If you're an income investor, you want -- no surprise here -- income. But you almost certainly don't mind receiving extra money in the form of share appreciation.
You could do a lot of research on your own to find stocks that provide both solid income and growth prospects. Alternatively, you could outsource the job to analysts who are paid big bucks to predict how various stocks could perform. If the latter approach sounds appealing, here are three beaten-down, high-yield dividend stocks that Wall Street thinks could soar more than 25% over the next 12 months.
1. CVS Health
CVS Health (CVS +3.34%) fared better than the overall market in 2022 despite tumbling nearly 10%. But the healthcare giant hasn't been so fortunate so far this year with its shares sinking around 25%.
NYSE: CVS
Key Data Points
Wall Street, though, thinks that CVS Health could be in store for a rebound. The average analysts' 12-month price target for CVS reflects an upside potential of nearly 31%. Fifteen of the 24 analysts surveyed by Refinitiv in October rated the stock as a buy or a strong buy. None recommended selling it. Even the most pessimistic analyst thinks that CVS Health's share price could climb 10% higher.
Analysts no doubt recognize that some of CVS Health's headwinds should only be temporary. For example, the company's Aetna health insurance business has experienced increased medical costs as concerns about COVID-19 decreased.
In the meantime, CVS Health offers an attractive dividend yield just north of 3.5%. Although the 2018 acquisition of Aetna led the company to suspend its dividend increases for a while, CVS has boosted its dividend payout for two consecutive years.
2. United Parcel Service
Packaging-delivery leader United Parcel Service (UPS 3.97%) has also stumbled in 2023. Its shares have fallen nearly 20%, with the company's disappointing third-quarter results last week adding to the misery.
NYSE: UPS
Key Data Points
Analysts don't seem to believe that UPS is down for the count. The average 12-month price target is 27% above UPS' current share price. However, there's not a clear consensus on Wall Street about this beaten-down stock. Only five of the 26 analysts surveyed by Refinitiv in October rate it as a buy or strong buy. Most of the others recommend holding UPS, with one outlier rating the stock as "underperform."
UPS' dividend is arguably the best thing going for shareholders these days. Its yield currently stands at nearly 4.6%. The company has increased its dividend for 14 consecutive years.
CEO Carol Tome sounded optimistic in UPS' Q3 earnings call that the company will be able to win back all of the shipping volume diverted to rivals during the workers' strike. She also thinks that UPS will have solid growth opportunities as it moves aggressively into the complex healthcare logistics market.
3. Pfizer
It's been a no-good, horrible year for Pfizer (PFE 1.16%). The big pharma stock is down close to 40% so far in 2023. Pfizer's swing to a net loss in Q3 didn't help matters.
NYSE: PFE
Key Data Points
But most analysts on Wall Street remain bullish about Pfizer. The average price target reflects an upside potential of nearly 27%. Of the 22 analysts surveyed by Refinitiv in October, 12 rate Pfizer as a buy or strong buy. Nine analysts recommend holding the stock, with one recommending that investors sell their shares.
Pfizer's woes are all COVID-related. The drugmaker predicts full-year sales of its Comiranty vaccine and Paxlovid antiviral therapy will plunge 70% and 95%, respectively, from 2022 levels. The company's Q3 loss was due to a $5.6 billion write-off of COVID product inventory. However, Pfizer's management remains upbeat about its non-COVID growth prospects.
One thing going right for Pfizer from investors' standpoint, though, is its dividend. The yield is nearly 5.4%, driven higher largely by the dismal stock performance.
Is Wall Street right about these stocks?
I'm not sure if CVS Health, UPS, or Pfizer will deliver the kinds of gains over the next 12 months that analysts project. However, my take is that Wall Street is right to be bullish about the long-term prospects for all three stocks.
The valuations of CVS Health, UPS, and Pfizer look attractive. Their underlying businesses remain strong (with the notable exception of Pfizer's COVID products). I suspect that CVS and Pfizer would hold up pretty well if the economy experiences a downturn. Most importantly for income investors, all three companies appear to be in good shape to keep the dividends flowing.
