There’s a lot of chatter in the investing world about how dividend investing can help fast-track your portfolio’s growth while also providing you with extra cash flow.
However, you need to invest in the right stocks to enjoy the amazing benefits of dividends. So what are some of the best cheap dividend stocks to buy now?
Read on to find out.
Best Cheap Dividend Stocks To Track
Lloyds Banking Group PLC (NYSE: LYG)
We’re kicking things off with a major financial provider, Lloyds Banking Group Plc.
It’s one of the largest retail banks in the United Kingdom, offering a wide range of services from commercial and retail banking to insurance and wealth.
These services are provided via its brands Halifax, Lloyds Bank, Scottish Widows, and the Bank of Scotland. The company is based out of London, UK, and was created in 1965.
The company is predicted to benefit from a rise in interest rates, and its stock price as of January 2023 is set at $2.30 per share.
Lloyds Banking Group Plc offers investors a high dividend yield of 4.69% with a $0.10 annual payment and a payout ratio of 38.04%.
Barclays PLC (NYSE: BCS)
Offering financial services in the Americas, Africa, Asia, the Middle East, Europe, and most especially the United Kingdom, Barclays PLC is a financial products and service provider and a multinational investment bank.
The company was founded in 1985, and its services include investment banking, credit cards, wealth management, retail banking investment management services, and wholesale banking.
Even though Barclays has experienced slow growth in its investment and corporate banking division in recent quarters, it has been able to offset this with results from its credit card and payment division.
As of January 2023, its stock price is $8.38, with a strong dividend yield of 3.78%.
The company has an annual payout of $0.31 with a 20.29% payout ratio and a 5-year growth of 15.44%.
Orange SA (NYSE: ORAN)
Formerly known as France Telecom, Orange SA is a diversified multinational telecommunications company based in France.
It is a major player in the global telecommunications market and operates in several countries across Africa, Europe, and the Middle east.
The company sells handsets, broadband equipment, and accessories. It also offers IT integration services and other corroborative services.
ORAN’s share price currently sits at roughly $10 per share (as of January 2023). It has a dividend yield of 7.09%, and its annual payout is $0.74.
Telefonica SA (NYSE: TEF)
Based in Madrid, Telefonica SA is another telecommunication service provider on our list operating in Europe and Asia.
Its services range from fixed line and mobile phone services to television and broadband internet.
The company further provides international wholesale services for other telecommunication operators.
It also offers consumer loan services, home insurance, online telemedicine, and music streaming.
For the first nine months of 2022, Telefonica experienced a 4.1% growth in its revenue, which is a testament to its strong business model.
It has a share price of $3.70 and an aggregate estimated dividend yield of 8.66%, with a corresponding annual payout of $0.32.
Hanesbrands Inc (NYSE: HBI)
One of the largest clothing companies in the world, Hanesrands Inc is focused on manufacturing and selling male and female clothing apparel.
These include underwear, sportswear, socks, T-shirts, and a wide range of other products. The company is divided into three segments: innerwear, international, and activewear.
It has stores in the Commonwealth of Puerto Rico and the United States, and 626 stores internationally.
Though Hanesbrands stock is underperforming, it has a silver lining for investors buying up dividend stocks.
The company’s falling stock price has pushed its forward predicted dividend yield to 8.31%.
The corresponding annual dividend payout for the company is $0.60, with a payout ratio of 44.44%.
Compass Mineral International (NYSE: CMP)
Compass Mineral International is an American multinational company involved in producing and selling essential minerals and salt.
Founded in 1933, Compass Mineral Int is headquartered in Kansas.
While the company primarily produces salt, it also manufactures and sells magnesium, potassium, and sulfur minerals.
As of January 2023, the company’s stock price is $44.06, and a forward predicted dividend yield of 1.36%. It has a payout ratio of 107.14%, with a predicted annual payout of $0.60.
T. Rowe Price Group Inc (NASDAQ: TROW)
Respected among asset managers, T. Rowe Price is an American company offering financial services in investment management.
The company is a NASDAQ index constituent and manages exchange-traded and mutual funds.
It’s worth noting that T. Rowe has also paid increasing dividends over the past 35 years, so it’s fair to say that the company is friendly to shareholders.
It has reported a 5-year growth rate of 16.05%, and as of January 2023, its stock price is $111.87.
The company has a predicted dividend yield of 4.44% and an annual payout of $4.80 with a payout ratio of 49.58%.
Equitrans Midstream Cop. (NYSE: ETRN)
Equitrans Midstream Cop is based out of Pennsylvania and was incorporated in 2018.
This American energy company is involved in exploring, gathering, storing, and transmitting natural gas in the Appalachian Basin.
The company has three divisions transmission and storage system, gathering system, and Water Service Systems.
Equitrans Midstream Cop earnings in 2022 came back at $1.36 billion, which is enough to support an estimated dividend yield of 8.67%.
Its annual payout is set at 0.60%, with the company’s share price sitting at $6.97 (as of January 2023).
