6 Good Dividend Stocks Under $50/share
Dividend income is one of the most popular passive income streams people can create through their investments in high quality company stocks.
Dividend income is one of the most popular passive income streams people can create through their investments in high quality company stocks. As mentioned before, one thing we really like about focusing on dividends is that you can be less concerned with the normal ups and downs of the stock. As long as the company is well managed, has a desirable product and growth prospects, it does not really matter what the day to day stock price is. It is great to build a strong dividend paying portfolio over the years, but building such a nice passive income “machine” can be expensive. This is especially true if loading up on shares of high quality Dividend Kings or Aristocrats (stocks with 50 or 25 years + of consecutive dividend payments). Great companies like 3M cost about $200/share making it hard to buy that many. This is one reason it is important to look at the dividend yield which we will describe in more detail.
Therefore we have compiled a list of good dividend paying stocks with a cost of well under $50/share. Not inexpensive by any means, but much easier to buy shares at under $50 vs. over $200! Especially if you are just starting out in building a dividend income generating portfolio. Also, many of these at times can be considered good value plays if they have good long term growth prospects. A good example is AT&T at the moment.
Please keep in mind that none of what is talked about here are the first steps to investing or managing personal finances in a sound fashion. We are big believers in the fundamentals first, just like in sports. One is to master the fundamentals and foundational skills before getting fancy or creative. Our personal finance strategy at TMV is grounded in basics, keep debt levels and spending as low as possible, have an emergency fund, max out 401k low expense type index funds first before diving into extra efforts like dividend investing. Good dividend portfolios are one strategy out of many to acquire assets that spin off passive income. Also remember that any investments in individual stocks holds some level of risk.
As an extra element of a multi pronged investment approach, I like using my Robinhood account to buy shares of solid dividend players. These are Dividend Kings, Aristocrats and Champions, in other words companies with a long track record of paying a constant and often rising dividend to investors.
That said, here are 6 stocks many analysts say are strong companies for the long term and have a current share price under $50.
We also list the dividend yield which is an important number to keep in mind. It basically tells you how the dividend per share compares to the current stock price, producing a certain percentage return or yield per share. We divide the company's annual dividend payout by the stock price to calculate the yield. The average S&P 500 stock dividend yield is about 1.9%. This is just another tool that dividend investors use to judge and rank stocks.
Jim Cramer says to be cautious of overly high dividend yields. If the yield is too high it tends to mean investors are massively selling and pushing the price down. Another red flag is when the company cannot sustain a long term dividend due to poor fundamentals and high debt.
1. Aflac (AFL) (.26/share/quarter) (share price about $43) (2.3% dividend yield)
Aflac is the largest provider of supplemental insurance in the United States. It is most known for its payroll deduction insurance coverage. So for example, if someone is injured and cannot work, they can provide short term disability insurance. They provide a whole host of other insurance products, long term care, home health care, etc.
2. A.O. Smith (AOS) (.18/share/quarter) (about $43/share) (1.9% yield) Dividend Aristocrat
A.O. Smith delivers innovative solutions to water heating needs, for nearly 80 years. They “deliver the world’s hot water” to residential and commercial customers in more than 60 countries, offering some of the best-known and widely respected brands in the industry. Brands deliver long-lasting, reliable service with the features our customers value. We also offer the broadest range of high-efficiency water heating products that save energy. China accounts for a large amount of sales. Some analysts see the dividend doubling by 2020.
3. Archer Daniel Midland (ADM) (.335/share/quarter) (about $46/share) (2.78% yield)
ADM is an America food processing corporation. ADM has an impressive 42 year dividend increase streak. ADM owns about 636 processing plants and leases another 140 around the globe. Last I checked, eating is not going out of style and someone needs to process food for billions of people.
4. AT&T (T) (.50/share dividend/quarter) ($30/share) (6.52% yield)
Due to the lower end stock price, AT&T currently boasts a 6.5% dividend yield. AT&T has some positives and negatives that analysts talk about constantly. AT&T is just getting started integrating media into its broader business and long term, the outlook is overwhelmingly bullish. AT&T remains one of the best Dividend Aristocrats for income investors with 34 consecutive years of dividend hikes. Many analysts believe the recent pullback is an opportunity for income investors to buy this best-in-class high dividend stock. The 6.5% yield is unlikely to last though.
5. Hormel Foods HRL (.187 cents/share dividend/quarter) (45/share) (1.67% yield)
Wholly Guacamole, Columbus Sausages, Muscle Milk, Jennie-O, Applegate, Spam, Skippy, & dozens of other protein products. 52 consecutive years of dividend increases. $9.2 billion in sales in 80 countries. The company has some great legacy brands and is busy executing smart acquisitions that have increased the company's profit margins. The dividend has grown at a double digit growth rate over the decade, and is poised to continue at a similar rate. Analysts believe the shares are a bit on the expensive side, but Hormel can make for a stellar addition to any dividend growth investor's portfolio.
6. Coca-Cola (KO) (.39/share/quarter) ($49/share) (3.14% yield)
Coca-Cola, one of the most iconic American companies in the world since 1886! Coca-Cola is another classic one just under $50 worth considering. It boasts 55 years of increasing dividends! I consider KO to be one of those foundational dividend stocks. They boast the classic iconic brands, as well as Minute Maid, Dasani Water, Sprite, Vitamin Water, etc. They most recently acquired a large coffee chain in Europe, Costa Coffee to expand into that market. Sure, tastes have changed in recent years with some consumers preferring less sugary drinks, and of course a major player like KO is adapting to that change. For example with their acquisitions of Honest Tea and Suja-life drinks and more.
Coca-Cola may deliver about $8 billion in net earnings this year. Talk about "liquid gold"!
Dividend Yield: About 3.14%, a bit on the high side for most S&P 500 stocks, so a strong yield.
Price to Earnings Ratio: If you divide the current price of about $49/share by an expected earning of $2.08, this is about a 23.5 P/E ratio. This is about the average P/E ratio for the S&P 500, and means the share is about proper valued at the moment, not too high or too much of a great value. If the stock price dipped to about $41-44/share, you may be looking at a good value.
Coca-Cola faces some stiff competition. But with good management and good strategic execution of acquisitions, this iconic brand will be around for a while.
All I can say is that it typically pays to be like Buffett, Investing in high quality companies, with wide moats, that pay a dividend is classic Buffett investing. He particularly likes to invest in these companies when the share price is at a discount.