5 Cheap Dividend Stocks with 3%-Plus Dividend Yield

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Dividend Stocks

Income investors might stay away from cheap dividend stocks on concerns that these equities might deliver lower returns than higher priced ones.

However, if chosen correctly, cheap dividend stocks can generate high returns, sometimes even higher than their more expensive peers. Most income investors should consider including low-priced equities in their investment portfolio to maximize their returns over long periods of time.

Some investors might not consider investing into any equities outside of a limited selection of familiar ones. That might be a safe approach that allows equity selection from a list of well-known companies with proven records of delivering solid returns over extended periods. While certainly safe and likely to deliver solid gains, this strategy could underperform even average market growth.

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Every portfolio should allocate a portion of the funds into equities with stable asset appreciation and rising dividend income distributions. However, every portfolio should also allocate a small portion of funds for investment into equities that exhibit slightly higher levels of volatility but also offer potentially higher returns.

Individual investors should determine how large of a share to allocate to these alternative investments based on their individual risk affinity. Additionally, investors must consider the investment portfolio’s specific goals and strategies over the long and short term.

 

Selecting Equities

To search for new investment opportunities, investors should start with a clean slate and first identify a few basic criteria. Using their favorite investment analysis tool — like the Dividend Screener available at DividendInvestor.com — investors can tweak and tighten their specific requirements until a list of only few potential equities remains. After narrowing the list of potential equities to a handful of promising contenders, the manual research of the remaining options becomes manageable.

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After filtering all the available equities through multiple steps of general and specific criteria, the list below contains five cheap dividend stocks that might have the potential to deliver robust dividend income and total returns, at least over the near term. The lowest market capitalization of these five companies is just below $5.5 billion while the largest is in excess of $20 billion, giving us an average of slightly below $13 billion in this list.

Furthermore, equities on the list below have boosted their annual dividends for at least the past two consecutive years and offer yields of more than 3%, as well as positive total returns over the past 12 months and three years. Lastly, the share prices of all five equities were below $20 at the end of trading on December 30, 2019.

 

5 Cheap Dividend Stocks to Buy Now: #5

Huntington Bancshares, Inc. (NASDAQ:HBAN)

Market Cap: $15.53 billion

Sector: Financials

First Dividend Paid: 1912

Consecutive Annual Dividend Hikes: 8 years

Dividend Frequency: Quarterly

12-Month Total Return: 2.2%

Three-Year Total Return: 24.6%

December 30, 2019, Closing Price: $15.08

Dividend Yield: 3.99%

Headquartered in Columbus, Ohio, and founded in 1866, Huntington Bancshares, Inc. — a holding company for The Huntington National Bank — provides commercial, small business, consumer and mortgage banking services. As a banking institution the company has been recovering from a share price decline driven by the 2008 financial crisis. However, since its all-time low just above the $1.00 mark in February 2009, the share price has advanced 15-fold.

In addition to its robust asset appreciation, Huntington Bancshares, Inc. also enhanced its annual dividend distribution 15-fold since resuming annual dividend hikes in 2011. However, because of a share price decline in 2015 and another pullback in late-2018, dividend growth outpaced asset appreciation over the past five years, which pushed the current yield 35% above the company’s own five-year yield average of 2.94%. Since embarking on its current streak of consecutive annual dividend hikes 10 years ago, the company has enhanced its annual payout at an average rate of 31% per year.

 

5 Cheap Dividend Stocks to Buy Now: #4

Hewlett Packard Enterprise Company (NYSE:HPE)

Market Cap: $20.4 billion

Sector: IT & Communications

First Dividend Paid: 2016

Consecutive Annual Dividend Hikes: 2 years

Dividend Frequency: Quarterly

12-Month Total Return: 24.62%

Three-Year Total Return: 22.8%

December 30, 2019, Closing Price: $15.86

Dividend Yield: 3.04%

Hewlett Packard Enterprise Company provides data analytics, cloud computing and storage solutions to private, corporate and institutional customers. The company has more than doubled its total annual dividend payout amount over the past four years for an average growth rate of 21.5% per year.

