In this article, we discuss 12 best cheap dividend stocks to buy now. You can skip our detailed analysis of dividend stocks and their performance, and go directly to read 5 Best Cheap Dividend Stocks To Buy Now.
Investing in cheap stocks is like finding a great deal at a store – it's about picking stocks that might be undervalued right now but have the potential to be worth more in the future. Instead of going after the popular or flashy choices, value investors look for hidden gems that others might have missed. So, value investing can be a viable strategy for long-term investors, but its effectiveness depends on market conditions, individual goals, risk tolerance, and one's ability to select undervalued stocks. In rolling periods of 15 years between 1927 and 2019, value investing did better than growth investing over 90% of the time, according to finance professors Eugene Fama and Kenneth French.
Value investing is often discussed in contrast to growth investing. Both investment strategies have experienced periods of both outperformance and underperformance at different times in history. According to a study published by Goldman Sachs, value investing has generally done well in the past, especially from 1970 to early 2007. But then, from around mid-2007 until the COVID-19 pandemic hit, growth investing was more successful. After the pandemic, value investing began to perform better again. The report also mentioned that value investing tends to do better when there's high inflation, the economy is growing strongly, and interest rates are high. From the time after World War II until the 1970s, interest rates kept rising in response to ever-higher inflation, leading to a period of clear Value dominance.
Jawad Mian, a founder of macro-advisory firm Stray Reflections, spoke about value investing in his interview with Wall Street Journal in June this year. He said that value beat growth because it focused a lot on sectors like energy, materials, and financials, which were very important for the U.S. economy after the Great Depression. But now, the economy is mostly driven by technology, which is making the growth part of the market perform well.
Value stocks often come from well-established companies that have a history of making steady profits and paying dividends. Investors who are looking for long-term investments and want a steady income can gain from the dividends that value stocks offer. Some popular companies like The Procter & Gamble Company (NYSE:PG), Johnson & Johnson (NYSE:JNJ), and AbbVie Inc. (NYSE:ABBV) have been increasing their dividends for many years. These companies also have strong financial positions, indicating that their dividends could keep growing. In this article, we'll further talk about cheap dividend stocks to buy now.
For this list, we scanned through Insider Monkey's database of Q2 2023 and selected dividend stocks with P/E ratios below 20, as of August 20. The low price-to-earnings ratio shows that they are traded below their intrinsic value. From the resultant dataset, we selected 12 companies that have the highest number of hedge fund investors at the end of Q2 2023.
Lockheed Martin Corporation (NYSE:LMT) is a Maryland-based aerospace, defense, arms, security, and advanced technology company. It is one of the largest defense contractors in the world. On June 22, the company declared a quarterly dividend of $3.00 per share, which was in line with its previous dividend. It is one of the best dividend stocks on our list as it has been raising its dividends consistently for the past 20 years. The stock's dividend yield on August 20 came in at 2.66%.
In addition to LMT, The Procter & Gamble Company (NYSE:PG), Johnson & Johnson (NYSE:JNJ), and AbbVie Inc. (NYSE:ABBV) are also some of the best dividend stocks to consider because of their decades-long dividend growth streak.
In the second quarter of 2023, Lockheed Martin Corporation (NYSE:LMT) reported revenue of $16.7 billion, which showed an 8.1% growth from the same period last year. Its operating cash flow for the quarter came in at $1.1 billion and its free cash flow stood at $0.8 billion. The company returned $1.5 billion to shareholders through dividends and share repurchases during the quarter.
At the end of Q2 2023, 52 hedge funds tracked by Insider Monkey reported having stakes in Lockheed Martin Corporation (NYSE:LMT), compared with 58 in the previous quarter. The collective value of these stakes is roughly $2 billion.
Amgen Inc. (NASDAQ:AMGN) is an American biotech company that focuses on developing and producing innovative therapies to treat a wide range of medical conditions. The company generated roughly $7 billion in revenues in the second quarter of 2023, up 6% from the same period last year. Its free cash flow also jumped to $3.8 billion, from $1.7 billion in the prior-year period.
Amgen Inc. (NASDAQ:AMGN), one of the best dividend stocks on our list, has been raising its dividends since 2011. The stock is currently trading at a P/E multiple of 17.79x. It currently pays a quarterly dividend of $2.13 per share and has a dividend yield of 3.27%, as of August 20.
