High-yield, low-beta value plays for buy-and-hold investors

Key Points

• The risk of recession remains, and volatility rises making low-beta, high-yield stocks attractive. 
• Low-beta can mitigate downside risk and lead to market-beating gains when markets rebound. 
• Marketbeat.com stock screening tools can help you find investments like these. 

With risk omnipresent in the market and more reason than 1 to fear a recession, value, yield, and beta are more critical for successful investing than ever. If nothing else, volatility should be expected until early Q2 2024, and those stocks trading at elevated valuations stand to lose the most. With this in mind, investors may want to build a larger-than-usual position in safe-haven, dividend-paying stocks that are attractively priced. 

A stock's valuation is its price relative to its cash flow, trading history, peers and the broad market. Stocks trading at a discount can provide safety for investors as they may already price in upcoming market weakness. That can help preserve capital while dividends are collected and boost returns when the market is ready to rebound. 

A search using Marketbeat.com’s stock screening tool will quickly turn up a handful of undervalued names for investors; the only question is which is suitable for the portfolio. Add in a higher-than-average yield and low beta, and you can develop solid investment possibilities that any buy-and-hold investor would appreciate, which we’re looking at today. Undervalued, high-yielding buy-and-hold stocks with high yields are trading at significant support levels. All yield at least 3%, trade below 10X earnings, and come with a beta below 0.6. 

B&G Foods pays 9% yield 

B&G Foods NYSE: BGS is a packaged food company with brands such as Crisco, Emeril’s, Ortega, and Green Giant in its portfolio. The company stock is trading at a 12-year low 1 year after a dividend cut and appears overextended. The sell-off has the valuation running near 8.5X earnings with a 9% yield even after the distribution cut. This is a deep value relative to consumer staples companies, a value relative to other packaged food names, and it trades with a beta of 0.65. 

There is a risk that the stock will continue to fall in the near term, but the dividend appears safe. The company has made some moves to bolster the balance sheet and reposition debt, including selling assets. This should help get it back into position for growth, which should resume by the 1st quarter of F2025. 

Verizon shifts gears into rebound mode 

Verizon NYSE: VZ has presented a deep-value opportunity for high-yield investors for the last year and may have finally turned the corner. The Q3 earnings release includes margin improvement and increased FCF guidance, which is excellent news for the dividend. The stock pays about 7.6%, with shares trading near 7.5X earnings, and it is a growing distribution. 

Verizon is on track to reach Dividend Aristocrat status before the end of the decade, which is a catalyst for share prices of its own. Until then, shares of VZ are rebounding from the long-term low and may gain 15% to 25% by early 2024. The post-release analysts' activity has the consensus up to Moderate Buy from Hold, and the price target is also improving.  

Bristol Meyers Squibb gets price cut 

Shares of Bristol-Meyers Squibb NYSE: BMY are down significantly under the threat of lower realized drug prices but are now deeply oversold. The market fell nearly 40% from its high, putting it at 6.7X earnings with a yield of 4.5%. The market may fall further but is nearing critical support at the depths of the 2020 correction. The worst possible news has been priced into the market at this level, and reality will likely be better. 

As it is, the analysts see the company growing revenue and earnings in 2024 to fuel its dividend program. Because the company is only paying 30% of earnings now and has a history of dividend increases, another increase is likely in 2024. Analysts rate the stock at Hold and see it trading near its floor. The low price target tracked by Marketbeat.com is $50; the consensus is 30% above that. 

Diversified CVS pays 3.6% 

CVS Health NYSE: CVS came under pressure this year as retail pharma took a hit from the post-COVID letdown. The takeaway is that the health insurance business is offsetting the weakening in retail, and even retail pharma is doing OK. Regarding the value and yield, the stock trades below 8X earnings while paying a 3.6% yield. Analysts rate it a Moderate Buy and see it advancing more than 1000 basis points at the low end of their range.