In this article, we discuss 14 cheap DRIP stocks to buy now. You can skip our detailed analysis of dividend reinvestment plans and performance of dividend stocks in the past, and go directly to read 5 Cheap DRIP Stocks To Buy Now.
Investing in dividend stocks is often seen as a game for patient investors because it typically yields better returns over the long haul. The idea is that those who are willing to hold onto their investments for an extended period stand to benefit the most from this strategy. One of the key secrets to success in dividend investing lies in the power of compounding. Reinvesting dividends—putting those earnings straight back into buying more shares of the same investment—helps investors make their money work harder. Instead of pocketing the dividend payouts, they're plowed back into the investment, allowing for the accumulation of more shares. Reinvesting dividends has proven to be a powerful strategy that has significantly contributed to superior returns over the years. According to a report by Hartford Funds, since 1960, 69% of the total return of the S&P 500 Index can be attributed directly to reinvested dividends and the magic of compounding.
Investors often focus on stock price appreciation as the primary measure of their investment's success. However, a closer examination of the performance of leading global indexes over a 25-year period ending in March 2018 revealed that reinvested dividends contributed significantly to an additional growth of nearly 3% in these indexes, according to Forbes. The significance of this finding lies in the fact that reinvested dividends add a substantial layer of growth to investment beyond what is solely achieved through the increase in stock prices. This growth serves as a compelling reminder to investors about the significance of a comprehensive approach to measuring investment performance. Focusing solely on stock price appreciation might provide a partial view of an investment's success, but factoring in the reinvestment of dividends into the equation reveals a more accurate and holistic picture of overall returns.
In our article titled 13 Best DRIP Stocks to Own, we delved into the crucial role of dividend stocks in achieving long-term investment success. Referencing a report by T. Rowe Price, the article highlighted that over the last three decades until last year, reinvested dividends significantly contributed to the overall gains of the S&P 500 Index, accounting for a substantial 42.5%. The report also revealed the increased impact of dividend reinvestment, particularly for a select group of outstanding companies that consistently raise their dividends at a pace faster than the overall market. This phenomenon gains strength because the more often a growing dividend is reinvested, the greater its potential to significantly bolster long-term investment returns.
Investing in stocks that offer strong dividend growth potential can be a smart strategy for long-term investors seeking consistent returns. Johnson & Johnson (NYSE:JNJ), The Procter & Gamble Company (NYSE:PG), and AbbVie Inc (NYSE:ABBV) are some of the best DRIP stocks to own due to their robust track records of dividend growth and stability. By reinvesting dividends from these stocks, investors have the opportunity to compound their holdings over time, potentially enhancing their total returns and building wealth steadily. In this article, we will further discuss some cheap DRIP stocks to own.
14 Cheap DRIP Stocks To Buy Now
Photo by Karolina Grabowska from Pexels
Our Methodology:
For this list, we started by using stock screeners to find dividend stocks with P/E ratios below 20 and share prices under $100, as of December 21. As anticipated, the list was extensive. From that long list, we selected 13 stocks with dividend reinvestment plans and the lowest P/E ratios. These chosen stocks are ranked based on their P/E ratios, from highest to lowest.
We also talked about hedge fund sentiment for each stock in this article. Hedge funds' top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points since 2014 (see the details here). That's why we encourage our readers to delve into the specifics and nuances of our research.
Philip Morris International Inc. (NYSE:PM) is a leading multinational tobacco company. It's primarily engaged in the manufacture and sale of cigarettes, smoke-free products, and other tobacco-related products. On December 7, the company declared a quarterly dividend of $1.30 per share, which was in line with its previous dividend. The stock has a dividend yield of 5.60%, as of December 21. With a P/E multiple of 17.92x, PM is one of the best DRIP stocks to own.
At the end of Q3 2023, 62 hedge funds tracked by Insider Monkey owned stakes in Philip Morris International Inc. (NYSE:PM), growing from 54 in the preceding quarter. The total value of these stakes is over $4.7 billion. With more than 15 million shares, Fundsmith LLP was the company's leading stakeholder in Q3.
Franklin Resources, Inc. (NYSE:BEN) is a California-based investment management company. Its primary focus lies in providing investment advisory and management services to individual and institutional investors worldwide. The company announced a 3% hike in its quarterly dividend on December 13. It will now pay a quarterly dividend of $0.31 per share for a dividend yield of 4.20%, as of December 21. BEN is one of the best cheap DRIP stocks to own as the company has raised its payouts for 48 consecutive years.
The number of hedge funds tracked by Insider Monkey owning stakes in Franklin Resources, Inc. (NYSE:BEN) grew to 22 in Q3 2023, from 19 in the previous quarter. The overall value of these stakes is over $120 million.
