WWhat if I told you that in such an expensive market there are nine dividend-paying stocks with less than nine price-to-earnings (P / E) ratios?
And that this low P / E ratio brought in 6.9% per year in dividends ?!
If I hadn’t researched and written it, I wouldn’t believe it myself. But in a minute, I’ll share the details of this 9-pack which is earning 4.2% to 19.2%.
These hidden gems are unlikely to be touted on traditional financial websites. With the S&P 500 in the stratosphere, these ground-level bargains are overlooked. But we nonconformists see these cheap dividend stocks that:
- Benefit from P / E ratios of just 8.5 on average.
- Yield of 6.9% collectively.
Let’s start with LyondellBasell (LYB, 5.1% yield), a Netherlands-based multinational chemical company that is both the largest producer of polypropylenes and the largest licensor of polyolefins, both of which have a wide range of products. ‘uses, from consumer packaging to auto parts. .
LYB underperformed the market in 2021, trading practically flat against a return of almost 25% for the S&P 500. And that kept it at a very low price, at just 5.5 times the estimates of profits.
We have to admit that Lyondell is “cheap for a reason”. Namely, the company expects a significant operational setback in 2022: a 4.4% drop in revenues and an almost 19% drop in profits thanks to soaring input costs.
Tax preparation services firm H&R Block (HRB, 4.4% return) could also face headwinds. The stock outperformed the market as stimulus and other COVID measures ushered in a slew of new tax headaches. This rocked the entire tax preparation industry for a year – now, however, H&R faces the challenge of retaining these customers. His forward P / E of 9 can take this into account.
Strategic Education (STRA, 4.2% return) and Western Union (WU, 5.7% return) find themselves in the bargain bin as their business models are challenged.
Take Western Union which, with a forward P / E of 7.7, is certainly attractive from a valuation standpoint. The same goes for a yield of almost 6%. But the stock is sagging under the weight of transformational changes in its industry – both traditional electronic payment companies, as well as the rise of cryptocurrencies.
Meanwhile, Strategic Education – the product of the 2018 merger of for-profit educators Strayer and Capella Education – is a long-standing underachiever facing the prospects of a rapidly changing educational landscape that challenges even institutions. most sacred traditions. Its cheap forward P / E of 13.8 reflects these difficulties, as well as expectations of an operational pullback next year.
2 stories of secular sobs that are only cheap, not values
More attractive is Chevron (CVX, 4.8% yield), which is trading at 11 times earnings estimates. Rising oil and gas prices are not an automatic victory for large integrated Chevron, where the benefits for its E&P division are somewhat offset by higher input costs for its large refining operations. Still, the confluence of better energy prices and picking up demand for its refined products is ultimately good for CLC prices.
And it’s hard not to love Chevron’s cunning and resilience. Even though he was saving money during the COVID energy crisis, he bought Noble Energy under a $ 5 billion deal. It has also succeeded in continuing to grow its dividend and recently relaunched its share buyback program.
The insurance industry is an area with several attractive stocks, where rising rates benefit insurers looking to invest policyholders’ premiums in low risk assets.
I recently touted the virtues of Prudential Financial (PRU, 4.3% return), whose businesses include individual and group life insurance, annuities, retirement services and investment management, between others.
âManagement knows a lot when they see one: they’ve bought back 10% of PRU’s shares in the past five years,â I said. And Prudential is now getting a deal on its own stock, at 9 times earnings estimates.
It is not, however, the only attractive insurer. Unum Group (UNM, 4.8% return) is the leading disability insurance company in the US and UK. Other products offered include life, critical illness and accident insurance. And Wall Street appears to be sleeping on its growth outlook – despite estimates of a 16% profit increase in 2022, UNM is trading at 5.5 times earnings estimates.
Another insurer to watch is Old Republic International (ORI, 3.5%) – a general insurance and old-line securities provider whose overall performance belies a much more powerful income producer. Consider my recent look at ORI:
“Where ORI’s payout transcends from ‘good’ to ‘excellent’ is its fairly consistent special dividends. Old Republic uses a two-part dividend system that sees the insurer pay a regular allowance, as well as payouts. annual specials based on his earnings for the year. “
Namely, his 22-cent dividend – which, by the way, has grown for 40 straight years to make him a mid-cap aristocrat – is only good for a return of just 3.5%, which is in fact. outside of our 4%. filter. Add in the special cash dividend of $ 1.50 per share announced in September, however, and you have a tantalizing return of 9.2%!
Sweetening the pot is a forward P / E of 9.5.
Speaking of special dividends, let’s take a second look at OneMain Holdings (OMF, 5.7% yield). The company, which operates under OneMain Financial, provides personal installment loans to approximately 2.2 million customers, many with unsecured credit scores.
This is certainly a cyclical activity, but one that has grown like a weed during COVID. And that fueled a series of massive dividends. Rather than paying separate special dividends, the OMF sets a âfloorâ for the quarterly dividend, then pays at least that, if not more. At the end of 2020, OMF set a floor of 40 cents per share for its dividend. This year it paid a dividend of $ 3.95 per share, then 70 cents per share (setting a new low in the process), then $ 4.20 per share, and another 70 cents. That $ 9.55 per share of income translates into a total return of 19.2% at current prices!
These dividends make a BIG difference
And we’re getting that return for just 5.5 times the estimate.
Earn 15% every year, even during recessions!
I love these stocks – and with awards like these, who wouldn’t love?
But for a number of reasons – inconsistent payments, slow growth prospects, even existential issues – I don’t like them.
I reserved this level of excitement for a small group of seven dividend growth games that are expected to double. This is because they succeed in what is called the âshareholder trifectaâ, where an action pays us back in three different ways:
- With a dividend today.
- A payout increase tomorrow (which raises the share price accordingly).
- And by buying back stocks (less free float means more mileage per share on dividends and increases).
These hidden return stocks can give us a recession-proof retirement. They can even make us as rich as we hoped to be in our youth!
These seven dividends are expected to double over the next few years. As these payouts emerge, stock prices will follow higher. So the best time to buy them is now – before they skyrocket, not after!
Bull or bear, I don’t care. These seven recession-proof dividend stocks are poised to generate returns of 15% per annum, every year.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.