We got what we expected Friday, as the consumer price index came in again at levels not seen in over 40 years. One thing is almost a certainty now: things could get much worse before they get better. Next week, the Federal Reserve will meet and another 50-basis-point increase will be announced. While rates are still low on a historical basis, the reality is that rising rates, combined with soaring inflation, are slowing the economy big time.
Mortgage applications dropped to their lowest levels in 22 years this week. That is a sure sign clouds are forming. So what should investors do now? Seek out companies that can continue to do business as usual, that likely will not get stung by inflation, pay big dividends and are stocks rated Buy by top Wall Street firms. We found seven that make good sense now. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
British American Tobacco
This conglomerate got much bigger with the acquisition of Reynolds American in 2017. British American Tobacco PLC (NYSE: BTI) provides tobacco and nicotine products to consumers worldwide. It offers vapor products, tobacco heating products and modern oral products; combustible products; and traditional oral products, such as Swedish-style snus and American moist snuff. The company distributes its products to retail outlets.
The company’s New Categories business, which includes products outside of traditional cigarettes, saw revenues increase 50% to £942 million in the first half of 2021. The company has noted recently that non-combustible products, such as its Vuse vaping brand and Glo heated tobacco brand, now make up almost 12% of total operations.
British American Tobacco stock investors receive a 6.72% dividend. The Jefferies price target is $49.10, and the consensus target is higher at $52.50. The stock closed on Thursday at $43.06.
This may be one of the best value propositions in the sector, as it uses a variable dividend strategy. Devon Energy Corp. (NYSE: DVN) is an independent energy company that primarily engages in the exploration, development and production of oil, natural gas and natural gas liquids (NGLs) in the United States and Canada. It operates approximately 19,000 wells.
The company also offers midstream energy services, including gathering, transmission, processing, fractionation and marketing to producers of natural gas, NGLs, crude oil and condensate through its natural gas pipelines, plants and treatment facilities.
Production is weighted toward crude oil while growth opportunities are liquids focused, anchored by the Delaware Basin, SCOOP/STACK, Eagle Ford Shale, Canadian Oil Sands, and the Barnett. Devon also owns equity in the publicly traded midstream MLP EnLink.
Shareholders receive a 6.52% dividend. Truist Financial has a $100 target price on Devon Energy stock. The consensus target is $78.71, and shares closed at $77.85 on Thursday.
This beaten-down biotech is trading a very reasonable 9.05 times estimated 2022 earnings and has big-time upside potential. Gilead Sciences Inc. (NASDAQ: GILD) is a research-based biopharmaceutical company that discovers, develops and commercializes medicines in the areas of unmet medical need in the United States, Europe and elsewhere.