Dividends and value stocks are a match made in heaven for 2022 investors.
The stock market is famously cyclical. Aside from the broader bull market vs. bear market assessment, equity investors regularly “rotate” their bets among market sectors and stock types as economic circumstances change and risk appetites shift. Thus far in 2022, Wall Street has decidedly shifted from preferring growth stocks to value stocks — a category that’s lived in growth’s shadow for much of the past decade. Rapidly rising interest rates are a major factor behind this recent shift, with some economists expecting as many as seven interest rate hikes this year. Still, bond yields are nothing to write home about, with the 10-year Treasury still yielding less than 3%. With fixed income still leaving much to be desired for income investors, here are seven high-dividend value stocks to buy — all with yields of at least 4% — from lowest to highest dividend yield.
Whirlpool Corp. (ticker: WHR)
Whirlpool, a familiar consumer brand to many Americans, is a Michigan-based appliance company that makes fridges, dishwashers, microwaves, ovens and more. The company enjoyed a boom in demand during the pandemic as consumers splurged to spruce up their homes as a work-from-home economy sprang into existence. With investors now fearing a slowdown in business as consumer behavior reverts to more normal trends, shares are down about 25% in the last year. Still, an expected slowdown is no reason not to like this dividend-paying value stock, which increased its payout by 25% in February; enjoys a well-regarded, 111-year-old brand; and trades for a mere 7 times forward earnings. By comparison, the S&P 500 benchmark stock index trades at about 20 times forward earnings.
Dividend yield: 4.1%
Bank of Nova Scotia (BNS)
If you’re pivoting to value stocks due to the rising rate environment, you’re already primed to like a stock like Bank of Nova Scotia, the Canadian financial company doing business as Scotiabank. That’s because bank stocks at large tend to perform well as rates rise, as the spread between what they pay for deposits and what they charge for loans — known as the net interest margin — increases. On April 13, Canada’s central bank, the Bank of Canada, doubled its benchmark interest rate from 0.5% to 1%, the steepest hike in 22 years, in an effort to help combat inflation. BNS, which trades for just 10 times earnings and pays a solid dividend, should stand to benefit as future rate hikes are implemented.
Dividend yield: 4.7%
Energy Transfer LP (ET)
Any half-decent list of dividend stocks to buy in 2022 should include at least one or two energy stocks. After all, crude oil prices have spent much of the year above $100 per barrel, while U.S. natural gas prices hit a 13-year high in April. Unlike producers, Energy Transfer doesn’t directly benefit from those surges, as it’s a “midstream” company engaged in the transport and storage of fossil fuels — but then again, it doesn’t carry big downside when prices fall. After acquiring Enable Midstream Partners in December 2021, Energy Transfer boasts 120,000 miles of infrastructure across the U.S., and an impressive 30% of the country’s natural gas and crude oil is transported via ET’s pipelines. Shares trade for just 6 times earnings.
Dividend yield: 6%
Vector Group Ltd. (VGR)
Another famously high-dividend corner of the market is the tobacco industry, where Vector Group resides. A fraction of the size of industry giants Altria Group Inc. (MO), Philip Morris International Inc. (PM) and British American Tobacco PLC (BTI), all of which are worth about $100 billion or more, the $2 billion Vector Group has more room to run. Despite that, VGR trades at just 11 times forward earnings and less than 2 times sales. Despite rivals like Phillip Morris trading at about 5 times sales and using more than 80% of earnings to pay dividends, VGR uses just 57% of earnings to pay its 6.3% dividend, leaving more room for upside.
Dividend yield: 6.3%
Companhia Energetica de Minas Gerais (CIG)
A little geographical diversification is always a nice portfolio feature, and Companhia Energetica de Minas Gerais, a Brazilian power company that goes by Cemig for short, checks that box for investors. The utilities sector tends to be a good place to hunt for high-dividend value stocks, as their highly regulated local monopolies allow for predictable cash flows and sizable payouts. Brazil has one of the 10 largest economies in the world, and with commodity prices on the rise, that’s good news for this economy, whose top exports include soybeans, crude oil and sugar. Shares currently trade for just 7 times earnings.
Dividend yield: 7.6%
Antero Midstream Corp. (AM)
Another midstream oil and gas stock, the Denver-based Antero Midstream is a pipeline operator churning out big cash flows that it passes on to investors. While Antero’s price-earnings ratio of about 16 is higher than some others on this list, so is the company’s 8% dividend yield, which is about three times the rate a 10-year Treasury bond pays and more than five times the S&P 500’s measly 1.4% dividend yield. The bizarre year of 2020, when oil prices briefly went negative, saw AM post a 26-cent-per-share loss, while 2021 brought earnings per share, or EPS, of 69 cents. This year, Antero’s business should continue to improve, with analysts expecting EPS of 82 cents. With the U.S. increasingly moving toward energy independence, domestic energy infrastructure of the kind Antero provides will become increasingly important to the economy and national security.
Dividend yield: 8%
Gerdau SA (GGB)
Last on the list of high-dividend value stocks to buy — and with the highest yield — is Gerdau SA, a top Brazilian steel firm. Another pick from South America’s most dominant economy, GGB trades at a criminally cheap 3 times forward earnings. Sometimes low multiples like these can indicate that the market believes a given industry is at or near a top, and it’s indeed possible that commodities have peaked and global supply-demand imbalances will correct as the economy cools and supply of everything from steel to oil steadily grows. The $10 billion Gerdau is interconnected with the global economy — the company cited strong performance of both the Brazilian and U.S. construction industries as a reason for meaningful margin improvement in the fourth quarter of 2021.
Dividend yield: 8.1%
Top high-dividend value stocks to buy now:
— Whirlpool Corp. (WHR)
— Bank of Nova Scotia (BNS)
— Energy Transfer LP (ET)
— Vector Group Ltd. (VGR)
— Companhia Energetica de Minas Gerais (CIG)
— Antero Midstream Corp. (AM)
— Gerdau SA (GGB)
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7 Value Stocks to Buy With High Dividend Yields originally appeared on usnews.com
Update 04/21/22: This story was published at an earlier date and has been updated with new information.
