In this article, we discuss 13 best cheap dividend stocks to buy right now. You can skip our detailed analysis of value dividend stocks and overall performance of dividend stocks, and go directly to read 5 Best Cheap Dividend Stocks To Buy Right Now.
Growth stocks took the lead in 2023, driven by the ‘Magnificent Seven’ rally in the tech sector. The whole tech rebound, following a significant downturn the year before, was enough to question the validity of value equities, which historically have shown better performances over the long term, according to analysts. Value stocks are mainly well-established companies that despite having stable business models and sustainable dividends, typically trade at lower prices compared to their intrinsic value, presenting an opportunity for investors to purchase them at a discount. Professor-turned-money manager Josef Lakonishok and value investing expert David Dreman truly believed the ‘tortoise beats the hare’ approach in investing. Their research suggested that value investing tends to outperform growth about 70% of the time, irrespective of company size. Through meticulous studies covering companies of varying sizes, they found that value stocks consistently delivered average returns of slightly over 7% per year compared to growth stocks over extended time frames.
While value stocks may not have performed as well as growth stocks last year, analysts are highlighting the potential buying opportunities within this space. Morningstar chief US marketing strategist Dave Sekera has given a positive stance on value investing in 2024. Here are some comments from the analysts:
“We see much better long-term investment opportunities within the value category and think investors should consider paring those growth stocks that have become overvalued and overextended. Now may be a good time to begin allocating to those contrarian plays that have underperformed, are unloved, and, most importantly, are undervalued.”
Analysts at Franklin Templeton have also expressed optimism regarding the performance of value stocks this year. Despite a period where value lagged behind growth on a global scale, the firm predicts a promising outlook ahead due to favorable global stock valuations, indicating potential for positive long-term returns. Moreover, the firm anticipates increased investment in value-oriented sectors and segments of the market, driven by ongoing consumer spending and recent government initiatives. The normalization of monetary policy is also expected to enhance the appeal of interest rate-sensitive and dividend-paying sectors to investors.
As we mentioned above, value stocks are often recognized for their dividends. Moreover, these equities offer higher dividend yields and have strong fundamental ratios when compared with growth stocks. Dividend growth is one of the most important factors when it comes to dividend investing. In this regard, The S&P 500 Dividend Aristocrat Index is used as a benchmark for dividend-focused strategies. The index seeks the performance of companies that have raised their payouts for 25 consecutive years or more. In 30 Undervalued Dividend Aristocrats To Buy According to Analysts, we referred to data from S&P Dow Jones Indices which revealed that investment strategies aimed at generating income often show value characteristics. Stocks that offer high dividend yields and trade at lower prices often grab investors’ attention. We also revealed that the dividend aristocrat index possesses a combination a combination of both growth and value attributes, rather than exhibiting a strong preference for one style over the other. A detailed analysis of the index from 1999 to 2022 revealed its style breakdown, indicating an average exposure of 59.04% to value stocks and 40.94% to growth stocks during this time period.
JPMorgan Chase & Co. (NYSE:JPM), Bank of America Corporation (NYSE:BAC), and General Electric Company (NYSE:GE) are some of the best dividend stocks that are also traded low compared to their intrinsic value. In this article, we will further take a look at some of the best cheap dividend stocks to buy right now.
For this list, we scanned through Insider Monkey's database of 933 hedge funds as of Q4 2023 and selected dividend stocks with P/E ratios below 25, as of April 5. The low price-to-earnings ratio shows that they are traded below their intrinsic value. From the resultant dataset, we selected 13 companies that have the highest number of hedge fund investors at the end of Q4 2023. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
Lockheed Martin Corporation (NYSE:LMT) is an American aerospace, defense, and security tech company that operates in various related segments. On January 24, the company declared a quarterly dividend of $3.15 per share, which was in line with its previous dividend. The company has raised its dividends for the past 21 years, which makes LMT one of the best dividend stocks on our list. As of April 5, the stock has a dividend yield of 2.77%.
In FY23, Lockheed Martin Corporation (NYSE:LMT) generated enough cash to fulfill its shareholder obligation. The company's operating cash flow for the period came in at $7.9 billion and it generated over $6.2 billion in free cash flow. During the year, the company returned $9.1 billion to shareholders through dividends.
At the end of Q3 2023, 58 hedge funds tracked by Insider Monkey held stakes in Lockheed Martin Corporation (NYSE:LMT), compared with 60 in the previous quarter. The collective value of these stakes is over $1.63 billion. Among these hedge funds, Two Sigma Advisors was the company's leading stakeholder in Q4.
