These six beaten-down stocks have promising potential, especially for value investors who are willing to wait for their value to emerge. Often having a good dividend yield can help make this happen.

The reason is that if the company can cover the dividend payment the investor can be reasonably secure knowing that patience will pay off. Collecting the dividend through this period also helps ameliorate the potential downside risk in the stock.

Investors know this and effectively can increase their holdings through dollar-cost-averaging whenever the stock’s yield is higher than its long-term average. Again, the key with these beaten-down stocks is that the company has a low dividend payout ratio.

Let’s dive in and look at these stocks.

Ticker	Company	Current Price
FNF	Fidelity National Financial	$35.84
NRG	NRG Energy	$36.92
FL	Foot Locker	$29.31
QCOM	Qualcomm	$124.74
ALLY	Ally Financial	$33.08
CRI	Carter’s, Inc.	$0.47

Fidelity National Financial (FNF)

Fidelity National Financial (NYSE:FNF) is a profitable title, escrow and trust company whose stock is off 32.7% YTD as of June 17. Moreover, from its peak on Jan. 14, the stock is off over 37%.

Maybe this is because Fidelity National is forecast to post slightly lower revenue in 2023. However, earnings-per-share (EPS) are forecast to rise 2.8% from $6.08 per share to $6.25 in 2023, according to Seeking Alpha.

This puts FNF stock on a very low price-to-earnings (P/E) multiple of just 5.6 times earnings. Moreover, its annual dividend of $1.76 is well covered by earnings, giving FNF an attractive dividend yield of 5.01%. In fact, its average yield over the past five years has been 3.15%. This implies its target price is 37% higher at $48.12 per share.

That implies that FNF stock will rebound as it rises to its target price, producing a lower dividend yield. It also makes Fidelity National one of the best beaten-down stocks to buy.

Foot Locker (FL)

Foot Locker (NYSE:FL) is a national footwear retailer whose revenue is projected to fall just slightly over the next year assuming a recession hits. Nevertheless, FL stock is down as if the retailer is going to go out of business, and the damage is way overdone.

For example, FL stock is off 34% YTD as of June 17. Moreover, from its peak on May 17, it’s off 56%.

But it’s not like the stock was overvalued. For example, the average of 20 analysts’ forecasts for 2022 is EPS of $4.50. That puts FL stock on a forward P/E multiple of just 6.38x — not very high. Even though earnings are forecast to fall slightly to $4.28 in 2023, the P/E rises to just 6.7x. Again, not very high.

Moreover, earnings more than cover the annual dividend payment of $1.60 per share. In other words, the dividend coverage ratio is low at 35.6%, again very low. But this means that the stock now sports a very high dividend yield of 5.57%.

That makes this one of the most beaten-down stocks likely to rebound. Moreover, analysts project that its 12-month price target is $34.38 per share, over 19% higher than its price as of June 17.

NRG Energy (NRG)

NRG Energy Corp (NYSE:NRG) is an integrated, Houston-based electric power generator. The stock is down 14.4% year-to-date (YTD) as of June 17.

Analysts expect this electric utility to grow 20% for the year ending 2023 to $4.76 per share. That puts the stock on a forward P/E multiple of just 7.6x. This is very cheap for an electric utility company.

Moreover, it has an attractive dividend yield of 3.85%, given its dividend of $1.40 per share. This also means its dividends are just 35.3% of earnings, ensuring security for the dividend payments. It has been raising its dividend each year for the past three years.

In addition, NRG produces a huge amount of free cash flow (FCF). For example, last quarter it made over $1.67 billion in cash flow from operations. It used just $85 million of that for dividends and even spent $188 million on share buybacks. That works out to $752 million over 12 months.

This represents a huge 7.8% of its market value. So between the dividend yield and buyback yield, over 11% of the market cap is returned to shareholders annually. That makes it one of the best stocks to buy for a recession.

Qualcomm (QCOM)

Qualcomm (NASDAQ:QCOM) is a wireless technology and patent management company that should post modest revenue and earnings growth over the next year. But the stock is off over one-third YTD as of June 17.

Nevertheless, earnings are forecast to rise, despite this huge selloff. Analysts project a gain of 4.80% to $13.18 for the FY ending Sept. 2023, after a rising of 46.8% forecast for this year to September 2022. This is based on the average of 28 analysts surveyed by Seeking Alpha.

This means that QCOM stock trades for less than 10x earnings for both 2022 and 2023. That is very cheap for such a powerful tech company and makes it one of the most beaten-down stocks on this list.

Moreover, Qualcomm produces a large amount of free cash flow (FCF). It uses that to pay its 2.5% dividend yield and large amounts of buybacks. For example, last quarter alone its FCF was over $2.2 billion, and it used $1 billion of that to repurchase its shares. That works out to an annual rate of over $4.1 billion, or about 3% of its stock market value.

Ally Financial (ALLY)

Ally Financial (NYSE:ALLY) is a financial lender to car and home buyers. The stock is down over 31% YTD as of June 17. It’s also off over 41% from its peak on Oct. 20.

Analysts now forecast that EPS will be $7.78 for 2022 and $7.80 for 2023. That means its earnings more than cover the dividend of $1.20 by 5 times. This also gives the stock an attractive dividend yield of 3.66%.

Nevertheless, despite having fallen so far, the stock was never overvalued. In fact, it now has a very low multiple of just 4.2 times based on 2023 earnings forecasts.

This shows that this is one of the most beaten-down stocks on this list. It’s not likely to stay this cheap, especially if the recession is not as bad as the market fears. Moreover, the company is buying back its stock very aggressively here. That will help ALLY stock to rebound.

Carter’s Inc (CRI)

Carter’s Inc (NYSE:CRI) is a baby and children’s clothing and outfit maker whose stock is off over 31% YTD as of June 17. It’s also down 36.4% from its peak on Nov. 16.

But the company is not going out of business, as this negative performance in the stock seems to imply. For example, earnings this year are forecast to be positive at $8.94 per share, based on the average of 9 analysts’ forecasts. That puts the stock on a forward multiple of just 7.8x, a very inexpensive multiple.

In fact, these analysts project earnings growth of 9.6% to $9.80 by the end of 2023. This lowers the multiple to just 7.1x earnings.

Nevertheless, its earnings more than cover the annual $3.00 dividend, making its 4.30% dividend yield very attractive. In fact, management recently raised the dividend and said it would continue its program of share buybacks.

In short, CRI stock is one of the beaten-down stocks that is likely to move substantially higher by next year.

On the date of publication, Mark Hake did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.