Morgan Stanley (NYSE:MS) is next on our list of the best DRIP stocks to own. The global financial services company currently offers a quarterly dividend of $0.85 per share and has a dividend yield of 3.67%, as of December 21. The stock currently boasts a price-to-earnings ratio of 16.41.
Morgan Stanley (NYSE:MS) was a part of 59 hedge fund portfolios at the end of Q3 2023, up from 54 a quarter earlier, as per Insider Monkey's database. The stakes owned by these hedge funds have a consolidated value of more than $2.5 billion. Ken Fisher's Fisher Asset Management was the company's largest stakeholder among these hedge funds.
Pfizer Inc. (NYSE:PFE) is a global pharmaceutical company known for its significant contributions to the healthcare industry. The company recently announced a 2.4% increase in its quarterly dividend, which stretched its dividend growth streak to 14 years. It now offers a quarterly dividend of $0.42 per share, which comes with an attractive dividend yield of 5.93%, as of December 21.
As of the end of Q3 2023, 73 hedge funds tracked by Insider Monkey reported having stakes in Pfizer Inc. (NYSE:PFE), which remained the same as in the previous quarter. The collective value of these stakes is over $2.43 billion.
Cisco Systems, Inc. (NASDAQ:CSCO) is a prominent multinational technology company that specializes in networking hardware, software, and services. CSCO is one of the best DRIP stocks to own as it is currently trading at a price-to-earnings ratio of approximately 14.95x. The company holds a 16-year track of consistent dividend growth and it offers a quarterly dividend of $0.39 per share. The stock's dividend yield on December 21 came in at 3.14%.
Cisco Systems, Inc. (NASDAQ:CSCO) was a popular stock among hedge funds, according to Insider Monkey's database of Q3 2023. The company ended the quarter with 64 hedge fund positions, up from 55 a quarter earlier. The collective value of stakes owned by these hedge funds is over $1.6 billion. With over 11.3 million shares, AQR Capital Management was the company's leading stakeholder in Q3.
Comcast Corporation (NASDAQ:CMCSA) is a Pennsylvania-based telecommunications and media conglomerate that operates in several segments of the entertainment, communications, and technology industries. The company pays a quarterly dividend of $0.29 per share and offers a dividend yield of 2.64%, as of December 21. Overall, it holds a 15-year streak of consistent dividend growth. With a P/E ratio of 12.17, CMCSA is one of the best cheap DRIP stocks to own.
Of the 910 hedge funds tracked by Insider Monkey at the end of Q3 2023, 68 funds owned stakes in Comcast Corporation (NASDAQ:CMCSA), growing from 66 in the preceding quarter. The collective value of these stakes is more than $3.6 billion.
Wells Fargo & Company (NYSE:WFC) is a major American multinational financial services company providing a broad range of banking, investment, and other financial products and services. The company's current quarterly dividend comes in at $0.35 per share for a dividend yield of 2.83%, as of December 21. It is one of the best cheap DRIP stocks to own on our list, as it has a P/E ratio of just 10.76.
Wells Fargo & Company (NYSE:WFC) was included in 77 hedge fund portfolios at the end of Q3 2023, up from 75 in the previous quarter, according to Insider Monkey's database. The total value of stakes owned by these hedge funds is over $4.32 billion.
Enterprise Products Partners L.P. (NYSE:EPD) is a leading American midstream energy company. It operates an extensive network of pipelines, terminals, processing plants, and storage facilities across key energy-producing regions in the US. The company offers a quarterly dividend of $0.50 per share, having raised it by 2% in July this year. This marked the company's 24th consecutive year of dividend growth, which makes EPD one of the best DRIP stocks to own. The stock offers a lucrative dividend yield of 7.65%, as of December 21.
At the end of September 2023, 25 hedge funds tracked by Insider Monkey reported having stakes in Enterprise Products Partners L.P. (NYSE:EPD), the same as in the previous quarter. The collective value of these stakes is more than $325.2 million. Among these hedge funds, Fairholme (FAIRX) was the company's leading stakeholder in Q3.
National Fuel Gas Company (NYSE:NFG) engages in the exploration and development of natural gas and oil reserves. The company is a Dividend King with 53 consecutive years of dividend growth under its belt. Currently, it offers a quarterly dividend of $0.495 per share for an attractive dividend yield of 3.93%, as of December 21. The stock is trading at a P/E multiple of 9.68x, which makes NFG one of the best DRIP stocks to own.
As of the end of Q3 2023, 23 hedge funds in Insider Monkey's database owned stakes in National Fuel Gas Company (NYSE:NFG), compared with 26 in the preceding quarter. The value of these stakes is roughly $170 million in total.