CSX Corporation (NASDAQ:CSX) is a Florida-based transport company that mainly specializes in railroad operations. The company currently offers a quarterly dividend of $0.12 per share, having raised it by 9.1% in February this year. Through this increase, the company stretched its dividend growth streak to 19 years, which makes CSX one of the best dividend stocks on our list. The stock has a dividend yield of 1.32%, as of April 5.
As of the close of Q4 2023, 61 hedge funds in Insider Monkey's database held stakes in CSX Corporation (NASDAQ:CSX), down slightly from 62 in the previous quarter. The collective value of these stakes is more than $3.7 billion.
NextEra Energy, Inc. (NYSE:NEE) is next on our list of the best dividend stocks that are cheap right now. The leading clean energy company has been rewarding shareholders with growing dividends for the past 28 years. It currently offers a quarterly dividend of $0.515 per share and has a dividend yield of 3.22%, as of April 5. For FY23, its operating cash flow came in at $11.3 billion. Moreover, the company's outlook indicated that it expects its dividend per share to grow at roughly a 10% rate per year through 2024, off a 2022 base.
The number of hedge funds tracked by Insider Monkey holding stakes in NextEra Energy, Inc. (NYSE:NEE) grew to 65 in Q4 2023, from 58 in the previous quarter. These stakes are collectively valued at nearly $1 billion. With roughly 4 million shares, Two Sigma Advisors was the company's leading stakeholder in Q4.
The Goldman Sachs Group, Inc. (NYSE:GS) is a multinational investment banking and investment management firm that offers a wide range of related services to its consumers. The company declared a quarterly dividend of $2.75 per share on February 27, which fell in line with its previous dividend. In FY23, it stayed dedicated to its shareholder obligation as the company returned nearly $3.6 billion to shareholders through dividends, which makes GS one of the best dividend stocks on our list. The stock's dividend yield on April 5 came in at 2.70%.
Insider Monkey's database of Q4 2023 indicated that 69 hedge funds held stakes in The Goldman Sachs Group, Inc. (NYSE:GS), compared with 68 in the previous quarter. These stakes are worth over $6.3 billion in total.
McKesson Corporation (NYSE:MCK) is an American multinational healthcare services and information technology company. The company's quarterly dividend comes in at $0.62 per share for a dividend yield of 0.46%, as of April 5. With a seven-year streak of consistent dividend growth, MCK is one of the best dividend stocks on our list that are cheap right now.
McKesson Corporation (NYSE:MCK) ended the fourth quarter with 69 hedge fund positions, up significantly from 58 in the previous quarter, according to Insider Monkey's database. The stakes held by these funds are collectively worth more than $4.2 billion.
Amgen Inc. (NASDAQ:AMGN) is a California-based biotech company that specializes in the manufacturing and marketing of innovative therapies for the treatment of serious ailments. On March 6, the company announced a quarterly dividend of $2.25 per share, which was consistent with its previous dividend. In December 2023, the company achieved its 11th consecutive annual dividend hike. With a dividend yield of 3.33% as of April 5, AMGN is one of the best dividend stocks on our list.
According to Insider Monkey's database of Q4 2023, 69 hedge funds, up from 60 in the previous quarter, held stakes in Amgen Inc. (NASDAQ:AMGN). These stakes have a total value of nearly $1.8 billion. With over 1.1 million shares, Two Sigma Advisors was the company's leading stakeholder in Q4.
Chevron Corporation (NYSE:CVX) is a leading American energy company that is engaged in various aspects of the oil and gas industries. The company currently pays a quarterly dividend of $1.63 per share, growing it by 8% in February this year. It has raised its payouts for 37 years in a row, which makes CVX one of the best dividend stocks on our list. In addition to holding a strong dividend growth track record, the company distributed over $11 billion to shareholders through dividends in FY23. As of April 4, the stock has a dividend yield of 4.03%.
At the end of December 2023, 71 hedge funds in Insider Monkey's database held investments in Chevron Corporation (NYSE:CVX), down from 72 in the previous quarter. The collective worth of these investments is over $21.6 billion. Warren Buffett's Berkshire Hathaway was the largest stakeholder of the company in Q4, owning stakes worth over $18.8 billion.
QUALCOMM Incorporated (NASDAQ:QCOM) ranks sixth on our list of the best dividend stocks to buy right now. The leading semiconductor and telecommunications company has been growing its dividends for the past 20 years and currently pays a quarterly dividend of $0.85 per share. The stock's dividend yield came in at 1.87%, as of April 5.
Insider Monkey's database of 933 hedge funds as of Q4 2023 showed that 78 funds had invested in QUALCOMM Incorporated (NASDAQ:QCOM), up significantly from 67 in the preceding quarter. The stakes held by these hedge funds have a total value of roughly $3 billion.