The number of hedge funds tracked by Insider Monkey reported having stakes in Amgen Inc. (NASDAQ:AMGN) stood at 57 in Q2 2023, the same as in the previous quarter. The consolidated value of these stakes is over $1.56 billion. With over 1.6 million shares, Two Sigma Advisors was the company's leading stakeholder in Q2.
NextEra Energy, Inc. (NYSE:NEE) is an American energy company that operates in the electric utility and renewable energy sectors. On July 27, the company declared a quarterly dividend of $0.4675 per share, consistent with its previous dividend. It has a 27-year run of raising its dividends, which makes it one of the best dividend stocks on our list. The stock's dividend yield on August 20 came in at 2.79%.
As of the close of Q2 2023, 59 hedge funds tracked by Insider Monkey reported having stakes in NextEra Energy, Inc. (NYSE:NEE), which remained unchanged from its previous dividend. The overall value of these stakes is over $918.3 million.
McKesson Corporation (NYSE:MCK) is a global healthcare services and information technology company that operates in the healthcare supply chain and healthcare technology sectors. In its recent quarterly earnings, the company posted revenue of $74.5 billion, up 11% from the same period last year. Its operating cash flow for the quarter came in at $1.1 billion. As of August 20, the stock has a price-to-earnings ratio of 16.80.
On July 24, McKesson Corporation (NYSE:MCK) declared a quarterly dividend of $0.62 per share, having raised it by 15% from its previous dividend. Through this increase, the company stretched its dividend growth streak to seven years. During its most recent quarter, the company returned $74 million to shareholders through dividends, which makes it one of the best dividend stocks on our list.
At the end of June 2023, 60 hedge funds in Insider Monkey's database reported having stakes in McKesson Corporation (NYSE:MCK), worth collectively over $3.16 billion.
Broyhill Asset Management mentioned McKesson Corporation (NYSE:MCK) in its Q2 2023 investor letter. Here is what the firm has to say:
“The portfolio’s largest contributors to performance were Fomento Economico Mexicano (FMX), Fiserv Inc. (FI), and McKesson Corporation (NYSE:MCK). Following the first quarter’s earnings, McKesson delivered a triple beat by beating consensus in the quarter, guiding next year EPS growth above consensus, and raising its long-term operating earnings growth. Investors were pleasantly surprised with what Deutsche Bank dubbed the “Rare Trifecta.”
CSX Corporation (NASDAQ:CSX) is an American holding transportation and logistics company that specializes in rail-based freight transportation. The company currently offers a quarterly dividend of $0.11 per share and has a dividend yield of 1.43%, as of August 20. It has raised its dividends consistently for the past 18 years. With a P/E multiple of 15.59x, CSX is one of the best dividend stocks on our list trading below its value.
Insider Monkey's Q2 2023 database showed that 64 hedge funds owned investments in CSX Corporation (NASDAQ:CSX), up from 61 in the previous quarter. The stakes owned by these funds have a total value of nearly $4 billion. With over 52.5 million shares, Soroban Capital Partners was the company's leading stakeholder in Q2.
An American multinational investment bank, The Goldman Sachs Group, Inc. (NYSE:GS) is next on our list of the best dividend stocks to buy now. The company currently pays a quarterly dividend of $2.75 per share, after increasing it by 10% in July this year. The stock offers a dividend yield of 3.43%, as of August 20.
The Goldman Sachs Group, Inc. (NYSE:GS) was a part of 70 hedge fund portfolios at the end of Q2 2023, up from 69 a quarter earlier, according to Insider Monkey's database. The collective value of stakes owned by these hedge funds is over $313 million.
Exxon Mobil Corporation (NYSE:XOM) is one of the world's largest publicly traded multinational oil and gas corporations. The company is involved in various aspects of the energy industry, including the distribution of petroleum and petrochemical products.
On August 14, Exxon Mobil Corporation (NYSE:XOM) declared a quarterly dividend of $0.91 per share, which remained unchanged from its previous dividend. It is one of the best dividend stocks on our list as it maintains a 40-year streak of consistent dividend growth. The stock has a dividend yield of 3.32%, as of August 20.
Other dividend stocks that are grabbing investors' attention include The Procter & Gamble Company (NYSE:PG), Johnson & Johnson (NYSE:JNJ), and AbbVie Inc. (NYSE:ABBV).
As of the close of Q2 2023, 71 hedge funds tracked by Insider Monkey were bullish on Exxon Mobil Corporation (NYSE:XOM). The stakes held by these hedge funds have a collective value of over $3 billion.
