Heading into the final stretch of 2023, the stock market has delivered robust returns. Growth stocks have rebounded with new innovations in fields such as artificial intelligence and semiconductors leading to investor excitement. However, major macroeconomic headwinds remain, such as higher interest rates, slowing consumer spending and the potential for a major slowdown in key sectors such as housing.
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This is making many investors want to find compelling value stocks to buy. The good news is that there are plenty of compelling companies out there today that can hold up in a slowing economy. These 10 companies have strong earnings and, in many cases, pay large dividends as well. All 10 of these leading value stocks are on sale for 18 times forward earnings or less. As such, these firms should be safe havens even if the current market rally reverses itself.
Here are 10 of the best value stocks to buy now:
— Exxon Mobil Corp. (ticker: XOM)
— Pfizer Inc. (PFE)
— Verizon Communications Inc. (VZ)
— Qualcomm Inc. (QCOM)
— RTX Corp. (RTX)
— Discover Financial Services (DFS)
— Enbridge Inc. (ENB)
— Global Payments Inc. (GPN)
— Black Hills Corp. (BKH)
— Molson Coors Beverage Co. (TAP)
Exxon Mobil Corp. (XOM)
Exxon Mobil is a massive integrated oil and gas giant. Besides energy production, it also owns chemicals and refining assets which have paid off in spades recently thanks to a more favorable pricing environment for commodity goods over the past three years. Exxon has gone contrary to much of the industry; instead of pivoting to renewables, Exxon invested in additional oil and gas projects such as its massive new offshore oil field in Guyana.
The company furthered its strategic direction with the recently announced $4.9 billion acquisition of Denbury Inc. (DEN). This will make Exxon the largest player in North American carbon storage and transmission. There appears to be significant market demand for carbon sequestration services, and Exxon should be able to get in on the ground floor as this niche starts to take off. And with the price of oil surging once again, this adds an additional tailwind for Exxon shares to close out the year on a positive note.
Pfizer Inc. (PFE)
Pharmaceutical giant Pfizer was trading for around $40 per share prior to the onset of COVID-19. Today, the stock is down below that pre-pandemic level. This is a surprising turn of events, given that Pfizer saw an absolute boom in business related to its COVID-19 products. Investors were understandably selling off pandemic-related stocks as those revenue streams appeared to be drying up. However, with another variant now causing concern, vaccine revenues may linger longer than expected.
In any case, Pfizer’s sell-off has turned into a severe overreaction. In 2019, Pfizer generated $41 billion in revenue. Analysts project the firm to earn around $62 billion in sales in both 2023 and 2024, respectively. That’s a drop from its $100 billion top-line figure in 2022, but it’s still a far larger number than where Pfizer was a few years ago. The company invested its vaccine profits responsibly and is now a more profitable business than it was a few years ago. Despite that, the market is giving PFE stock no credit. Shares now go for just 10 times forward earnings and offer a 4.8% dividend yield.
Verizon Communications Inc. (VZ)
Telecom stocks have long been value investor favorites due to their stable profits and high dividends. That stability has come into question recently, however. It’s no secret that the industry is facing headwinds. Rising competition from the cable industry has limited pricing power. Network deployments of 5G have been expensive and have generated only modest returns on invested capital to date. Rival AT&T Inc. (T) also slashed its dividend in 2022 following an ill-timed merger and acquisition spree. However, arguably this negativity is hitting a peak. Verizon, for its part, continues to enjoy steady profits and cash flows. And the industry retains its recession-proof footing thanks to the ubiquity of smartphones in modern-day living. With a more than 35% decline in VZ stock over the past five years, shares now go for just seven times earnings and offer a 7.8% dividend yield.
Qualcomm Inc. (QCOM)
Speaking of 5G, its pitfalls have tripped up leading mobile communications-focused semiconductor company Qualcomm as well. Qualcomm earns a large portion of its revenues from designing and licensing intellectual property relating to communications technologies such as 4G and 5G. The slowdown in 5G deployments has had a negative impact on Qualcomm. Furthermore, Qualcomm designs its own chip ecosystems, such as Snapdragon, for tablets and phones; the decline in consumer electronics demand over the past year has hit Qualcomm’s sales as well. However, investors shouldn’t lose sight of the bigger picture. Mobile data demand will only grow over time, ensuring that 5G investments will continue. Additionally, Qualcomm has made great strides in mobile communications chips, including AI-enabled offerings that have proven competitive with Nvidia Inc.’s (NVDA) chips for mobile AI applications. With the recent dip, QCOM stock now goes for less than 13 times forward earnings and pays a 2.8% dividend yield.
