These highly rated value stocks to buy have dividend yields of 3.9% and up.
Since the financial crisis in 2008, growth stocks have significantly outperformed value stocks. However, elevated inflation and rising interest rates have triggered a rotation out of growth stocks and into value stocks in 2022 as investors seek the relative safety and stability of cash flows and profits. In addition, dividends provide a dependable source of income in an uncertain economic environment. The Morningstar analyst team rates all the stocks in its coverage universe on a scale of one to five stars. Here are seven value stocks to buy that have five-star Morningstar ratings and dividend yields of at least 3.9%.
Citigroup Inc. (ticker: C)
Citigroup has been one of the worst-performing U.S. big bank stocks in recent years. Shares are down 13% in 2022 through July 27 and 23% in the past five years. However, analyst Eric Compton says the stock was his top 2022 bank stock pick and it is still attractively valued following an excellent second-quarter earnings report. Compton says Citigroup can’t yet compete with the operational performance of many of its megabank peers, but it is making progress. Morningstar has a “buy” rating and $78 fair value estimate for C stock, which closed at $52.35 on July 27.
Dividend yield (trailing 12 months, or TTM): 3.9%
Best Buy Co. Inc. (BBY)
Best Buy is a leading North American consumer electronics and entertainment software retailer. Analyst Sean Dunlop says he is encouraged by Best Buy’s resilience given the backdrop of rising fuel and food costs, weakening consumer sentiment and bearish price action among consumer cyclical stocks. Dunlop says Best Buy’s Totaltech and Health investments will help the company generate mid-single-digit average annual sales growth in fiscal 2024 and 2025, and its health segment will help it reach its operating margin targets. Morningstar has a “buy” rating and $126 fair value estimate for BBY stock, which closed at $74.49 on July 27.
Dividend yield (TTM): 4.2%
VF Corp. (VFC)
VF Corp. is a leading apparel wholesaler of lifestyle brands, including The North Face, Vans and Timberland. Analyst David Swartz says the company is navigating logistical challenges, but it has a strong portfolio of brands in multiple apparel categories. Swartz says supply chain disruptions and the war in Ukraine create near-term disruptions for VF, but the company should outgrow most competitors in the long term. Swartz estimates VF’s active segment will account for 45% of its total operating income in fiscal 2023. Morningstar has a “buy” rating and $66 fair value estimate for VFC stock, which closed at $46.86 on July 27.
Dividend yield (TTM): 4.3%
KeyCorp (KEY)
KeyCorp is a U.S. regional bank that operates in 15 states in the West, Midwest and Northeast regions. KeyCorp and other bank stocks are well positioned to grow net interest margins as interest rates rise, as long as a U.S. economic downturn doesn’t negatively impact loan growth. Compton says KeyCorp’s noninterest income comes mostly from investment banking and asset management, and KeyCorp will likely generate consistently higher fee revenue in the 2020s than in the 2010s. Morningstar has a “buy” rating and $26 fair value estimate for KEY stock, which closed at $18.02 on July 27.
Dividend yield (TTM): 4.3%
Simon Property Group Inc. (SPG)
Simon Property Group is a retail real estate investment trust, or REIT, that primarily owns and operates regional malls, outlet malls, and community and lifestyle centers. Analyst Kevin Brown says same-store net operating income growth of 7.5% in the first quarter exceeded his expectations, and Simon’s occupancy cost fell to its lowest level in more than seven years. While the shopping mall model has been disrupted significantly, Brown says Class A malls will remain dominant within the brick-and-mortar retail group. Morningstar has a “buy” rating and $160 fair value estimate for SPG stock, which closed at $104.12 on July 27.
Dividend yield (TTM): 6.2%
Energy Transfer LP (ET)
Energy Transfer is a midstream U.S. oil and gas infrastructure provider. Analyst Stephen Ellis says soaring energy prices have helped Energy Transfer generate significant momentum across virtually its entire business. The company also has an alternative-energy group focused on developing renewable energy technology for the future. Energy Transfer is the only stock in this list that has generated a positive return in 2022, gaining 33% year to date. Morningstar has a “buy” rating and $17.50 fair value estimate for ET stock, which closed at $10.95 on July 27.
Dividend yield (TTM): 6.2%
ING Groep NV (ING)
ING Groep is a Netherlands-based financial services company that provides banking, insurance and asset management services. Analyst Niklas Kammer says low and negative interest rates in Europe are weighing on ING’s investor sentiment, given net interest income contributed 77% of ING’s revenue in 2020. However, Kammer says ING is far more than just a play on European interest rates. He says the company has strong deposit franchises in its core markets, giving it a significant competitive advantage. Morningstar has a “buy” rating and $15.60 fair value estimate for ING stock, which closed at $9.50 on July 27.
Dividend yield (TTM): 7.4%
7 value stocks to buy with high dividend yields:
— Citigroup Inc. (C)
— Best Buy Co. Inc. (BBY)
— VF Corp. (VFC)
— KeyCorp (KEY)
— Simon Property Group Inc. (SPG)
— Energy Transfer LP (ET)
— ING Groep NV (ING)
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7 Value Stocks to Buy With High Dividend Yields originally appeared on usnews.com
Update 07/28/22: This story was published at an earlier date and has been updated with new information.
