown and that AbbVie is adeptly filling the void. Yet most investors remain on the fence. Their hesitation is your opportunity.
Humira is the anchor within AbbVie’s immunology portfolio and has been a blockbuster arthritis treatment for a long time. As it comes off patent in the U.S. and Europe sales are declining.
Other products, Skyrizi and Rinvoq, are quickly taking up the slack in AbbVie’s immunology portfolio. Each drug’s sales increased by more than 50% in the most recent quarter.
It’s patently clear that AbbVie’s sales reps are doing their jobs just fine. As a result, the company increased earnings guidance upward for the rest of the year. There’s still plenty of upside remaining besides the fact that ABBV shares yield 3.9%.
TotalEnergies (TTE)
TotalEnergies (NYSE:TTE) is an oil stock that doesn’t get much attention stateside. The French firm is a considerable force in the energy industry. It employs more than 100,000 workers and reported more than a quarter of a trillion dollars in sales in 2022.
It’s also underrated currently. TTE shares have been trending upward since early July. Shares continued to trend upward through late July even as TotalEnergies reported declines of 28% in earnings in its Q2 release.
That said, the company did deliver $18 billion in cash flows in H1 and $8.5 billion in Q2 alone.
There’s certainly no shortage of money at the firm. It’s just that 2022 was such a bonanza that it’s proving difficult to match those results in 2023.
TotalEnergies continues to move forward with a sensible mix of energy development. The company is developing a mix of hydrogen and exploration in high-potential Suriname that have investors excited.
Unilever (UL)
Unilever (NYSE:UL) is one of the most recognizable consumer packaged goods stocks globally.
It’s also a European firm and thus, receives a little bit less attention than some of its U.S. counterparts. Yet, CPG firms have been doing well on both sides of the pond.
They’ve been able to pass higher prices along to consumers who willingly pay. The result is booming business for Unilever.
Despite that fact, UL shares offer substantial upside. There’s more than 10% upside baked into target prices at the moment.
That alone is a strong return. Add in a dividend yielding 3.6% and the math becomes that much more compelling.
Unilever’s first half of 2023 has been impressive. Sales increased by 9.1% as the firm increased prices by 9.4% during the period. Again, consumers remain very willing to pay despite the rise in price. Inflation has not hurt Unilever. First half ‘23 net profits increased by more than 20%. It looks like a stable investment with a lot of upside overall.
Chevron (CVX)
Chevron (NYSE:CVX) stock is worth buying currently.
Gas prices are showing signs of rising, the company is cash-rich, and shares are near the low target price on Wall Street. All of those factors combine to make Chevron a fairly straightforward choice at the moment.
Gas prices have risen over the last week. That’s a positive sign for Chevron given that gas prices soften following Labor Day. The summer travel season is over, kids are back in school, and demand naturally falls.
The figures suggest prices are likely to continue to rise. Gasoline demand actually increased during the week following Labor Day while stock simultaneously fell. Oil prices are rising as well. That combination of factors makes it more and more likely that you and I will continue to see higher prices at the pump.
Hedge that with an investment in Chevron. The firm is already cash-rich and added to that stockpile even as 2023 earnings fell relative to those in 2022.
Pfizer (PFE)
Pfizer (NYSE:PFE) is one of the most undervalued healthcare stocks and stocks. The pharmaceutical giant is oversold for an obvious reason: The Covid-19 hangover is real and the market has discounted PFE shares as a consequence.
That’s an opportunity because the market can and does exhibit irrationality that leads to an overselling of strong forms. In this case, Pfizer is that firm.
Investors are acting as if Pfizer’s declining sales are a surprise. They shouldn’t be. Pfizer’s sales eclipsed $100 billion in 2022 precisely because it won the race to vaccine commercialization.
The company reported approximately $40 billion in sales for each of the 3 years between 2018 to 2020. Then it went crazy in 2021 and 2022. It’ll probably fall to $65 billion by the end of 2023. Guess what? It has grown by more than 50% since 2020.
The company is reinvesting its Covid windfall into a massive new pipeline of drugs and product launches in the next year. Buy at today’s low prices, take the strong dividend income, and be patient in the interim. It’s almost certain to pay off handsomely.
Citigroup (C)
While it’s certainly not a good time to be an employee at Citigroup (NYSE:C), it is a good time to invest. The stock is rising following a reorganization announcement intended to streamline operational reporting, remove layers of management, and increase profits.
The parent company’s five business lines will each report to CEO Jane Fraser directly. The company is also focusing on local operations while culling some operations internationally.
The news has been well-received by Wall Street. Further, it’s a positive for investors given that C shares have fallen so far in 2023. They’re set to rebound because of the news and include a dividend yielding nearly 5% as an incentive.
Citigroup is one of the largest banks in the U.S. and is thus relatively shielded from the chaos of early 2023. The company is addressing its issues, culling excess, and should emerge stronger.
Target (TGT)
Target (NYSE:TGT) hasn’t been a strong performer in 2023. The stock is very cheap because of that.
Investing because a company has fallen is often a dangerous proposition. After all, there’s a chance that such companies continue to fall, but hear me out here. I’ll outline the decline and then pivot into the reason that investors should be bullish, anyway.
Target’s sales were down in both H1 and Q2. The decline accelerated in Q2 as sales fell by almost 5% year-over-year. No matter how you look at it, declining sales are a negative.
However, there was some good in the earnings report. Management has not let slumping sales negatively affect earnings. In fact, earnings increased dramatically.
While that’s a reason for bullishness, it’s not the reason I want to highlight as a catalyst for investing in Target. Instead, it’s the defensive nature of Target in general. Investors are growing increasingly cautious.
Tech stocks are wavering and recession fears remain high. Investors are likely to pivot into defensive positions and that’s exactly what Target is and one of the primary reasons it’s set to rebound.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