RTX Corp. (RTX)
RTX, the company formerly known as Raytheon, is a leading defense and industrial conglomerate. It has other subsidiaries including Collins Aerospace and Pratt & Whitney as well. Nowadays, RTX is involved in aircraft engines, avionics, guided missiles, drones, satellites and even cybersecurity software. All this to say that RTX offers a wide range of the tools and solutions that the military will need to operate effectively in many spheres around the globe and in space. As the war in Ukraine and rising tensions with China have shown, defense remains a top priority, and there is a structural backdrop that will likely support higher defense budgets going forward. RTX has recently suffered a jet engine recall, which is likely to prove costly. But this has knocked roughly 20% off the stock price, making for a bargain entry point for investors willing to look past the current headlines.
[SEE: 9 Best Cheap Stocks to Buy Under $5.]
Discover Financial Services (DFS)
Discover is the operator of its namesake credit card network. Unlike several of its rivals, Discover isn’t just a payments processing network; it also operates as a lender. To that end, Discover runs a large bank, with about $75 billion in direct-to-consumer deposits, and uses that to fund its credit card loans. Given how high credit card interest rates are, Discover’s lending business has historically been exceptionally profitable. And loan losses have been limited; even in the 2008 financial crisis, Discover remained profitable.
Despite that, investors assume the worst since Discover is perceived to be a high-risk personal lending company. Discover has been able to take advantage of its low valuation, however, by buying back mountains of stock. In fact, its total share count has plunged from more than 500 million in 2010 to just 253 million today. Discover stock is currently sinking amid rising loan delinquency rates and the CEO’s exit from the firm. Arguably, however, this is all baked into the share price, with DFS stock down to just seven times forward earnings.
Enbridge Inc. (ENB)
Enbridge is one of Canada’s largest midstream energy companies. It primarily runs oil and natural gas pipelines along with a variety of other ancillary energy assets. Historically, the large Canadian midstream energy companies have dramatically outperformed their American peers. However, this has reversed over the past 18 months, offering a buying opportunity for the Canadian players. That became especially true in September for ENB stock. Enbridge shares moved lower following the announcement of its plans to buy a large natural gas utility from Dominion Energy Inc. (D). There are natural synergies to the deal between Enbridge’s existing gas pipelines and Canadian utility business and the new assets it is acquiring in the U.S. Furthermore, the deal will be accretive to earnings. As such, investors shouldn’t be dumping Enbridge on the news. Shares now yield 7.4%.
Global Payments Inc. (GPN)
Global Payments is one of America’s largest payments and merchant processing companies. In essence, Global Payments provides the infrastructure to make commerce possible. It provides payment terminals to merchants and related functions such as accounting and tax services, fraud detection, point-of-sale software, chargeback management and so on.
Like most payments stocks, Global Payments has slumped over the past two years. This payments industry crash came about as the shop-at-home tailwind for e-commerce has rapidly faded. Meanwhile, rising competition within the industry has pressured profit margins. Global Payments is navigating the storm well, however. Analysts still see its revenues rising 7% and earnings jumping more than 10% this year despite the issues that many of its peers are facing. The firm has started to rally following its upbeat earnings results, but shares still go for less than 11 times forward earnings.
Black Hills Corp. (BKH)
Black Hills is an electric and natural gas utility that primarily serves the Great Plains and Rocky Mountains regions. Its natural gas division serves approximately 1.1 million customers and the electricity division covers 220,000 customers. The appeal of utility stocks is that they function as fixed-income alternatives. As interest rates go up, however, people demand much higher yields from income stocks such as utilities to compensate for the extra risk that equities entail. As a result, Black Hills shares have sunk almost 30% over the past year and now trade at levels seen way back in 2014. The firm’s dividend yield of 4.5% is the highest that it has offered in almost a decade.
While the stock price is down, the company’s earnings and dividend continue to rise. In fact, Black Hills is one of America’s few “Dividend Kings,” which are firms that have raised their dividends for at least 50 consecutive years. Income investors can get a knock-down bargain in this blue-chip stock today.
Molson Coors Beverage Co. (TAP)
Molson Coors Beverage is the second-largest brewing company in North America. The stock had been a chronic underperformer, losing half its value between 2016 and 2020. However, Molson Coors is now bouncing back. That’s in large part because of the marketing problems over at rival Anheuser-Busch InBev SA/NV (BUD). Its Bud Light brand has seen a collapse in sales this year, and industry experts have pointed to an almost one-to-one swing from Bud Light consumption over to Molson Coors’ rival light beer products. In the longer-term, macrobrews remain a category in decline. Molson Coors will need to lean into its craft products such as Blue Moon along with premium brands to get a permanent upturn in sales. For now, though, Bud Light’s problems are pure gain for Molson Coors, and TAP shares now go for less than 13 times forward earnings.
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10 Best Value Stocks to Buy Now originally appeared on usnews.com
Update 09/15/23: This story was previously published at an earlier date and has been updated with new information.
