Here are some dividend stocks that won’t break the bank.
The U.S. economy is on shaky ground and inflation levels remain near multidecade highs. One way for investors to offset the negative impact of inflation is to generate regular income via dividend stocks. Historically, dividends have accounted for about 40% of the total stock market return since 1930, but they have accounted for more than half of the market’s total return during decades in which inflation was high. Fortunately, there are plenty of dividend stocks out there that don’t cost an arm and a leg. Here are eight of the best dividend stocks under $20, according to CFRA Research.
Vale SA (ticker: VALE)
Vale SA is a Brazilian miner and is one of the world’s largest iron ore and nickel producers. Analyst Matthew Miller says Vale has an impressive free cash flow profile that helps the company fund its 9.3% dividend yield over the trailing-12-month period. Miller says the company faces ongoing litigation risks tied to the 2019 Brumadinho dam disaster in Brazil, but the company has taken appropriate steps to mitigate the risk of future dam ruptures. He says Vale should trade at a higher valuation given its sizable capital return program. CFRA has a “buy” rating and $16 price target for VALE stock, which closed at $15.22 on Nov. 16.
Ford Motor Co. (F)
U.S. auto giant Ford reinstated its dividend in late 2021 after suspending it in 2020. Critics of the move question Ford’s focus given the company has also pledged to invest $50 billion in vehicle electrification technology through 2026. Ford shares have tumbled 30.9% in 2022 through Nov. 16, making it the worst-performing stock on this list. However, Ford’s underperformance has driven its dividend yield up to an attractive 4.3%. Analyst Garrett Nelson says Ford is well positioned for the future with a solid slate of new vehicle models. CFRA has a “buy” rating and $16 price target for F stock, which closed at $13.90 on Nov. 16.
Stellantis NV (STLA)
Stellantis is a global automaker formed by the 2021 merger of Group PSA and Fiat Chrysler. The stock trades at just 3.3 times forward earnings, the lowest earnings multiple of any stock on this list. Nelson is bullish on Stellantis’ valuation and says its post-merger scale, cost synergies and turnaround opportunity should help the stock unlock value over time. Nelson says Stellantis is well capitalized and has a unique financial flexibility that differentiates it from many other automakers. Stellantis also pays a 7.6% dividend yield, the highest on this list. CFRA has a “buy” rating and $16 price target for STLA stock, which closed at $14.83 on Nov. 16.
Vodafone Group PLC (VOD)
Vodafone is a global wireless telecommunications company that has a strong presence in Western Europe, India and Africa. Analyst Adrian Ng says the company’s cost-cutting initiatives are helping Vodafone expand margins, and its diverse business profile creates opportunities for future growth. Ng says Vodafone should continue to generate enough cash flow to support its 8% dividend yield. Vodafone reported 5% organic growth in earnings before interest, taxes, depreciation and amortization, or EBITDA, in fiscal 2022, and Ng expects margin expansion will drive further EBITDA growth in 2023. CFRA has a “buy” rating and $20 price target for VOD stock, which closed at $11.62 on Nov. 16.
Manulife Financial Corp. (MFC)
Manulife Financial is one of the world’s largest insurers and wealth managers. Analyst Catherine Seifert says Manulife’s revenue growth may slow in a challenging environment in coming quarters, but the stock’s attractive valuation, its above-average operating revenue growth and its 5.9% dividend are a bullish combination for investors. In addition, Seifert says easing pandemic lockdowns and rising interest rates have been tail winds for Manulife. After a down year in 2022, she projects Manulife’s segment operating revenue growth will rebound to between 4% and 7% in 2023. CFRA has a “buy” rating and $22 price target for MFC stock, which closed at $17.48 on Nov. 16.
Orange SA (ORAN)
Orange SA is a diversified French telecom company. Orange shares are down 26.1% over the past three years, but Ng says the stock is attractively valued, given that all of the challenges surrounding a difficult European regulatory environment have already been priced into the stock. In addition, Ng says Orange’s cost-cutting measures will help support margins, and the company has opportunities to monetize its roughly $10 billion in tower assets. Finally, he says management is committed to maintaining the stock’s 7.5% dividend yield. CFRA has a “buy” rating and $12 price target for ORAN stock, which closed at $10.08 on Nov. 16.
Huntington Bancshares Inc. (HBAN)
Huntington Bancshares is a U.S. regional bank that offers consumer and commercial banking, brokerage, insurance and investment services primarily in the Midwest. Analyst Alexander Yokum says he is optimistic about Huntington’s loan growth outlook and the bank’s opportunities to improve efficiency. Yokum says Huntington’s prudent risk management will also serve investors well during climates of macroeconomic uncertainty. He says the bank’s merger with TCF will improve Huntington’s product portfolio and help generate at least 19% revenue growth in 2022. The stock also pays a 4.2% dividend. CFRA has a “buy” rating and $17 price target for HBAN stock, which closed at $14.90 on Nov. 16.
Telefónica SA (TEF)
Spain’s Telefónica SA is another attractive international telecom dividend stock trading under $20. Ng says Telefonica’s valuation should expand as the company focuses on more stable markets. In the third quarter, Telefonica reported 3.8% organic revenue growth, 2.8% services growth and 12.2% handset sales growth. Brazil was a particularly strong market, generating 12.3% growth in the quarter. Germany revenue was also up 4.2%. Unfortunately, revenue from the company’s core Spain market declined 2.8%. Telefonica shares pay a 4.3% dividend. CFRA has a “buy” rating and $4.50 price target for TEF stock, which closed at $3.63 on Nov. 16.
8 of the best cheap dividend stocks under $20:
— Vale SA (VALE)
— Ford Motor Co. (F)
— Stellantis NV (STLA)
— Vodafone Group PLC (VOD)
— Manulife Financial Corp. (MFC)
— Orange SA (ORAN)
— Huntington Bancshares Inc. (HBAN)
— Telefónica SA (TEF)
More from U.S. News
7 Best Mid-Cap Stocks to Buy Now
7 Best Oil and Gas Stocks to Buy Now
The 7 Best Metaverse Stocks to Buy Now
8 Best Cheap Dividend Stocks Under $20 originally appeared on usnews.com
Update 11/17/22: This story was published at an earlier date and has been updated with new information.
