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The “Dogs of the Dow” strategy consists of investing in the 10 highest-yielding stocks in the Dow Jones Industrial Average. Purchasing the Dogs of the Dow creates higher dividend income, by focusing on high-yielding stocks.

The following 3 stocks are part of the 10 Dogs of the Dow for 2023. Each of these 3 stocks has a high dividend yield above 4%, a strong business model, and should continue to pay dividends even in a recession.

Verizon Communications (VZ)

Verizon Communications is one of the largest wireless carriers in the country. Wireless contributes three-quarters of all revenues, and broadband and cable services account for about a quarter of sales. The company’s network covers ~300 million people and 98% of the U.S.

In the 2022 first quarter, revenue decreased 1.9% to $32.9 billion, which was $712 million below estimates. Adjusted earnings-per-share of $1.20 compared unfavorably to $1.35 in the prior year but was $0.01 higher than expected. Verizon had postpaid phone net losses of 127K during the quarter, but retail postpaid net additions totaled 633K. Retail connections totaled 143 million and the wireless retail postpaid phone churn rate was low at 0.90%. Business revenue fell 2.8% to $7.5 billion.

Verizon continues to generate strong free cash flow which is used in large part to pay dividends to shareholders. Free cash flow more than doubled to $2.3 billion from $1 billion in the prior year. Verizon reaffirmed guidance for 2023 as well with the company still expecting adjusted earnings-per-share of $4.55 to $4.85 for the year. Wireless service revenue is still projected to grow 2.5% to 4.5%.

Verizon has increased its dividend for 18 consecutive years. The stock has a current yield of 7.2%.

Walgreens Boots Alliance (WBA)

Walgreens Boots Alliance is the largest retail pharmacy in both the United States and Europe. Through its flagship Walgreens business and other business ventures, the company has a presence in more than 9 countries, employs more than 315,000 people and has more than 13,000 stores in the U.S., Europe, and Latin America.

On March 28th, 2023, Walgreens reported results for the second quarter of fiscal 2023. Sales grew 3% but adjusted earnings-per-share slumped -27% over the prior year’s quarter, from $1.59 to $1.16, mostly due to high COVID-19 vaccinations in the prior year’s period. Earnings-per-share exceeded analysts’ consensus by $0.05. The company has beaten analysts’ estimates for 11 consecutive quarters.

Walgreens has grown its earnings-per-share by 7.6% per year on average over the last decade. This was driven by a combination of factors including solid top-line growth ($72 billion to $133 billion), a steady net profit margin and a reduction in the number of shares outstanding. Over the long-term, an aging population and a focus on becoming a health destination should provide growth tailwinds.

Walgreens reaffirmed its guidance for earnings-per-share of $4.45-$4.65 in fiscal 2023, which is more than sufficient to fund the company’s growth objectives and support the dividend payout. The stock yields 6.1%.

International Business Machines (IBM)

IBM is a global information technology company that provides integrated enterprise solutions for software, hardware, and services. IBM’s focus is running mission critical systems for large, multi-national customers and governments. IBM typically provides end-to-end solutions. The company now has four business segments: Software, Consulting, Infrastructure, and Financing. IBM had annual revenue of ~$60.5B in 2022.

IBM reported results for Q1 2023 on April 19th, 2023. Companywide revenue grew 0.4% to $14,252M from $14,197M while diluted adjusted earnings per share fell 3% to $1.36 from $1.40 on a year-over-year basis. Diluted GAAP earnings per share increased to $1.02 in the quarter from $0.73 in the prior year on lower expenses and higher margins on better pricing.

Revenue for Software increased 2.6% to $5,921M from $5,772M in comparable quarters due to 2% growth in Hybrid Platform & Solutions and a 3% increase in Transaction Processing. Revenue was up 8% for RedHat, (-1%) for Automation, +1% for Data & AI, and (-1%) for Security. Consulting revenue increased 2.8% to $4,962M from $4,829M due to 1% rise in Business Transformation, (-1%) decline in Technology Consulting, and 7% growth in Application Operations.

Future growth will be driven largely by acquisitions. So far in 2023, it has announced the purchase of StepZen and NS1. IBM has acquired 30 companies under the present CEO. IBM forecasts revenue growth in the mid-single-digits and free cash flow of about $10.5 billion in 2023. IBM stock yields 5.2%.

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