Enterprise Products Partners (NYSE: EPD)
Based out of Texas and one of the world’s largest publicly traded partnerships, Enterprise Products Partners offers midstream energy services in the United States.
It operates 19 natural gas facilities and owns 255 tank trucks for transporting crude oil. The company also markets natural gas.
As of January 2023, EPD is priced at $25.13 with a payout ratio of 78.61%.
The company’s dividend yield is predicted to be 7.96%, with a corresponding annual payout of $1.96. It has 23 years of growth and 2.43% for five years of growth.
Stanley Black & Decker (NYSE: SWK)
With operations in several countries worldwide, Stanley Black & Decker is a multinational company that designs, manufactures, and sells tools and equipment to consumer and industrialist markets.
SWK took a hit in 2022, trading almost 60% below its stock’s 52-week high.
The company is also at risk of the adverse effects of a geopolitical crisis or war in the region, as most of its manufacturing capacity comes from China.
However, its selling point as a dividend stock is paying out increasing dividends for 55 years, with a payout ratio of 46.82%.
Stanley Black & Denver has an estimated dividend yield of 4.07% with a $3.20 annual payout, and with a steady 5-year growth of 5.61%, there’s a likelihood that it maintains its dividend stability.
United Parcel Service, Inc (NYSE: UPS)
United Parcel Service is one of the largest package delivery services globally. It’s also involved in letter delivery, transportation, logistics, and other related services.
The company offers domestic and international delivery services and owns a huge fleet of vehicles and 59,000 containers to transport goods to its aircraft.
A constituent of the S&P 500 index, United Parcel has consistently paid increasing dividends for 13 years.
The company is expected to maintain this status quo with a dividend yield of 3.50%, an annual payout of $6.08, and a payout ratio of 43.19%
Verizon Communications (NYSE: VZ)
Based out of New York City, Verizon Communications is a global telecommunications giant that offers broadband internet, wireless communications, and other related services to its consumers.
Founded in 2000, the company reported 27 million wireless postpaid connections and 477,000 broadband connections in 2021.
It has been experiencing a steady stream of growth ever since, as it currently sits atop the global communication’s sector alongside fellow American company, AT&T.
With a strong forward dividend yield of 6.26%, Verizon has paid out increasing dividends for the last 18 years.
The company’s five-year growth rate is 2.0%, with a payout ratio of 48.63%.
As of January 2023, Verizon Communications’ stock price is $42.24, while its annual forward payout is $2.61.
Cisco Systems, Inc (NYSE: CSCO)
Cisco Systems is a technology company based out of California that provides communication and networking services and equipment to its consumers in the Asia Pacific, Africa, the Middle East, Europe, and the Americas.
The company sells its services directly and through intermediaries and has strategically established alliances with other companies.
Cisco Systems remains a market share leader in wireless access, routing, and switching, with a forward dividend yield of 3.24% and an annual payout of $1.52.
The company has paid out increasing dividends for 11 years and, as of January 5, has a share price of $48.06 with a payout ratio of 44.41%.
Are Cheap Dividend Stocks a Good Investment?
If you’ve been investing for a few years now, you likely know that dividend stocks are a great way to make regular income through the stock market regardless of how the broader market is performing.
And as you know, most things that can provide you with regular income are inherently good investments.
However, while quality dividend stocks can help put extra money in your bank account, that’s not the only reason they’re good investments.
In other words, they can do much more than provide you with a regular income stream.
For instance, dividend paying stocks are typically less volatile than the vast majority of stocks, making them great at preserving your portfolio’s value amid market volatility.
And beyond their low volatility, some dividend stocks can give you some cool tax advantages.
These dividend stocks are referred to as qualified dividend stocks and are typically taxed at a lower rate than other types of income.
For a dividend stock to give you a tax advantage, it needs to meet specific criteria:
- It must have been paid by a US corporation or a qualified foreign corporation.
- The dividend must have been held for at least 61 days within the 121-day period beginning 60 days before the ex-dividend date.
- The dividends must not be part of a tax-exempt organization’s income; and the dividend must not be a capital gain dividend or a Section 1250 gain.
What Stock Gives The Highest Dividend Yield In The S&P 500?
Pioneer Natural Resources Co. ($PXD) currently boasts the highest dividend yield in the S&P 500. It has a dividend yield of 10%, which is significantly higher than the vast majority of stocks in the broader market, making it an attractive play for dividend investors.
Is it Smart To Invest In High Dividend Stocks?
Yes, it’s never a bad idea to invest in high dividend-paying stocks, as they can help amplify your portfolio’s returns by a wide margin. However, before you buy a dividend stock, it is essential to research its financials to identify any glaring risk associated with the stock.
Can You Get Rich With Dividend Stocks?
Dividend stocks can indeed help you on the path to being rich. However, you need to invest in them regularly while giving yourself a enough time to let the dividends compound.
How Can I Make $1k A Month With Dividends?
It depends on the annual dividend yield. For instance, you would need to invest $600k upfront in a market that generates a 2% annual yield to make $1k monthly in the form of dividend payments.