In this article, we discuss 12 cheap dividend stocks with high yields. You can skip our detailed analysis of value stocks and their past performance, and go directly to read 5 Cheap Dividend Stocks With High Yields.
The Importance of Investing in Undervalued/Cheap Stocks
Investing in value stocks is one of the most popular methods to make money through the stock market. Value strategy involves discovering cheap stocks trading below their intrinsic value and investing in them, expecting them to eventually rise to their accurate value. As the market recognizes the true value of these stocks over time, value investors aim to generate long-term capital appreciation through them. These stocks usually have low price-to-earnings ratios.
Over the years, there have been periods where either value or growth stocks have outperformed the other. Their performance has widely depended on various market conditions and investor sentiment. Historical analysis shows that value stocks performed better than growth equities during periods of high-interest rates and inflation. Franklin Templeton published a report on value stocks and highlighted that due to high-interest rates across the world last year, value equities surpassed growth stocks in global markets. The report further mentioned that trailing earnings per share of value companies have grown strongly over the last decade. So far in 2023, growth stocks have reasserted their dominance over value stocks.
When analyzing the performance of both value and growth stocks, research has shown that value investing is a reliable strategy for long-term investors. One such study was conducted by Eugene Fama and Ken French and published by Dimensional Fund Advisors. The study cited that value stocks have surpassed their growth counterparts by 4.1% annually in the US from 1927 to 2021. This shows that value investing can be suitable for long-term investors, and is, therefore, one of the most preferred investment options for them.
In addition to their long-term results, many value stocks come from established companies with stable earnings and a history of paying dividends. Long-term investors seeking regular income can benefit from the dividend payments provided by value stocks, which can contribute to total returns over time. Dividend companies like The Procter & Gamble Company (NYSE:PG), Johnson & Johnson (NYSE:JNJ), and AbbVie Inc. (NYSE:ABBV) are popular among investors as they have raised their dividends for decades. Moreover, these companies also have strong balance sheets, which signal the growth of their future dividends. In view of this, we will discuss cheap dividend stocks with high yields in this article.
We first used the Finviz stock screener to identify dividend stocks with yields above 6%, as of May 19. From the resultant list, we shortlisted 12 stocks with P/E ratios below 20, which shows that they are traded below their intrinsic value. The hedge fund sentiment around each stock was measured using Insider Monkey's database for Q4 2022. The stocks are ranked in descending order of their P/E ratios, as of May 19.
W. P. Carey Inc. (NYSE:WPC) is a New York-based real estate investment trust company that invests in properties leased to single tenants. In the first quarter of 2022, the company posted revenue of $427.8 million, which showed a 22.8% growth from the same period last year. Its cash position was stable as it had nearly $148 million available in cash and cash equivalents at the end of March 2023.
On March 10, W. P. Carey Inc. (NYSE:WPC) declared a 0.2% hike in its quarterly dividend to $1.067 per share. The company has been growing its dividends consistently since 2011, which makes it one of the best dividend stocks on our list. The stock can be added to dividend portfolios alongside The Procter & Gamble Company (NYSE:PG), Johnson & Johnson (NYSE:JNJ), and AbbVie Inc. (NYSE:ABBV). As of May 19, the stock has a dividend yield of 6.16%.
As of the close of Q4 2022, 18 hedge funds tracked by Insider Monkey reported having stakes in W. P. Carey Inc. (NYSE:WPC), compared with 22 in the previous quarter. These stakes have a collective value of roughly $117 million. Among these hedge funds, Schonfeld Strategic Advisors was the company's leading stakeholder in Q4.
Magellan Midstream Partners, L.P. (NYSE:MMP) is a publicly-traded partnership that transports, stores, and distributes petroleum products. The company currently pays a quarterly dividend of $1.0475 per share and has a dividend yield of 6.69%, as of May 19. It has a long dividend growth streak of 22 years, which makes it one of the best dividend stocks on our list.
In May, RBC Capital raised its price target on Magellan Midstream Partners, L.P. (NYSE:MMP) to $66 with a Sector Perform rating on the shares. The firm highlighted the company's acquisition by Oneok.
In the first quarter of 2023, Magellan Midstream Partners, L.P. (NYSE:MMP) reported a distributable cash flow of $313 million, up from $265 million during the same period last year. The company's free cash flow amounted to $281 million, compared with $240 million in the prior-year period.
At the end of Q4 2022, 10 hedge funds tracked by Insider Monkey owned stakes in Magellan Midstream Partners, L.P. (NYSE:MMP), the same as in the previous quarter. These stakes have a consolidated value of over $24.2 million.
Delek Logistics Partners, LP (NYSE:DKL) is an American master limited partnership that owns and operates oil and refined products logistics and marketing assets. In the first quarter of 2023, the company generated $61.8 million in distributable cash flow, up from $51.7 million during the same period last year. Its operating cash flow came in at $29.2 million.
On May 1, Delek Logistics Partners, LP (NYSE:DKL) declared a 0.5% hike in its quarterly dividend to $1.025 per share. This was the company's 41st consecutive quarterly dividend growth. It has also raised its dividends for 11 years straight, which makes it one of the best dividend stocks on our list. The stock has a dividend yield of 8.72%, as of May 19.
At the end of Q4 2022, Ken Griffin's Citadel Investment Group was the company's only stakeholder, owning stakes worth $2,534.