The most recent dividend hike in December 2019 increased the quarterly payout from $0.113 to the current $0.12 distribution. This quarterly payout is equivalent to a $0.48 annualized distribution and a 3%-plus forward yield, which is nearly 50% higher than the company’s own 2.03% five-year average.

Despite some volatility and a mid-year pullback, the share price has gained nearly 50% since its 52-week low in August 2019 and managed to maintain its general five-year uptrend. Additionally, the current share price has nearly 12% room on the upside before it reaches the analysts’ average target price in the mid-$17 range.

 

5 Cheap Dividend Stocks to Buy Now: #3

New Residential Investment Corporation (NYSE:NRZ)

Market Cap: $6.66 billion

Sector: Financials

First Dividend Paid: 2013

Consecutive Annual Dividend Hikes: 3 years

Dividend Frequency: Quarterly

12-Month Total Return: 24.5%

Three-Year Total Return: 40%

December 30, 2019, Closing Price: $16.11

Dividend Yield: 12.5%

As a real estate investment trust (REIT), the New Residential Investment Corporation invests in and manages residential mortgage related assets in the United States. The company invests in excess mortgage servicing rights (MSRs) on residential mortgage loans, real estate securities and residential mortgage loans.

Share price advancement of 60% since the all-time low at the beginning of 2016 suppressed the current yield just slightly below the company’s own five year-average. However, the current yield of 12.4% is still high enough to deliver dividend income that few other equities can match.

In addition to total returns of nearly 25% just in 2019, the company also rewarded its shareholders with robust long-term gains. Shareholders more than doubled their investment over the past five years for a total return of 101%.

 

5 Cheap Dividend Stocks to Buy Now: #2

Regions Financial Corporation (NYSE:RF)

Market Cap: 16.54 billion

Sector: Financials

First Dividend Paid: 1968

Consecutive Annual Dividend Hikes: 6 years

Dividend Frequency: Quarterly

12-Month Total Return: 32.7%

Three-Year Total Return: 28.7%

December 30, 2019, Closing Price: $17.16

Dividend Yield: 3.62%

Headquartered in Birmingham, Alabama, and founded in 1852, the Regions Financial Corporation operates more than 1,500 banking offices and 2,000 automated teller machines across the South, Midwest and Texas. The company has been paying dividends for more than five decades and generally delivered annual dividend payout growth until the 2008 financial crisis. Instead of eliminating its dividend payouts outright, the firm paid a nominal dividend of $0.01 for 19 consecutive quarters between the end of 2018 and mid-2013.

However, since resuming its annual dividend boosts in 2013, the company has increased its annual payout amount more-than 15-fold. This rapid dividend expansion is equivalent to an average growth rate of nearly 41% each year. In addition to the extraordinary dividend income growth, the company’s share price has risen more than six-fold since its all-time low in the aftermath of the 2008 financial crisis.

 

5 Cheap Dividend Stocks to Buy Now: #1

TFS Financial Corporation (NASDAQ:TFSL)

Market Cap: $5.5 billion

Sector: Financials

First Dividend Paid: 2008

Consecutive Annual Dividend Hikes: 4 years

Dividend Frequency: Quarterly

12-Month Total Return: 29%

Three-Year Total Return: 15.9%

December 30, 2019, Closing Price: $19.68

Dividend Yield: 5.51%

A subsidiary of the Third Federal Savings and Loan Association of Cleveland, MHC, the TFS Financial Corporation offers retail consumer banking services primarily in Ohio and Florida. While paying its first dividend in 2008, the company suspended its payouts in the aftermath of the financial crisis. However, since resuming dividend distributions in mid-2014 after a four-year pause, the company has hiked its annual dividend payout every year.

Moreover, the company has enhanced its annual payout nearly four-fold over the last five years. This advancement pace corresponds to an average dividend growth rate of 31% per year. Additionally, since a two-year decline of more than 25% between late-2016 and October 2018, the share price has been rising steadily to deliver double-digit-percentage total returns over the past three years, including nearly 30% just over the trailing 12-month period.

 


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Ned-Piplovic

 

Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.


 

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