Dividend stocks are on sale.
The smart money has been rotating out of the “go-go” big tech names to the safety of high-yielding dividend income stocks paying yields of 5%, 6%, 7%, 8%, or more.
At the same time, equity markets have gotten roughed up since they hit their 52-week highs back in mid-February. The S&P 500 is down 3% while the NASDAQ is down 9% over interest rate worries and an overbought stock market.
Yet it’s been a different story for the dividend-paying segment of the U.S. equity market. That segment, as measured by the iShares Dow Jones Select Dividend Index (DVY), is up 29% since the Presidential election last November.
Wall Street is finally showing some love for the lagging value, high-yielding dividend stocks. And if we see more downside in the market at large, the best of these income-generating equities could be the place for your money now.
Here are five cheap dividend stocks on sale.
AT&T (NYSE: T) (along with Verizon) was the big winner when it came to the 5G Spectrum auction with the two carriers acquiring 90% of the licenses for the new technology. Even though the bids needed to win the spectrum ran higher than expected, the 5G build-out bodes well for its future core business of providing the next generation of cellular service. AT&T continues to boost its dividends every year and now pays out a sweet 7.37% yield. Yes, there are challenges shaking up the communications and media world, but AT&T can still be a safe-first income play for the next 5 years for investors looking for high yields.
Dow Inc. (NYSE: DOW)
This company is a combination of an industrial and materials conglomerate … which makes it a great defensive play in all kinds of market conditions. DOW was spun off last year from DuPont (DD) after a 2017 merger and has been able to manage its business through different economic cycles over the years. The separation seems to be working better for both companies. DOW’s stock price has performed slightly better over the last year and the company is paying a respectable dividend of 4.50%. The stock may not trade like the high-flying tech sector but it’s on sale and a bargain at the current price.
Kraft Heinz Company (NASDAQ: KHC)
Kraft Heinz together with its subsidiaries manufactures and markets food and beverage products around the world. They had $26.1 billion of net sales in 2020. You probably know their many brands beyond Kraft Cheeses and Heinz Ketchup including Oscar Meyer, Jell-O, Capri-Sun, Maxwell House, Grey Poupon, and more. Kraft stock has benefited from the “at-home food demand” from the pandemic. This has seen its share price trade well above its 200 day moving average. We expect the company to continue to add to its top-line sales in 2021. Kraft Heinz is a solid dividend play at 4.30% and the stock is up 9% in the first 2 months of the year.
ONEOK Inc. (NASDAQ: OKE)
ONEOK is your classic midstream natural gas company that pays a healthy 9% plus dividend with a 5 year (CAGR) dividend growth rate of 9.01%. They locate, process, store, and transport natural gas in the US. The company sports a solid investment-grade balance sheet with significant cash liquidity. A $2.5 billion credit facility with no immediate debt maturities. They have a well-capitalized customer base with no single customer representing more than 10% of ONEOK’s revenue. OKE is not an MLP like some of its competitors. They are not compelled to distribute a high percentage of its cash as dividends. However, the company has been loyal to shareholders raising its dividend payment every year for the last 19 years.
Philip Morris (NYSE: PM)
Phillip Morris (PM) is the large, multinational cigarette and tobacco manufacturer, with 90% of its products sold outside of the US. PM used to be part of Altria Group (MO) until it was spun out in March of 2008. Phillip Morris USA is the industry leader in this space especially due to its continued introduction of next-generation products with a 49% share of the cigarette market in the United States. There are some headwinds down the road for the stock as other countries begin to hike the tax rates on PM’s cigarette sales. But the stock is still undervalued with a 14.44 forward PE and a healthy 5.7% annual yield. Phillip Morris and Altria are the two dividend darlings of this sector and a favorite of dividend investors. Phillip Morris has the edge lately, with its stock price outperforming Altria over the last year.