An American multinational conglomerate, 3M Company (NYSE:MMM) is next on our list of the best dividend stocks. On May 9, the company declared a quarterly dividend of $1.50 per share, which was in line with its previous dividend. The company maintains a 65-year streak of dividend growth. The stock has a dividend yield of 6.02%, as of May 19.
in Q1 2023, 3M Company (NYSE:MMM) reported an operating cash flow of $1.3 billion, which showed a 26% growth from the same period last year. The company's free cash flow for the quarter also showed a 24% year-over-year growth at $0.9 billion. It also returned $856 million to shareholders in dividends and share repurchases.
At the end of Q4 2022, 52 hedge funds tracked by Insider Monkey held stakes in 3M Company (NYSE:MMM), up from 49 in the previous quarter. The collective value of these stakes is over $1.57 billion. Citadel Investment Group was the company's leading stakeholder in Q4.
Enterprise Products Partners L.P. (NYSE:EPD) is a Texas-based midstream natural gas and crude oil pipeline company. The company's recent quarterly earnings were lauded by Street analysts. In April, both Morgan Stanley and Barclays raised their price targets on the stock to $33 and $30, respectively.
In the first quarter of 2023, Enterprise Products Partners L.P. (NYSE:EPD) reported a distributable cash flow of $1.9 billion, up 5.5% from the same period last year. The company generated $2 billion in operating cash flow for the quarter. In 12 months that ended March 2023, its free cash flow (FCF) came in at nearly $6 billion and it paid 75% of its FCF to shareholders during this period.
Enterprise Products Partners L.P. (NYSE:EPD), one of the best dividend stocks on our list, currently pays a quarterly dividend of $0.49 per share. The company has been rewarding shareholders with growing dividends for the past 23 years. As of May 19, the stock has a dividend yield of 7.52%.
At the end of Q4 2022, 24 hedge funds in Insider Monkey’s database owned stakes in Enterprise Products Partners L.P. (NYSE:EPD), growing from 21 in the previous quarter. These stakes are collectively valued at over $242.4 million.
Legacy Ridge Capital Management, LLC mentioned Enterprise Products Partners L.P. (NYSE:EPD) in its Q4 2022 investor letter. Here is what the firm has to say:
“Enterprise Products Partners L.P. (NYSE:EPD) is still owned in the fund and remains one of our largest positions, as it has been since the partnership was founded. This has not been a great investment. Shares are down about 6% since I first wrote about it. However, we have received $8.93 per share in dividends, which is about 34% of the 2018 share price. So, with dividends included we’ve made 28% cumulatively over 5-years. Still not good, but not an impairment of capital either.
U.S. Bancorp (NYSE:USB) is an American bank holding company that offers a wide range of other financial services to its consumers. The company pays a quarterly dividend of $0.48 per share for a dividend yield of 6.30%, as of May 19. It has raised its payouts consistently for the past 12 years, which makes it one of the best dividend stocks on our list.
U.S. Bancorp (NYSE:USB) generated over $7 billion in revenues in Q1 2023, up 28.2% from the same period last year. The company's net interest income for the quarter came in at over $4.6 billion, growing from $$4.3 billion from the prior-year period.
In April, Argus maintained a Buy rating on U.S. Bancorp (NYSE:USB) with a $58 price target, appreciating the company's first-quarter earnings. The firm also highlighted that the company's performance remained stable following the Silicon Valley Bank fallout.
Madison Investments mentioned U.S. Bancorp (NYSE:USB) in its Q1 2023 investor letter. Here is what the firm has to say:
“U.S. Bancorp (NYSE:USB) shares are ensnared in the bank-run panic that began late in the quarter. Two large banks failed in early March as depositors rushed to withdraw money on concerns that the banks would suffer from liquidity problems. That’s a self-fulfilling prophecy, of course, but in the case of the two banks, it was prompted by the revelations of utter mismanagement of their securities portfolio. Bank models are, essentially, to borrow short and lend long. This sounds dangerous of course, and it would be if not for the deposit guarantee provided by the FDIC. The history of the U.S. banking system can be divided into two eras – pre-FDIC, when bank runs were fairly common, and post-FDIC, when bank runs have been close to non-existent. However, FDIC protection has its limits, and it remains incumbent on management to properly manage its assets and liabilities. The two banks in question didn’t do that. By taking down the share prices of all banks, we think investors are shooting first and asking questions later; they are not distinguishing between the strong and the weak.
Northrim BanCorp, Inc. (NASDAQ:NRIM) is an Alaska-based bank holding company that offers loan and depository services to its consumers. During the first quarter of 2023, the company returned $3.4 million to shareholders in dividends, which makes it one of the best dividend stocks on our list.
On February 24, Northrim BanCorp, Inc. (NASDAQ:NRIM) declared a 20% hike in its quarterly dividend to $0.60 per share. This marked the company's 14th consecutive year of dividend growth. The stock's dividend yield on May 19 came in at 6.31%. Along with NRIM, investors are also paying attention to The Procter & Gamble Company (NYSE:PG), Johnson & Johnson (NYSE:JNJ), and AbbVie Inc. (NYSE:ABBV) due to their strong dividend growth streaks.
The number of hedge funds tracked by Insider Monkey owning stakes in Northrim BanCorp, Inc. (NASDAQ:NRIM) stood at 11 in Q4 2022, growing from 10 in the previous quarter. These stakes have a consolidated value of roughly $40 million.
