3 Affordable Dividend Stocks to Buy Now for Income and Growth

Key Points

• Investors can start 2025 on a great note by considering these cheap dividend stocks, which offer double-digit upside and income potential that beats inflation.
• The fundamental stories all back these themes, and Wall Street analysts are happy to keep higher price targets today.
• Institutional buyers couldn't pass this opportunity either, as judged by the recent buying activity.

The year 2025 is just getting started, and investors have as much pressure as ever to get their portfolios set in the right direction, as a few winners in the first half of the year can not only give investors confidence but also plenty of liquidity and room to then pursue the more aggressive deals in the market during the second half of the year. This is why having a mix of steady income through dividend stocks that are also cheap enough to offer upside becomes critical.

With fundamental stories that align directly with where the United States economy is headed this year, today’s list of stocks fits all the right criteria to get investors started on the right footing for the first half of the year and make a run for it during the second half. Spread between the real estate sector, the transportation sector, and even the consumer staples sector, there’s something for every portfolio.

That being said, today’s list of dividend income stocks with upside potential includes Realty Income Co. NYSE: O as a reliable real estate income trust (REIT), then there is Canadian National Railway NYSE: CNI to ride the boost in business activity and the transportation sector’s breakout, and finally Mondelez International Inc. NASDAQ: MDLZ as a relatively recession-proof brand trading at awfully low prices today.

Realty Income Offers Liquidity and Upside

This REIT, which carries a flat beta, should not be trading as low as it is today. Realty Income stock is now just below 80% of its 52-week high, meaning it’s flirting with Wall Street’s definition of a bear market (a 20% or more decline from highs), though there’s really no reason for this to be the case.

While residential real estate might have some cyclicality, Realty Income’s properties are focused on the retail and industrial side of the economy, not a market known for swinging too much. The opportunity in this stock comes packaged as a $3.16 dividend payout per share, which translates into a 6.1% annualized yield today.

More than that, this is one of the few REITs that make monthly payments, so the chance for investors to reinvest in this 6% dividend is enabled on a monthly basis. If not a reinvestment, then this dividend can act as ample liquidity for the coming months as deals show themselves to patient investors; it’s basically free buying power.

The benefits don’t stop there, however. Wall Street analysts are still willing to keep a 20.8% upside from today’s prices through their consensus price target of $62.50 today. This is a rare occasion, as analysts typically avoid boosting stocks that have declined recently.

Transportation Breakouts Led Institutional Buyers Here

As of December 2024, institutional buyers from Principal Financial Group decided to build up a stake of up to $10.8 million in Canadian National Railway stock, and there are a few reasons behind this. As Canada is one of the main trading partners with the United States, a recent manufacturing and services PMI breakout in that industry can lead to more profits.

This is why markets are also willing to pay a premium for the stock today. Canadian National Railway stock trades at a price-to-book (P/B) ratio of up to 4.3x compared to 2.1x of the overall transportation sector. While most would call this expensive, others will know what’s happening behind the scenes for the stock.

While valuation metrics call for a premium, the price action disguises that attractive factor by selling down to as low as 75% of its 52-week high price. Consequently, the current $2.38 a share payout has made the dividend yield for the stock go up to 2.4% today, compensating investors for any short-term volatility that might come before a bull run.

Analysts at the Royal Bank of Canada see this bull run bringing Canadian National Railway stock up to $174 a share, as their recent outperform rating suggests. To prove these valuations right, the stock would have to stage a rally of up to 74% from where it trades today, which would be a great start to 2025.

The Simplest Offer Yet: Mondelez International Stock

After a rejected takeover bid for Hershey Co. NYSE: HSY, Mondelez stock sold down to only 73% of its 52-week high, making it an undeniable deal in today’s market.

At this low price, analysts see double-digit upside opportunities, but more than just upside, investors can get a nice dividend income going in it.

With a payout of $1.88 a share, shareholders can tap into an annualized yield of up to 3.3% to beat inflation in the United States.

Then there’s the implication of buying the stock this low: a Wall Street consensus price target of $77.6 a share, implying a massive rally of 38% from today’s prices.

Others on Wall Street shared in the enthusiasm for Mondelez stock, such as those from State Street who boosted their holdings in the company by up to 3.2% as of November 2024, bringing their net position to a high of $4.5 billion today, or 4.5% ownership in the company.