When you hear the phrase "cheap dividend stocks," what comes to mind? It can mean different things to different investors. But whatever your definition, the idea of a cheap stock is a consideration of both a stock's price and its value.
For dividend-paying stocks, the price part means you'll want to find stocks that are trading near their 52-week low. Why? Because a guiding principle of picking stocks is to buy low and sell high. Stocks that are already at 52-week highs can move higher but frequently don't. That's particularly true of dividend stocks.
The other thing to consider is the company's dividend payment. While there are several ways to measure this, dividend yield is one of the most common measures. A company's dividend yield is the amount (in dollars) of its current annual dividend per share divided by its current stock price. Generally speaking, a dividend yield of over 3% is considered a good yield, but it can be lower or higher depending on the sector.
Now that we've defined terms, here are seven cheap dividend stocks offering value and price upside.
Quick Links
- Gilead Sciences
- Starbucks
- Diana Shipping
- Universal Health Realty Income Trust
- Vale
- Big 5 Sporting Goods
- York Water
#1 - Gilead Sciences (NASDAQ:GILD)
The biotechnology sector is not the first sector many investors would think of when considering cheap dividend stocks. Many of these companies put their cash back into drug discovery. That's why Gilead Sciences Inc. (NASDAQ: GILD) stands out.
The company is a giant in the pharmaceutical industry with commercially available treatments for HIV, hepatitis, cancer, and other diseases. It also has an expansive pipeline of 55 candidates as of this writing. Among the candidates in clinical trials are several cell therapies the company picked up with its acquisition of Kite Pharma in 2017. Gilead has plans to get at least 10 of these candidates into the market by 2030.
That explains why the stock may move higher, and here's why it’s a good buy. As of April 4, 2024, GILD stock is trading near its 52-week low at $70.30. Plus, it has an attractive dividend with a yield of 4.38%. The dividend has been growing for nine consecutive years.
About Gilead Sciences
Gilead Sciences, Inc, a biopharmaceutical company, discovers, develops, and commercializes medicines in the areas of unmet medical need in the United States, Europe, and internationally. The company provides Biktarvy, Genvoya, Descovy, Odefsey, Truvada, Complera/ Eviplera, Stribild, Sunlencs, and Atripla products for the treatment of HIV/AIDS; Veklury, an injection for intravenous use, for the treatment of COVID-19; and Epclusa, Harvoni, Vemlidy, and Viread for the treatment of viral hepatitis.
Read More - Current Price
- $92.57
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 15 Buy Ratings, 12 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $96.43 (4.2% Upside)
#2 - Starbucks (NASDAQ:SBUX)
The next cheap dividend stock to consider is Starbucks Corp. (NASDAQ: SBUX). The stock is down about 7% in 2024 and 4% in the last month. Investors appear to be taking a profit after the company missed on the top and bottom lines in their first quarter 2024 earnings report.
But Starbucks's case centers around pricing power. Despite higher prices, the company is generating about 4% higher spending per ticket. This speaks to the company's 27% gross margin, which means the company is having little issue passing higher commodity prices onto the consumer.
SBUX stock is trading near its 52-week low at $88.12. However, analysts see a 23% upside in the stock, which likely means they feel the 16% earnings increase is not fully priced.
And SBUX currently has a dividend yield of 3.59%, and the company has been increasing that dividend for the last 14 consecutive years.
About Starbucks
Starbucks Corporation, together with its subsidiaries, operates as a roaster, marketer, and retailer of coffee worldwide. The company operates through three segments: North America, International, and Channel Development. Its stores offer coffee and tea beverages, roasted whole beans and ground coffees, single serve products, and ready-to-drink beverages; and various food products, such as pastries, breakfast sandwiches, and lunch items.
Read More - Current Price
- $87.97
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 18 Buy Ratings, 8 Hold Ratings, 3 Sell Ratings.
- Consensus Price Target
- $103.77 (18.0% Upside)
#3 - Diana Shipping (NYSE:DSX)
If you're looking to invest strictly in the dry goods shipping industry, there may be better options than Diana Shipping Inc. (NYSE: DSX). However, if you're looking for cheap dividend stocks with solid upside potential, the company's 10.24% yield is hard to ignore.
Notably, DSX stock was in a year-long decline until the end of March. That coincided with the Baltimore bridge collapse. While it's too early to tell how the company may be impacted, it certainly seems that the cost dry shippers can charge will increase significantly in the short term. That's bullish for the sector.
Still, DSX is lagging behind some other shippers. That may have to do with the fact that the company cut its dividend sharply early in 2024. But the 69% payout ratio now looks much more sustainable.
Macroeconomics can either work in the company's favor or to its detriment. But with the economy continuing to defy expectations, Diana Shipping looks like a solid speculative play as a cheap dividend stock.
About Diana Shipping
Diana Shipping Inc provides shipping transportation services. The company transports a range of dry bulk cargoes, including commodities, such as iron ore, coal, grain, and other materials in shipping routes worldwide. As of March 1, 2024, it operated a fleet of 38 dry bulk vessels, including 4 Newcastlemax, 8 Capesize, 5 Post-Panamax, 6 Kamsarmax, 9 Ultramax, and 6 Panamax.
Read More - Current Price
- $1.85
- Consensus Rating
- Hold
- Ratings Breakdown
- 0 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $3.00 (62.2% Upside)
#4 - Universal Health Realty Income Trust (NYSE:UHT)
You would expect to find at least one real estate investment trust (REIT) on a list of cheap dividend stocks. That's the case with Universal Health Realty Income Trust (NYSE: UHT). The REIT specializes in healthcare and human service related facilities with 76 investments in 21 states.
This is a play on America's aging. Advances in medicine are helping individuals live longer, but more attention is being paid to the quality of that life, which is bullish for the long-term care market.
That hasn't been enough to get investors excited about UHT stock, which was trading above $130 a share in February 2020 but can be snagged for just $34.25 a share currently. Commercial real estate is under fire and investors are sour on the sector.
But that's what could make Universal Health an undervalued gem. The company has been increasing its dividend for 38 consecutive years and currently has an 8.46% yield. The payout ratio of 261% is a little concerning but could be manageable since the next increase wouldn't happen until later this year. At that point, there will be more clarity on interest rates and the election will be settled.
About Universal Health Realty Income Trust
Universal Health Realty Income Trust, a real estate investment trust, invests in healthcare and human-service related facilities including acute care hospitals, behavioral health care hospitals, specialty facilities, medical/office buildings, free-standing emergency departments and childcare centers.
Read More - Current Price
- $37.17
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#5 - Vale (NYSE:VALE)
Vale S.A. (NYSE: VALE) is an infrastructure and commodity play for investors to consider. Vale is a miner of many metals, and most significantly, in 2024, the company's leadership in iron ore mining. Iron ore is a key element in steel, which is likely to be in high demand.
The much-debated Inflation Reduction Act has had an effect on monetary policy, but it is allowing millions of dollars to flow into infrastructure projects. Those will only increase as the federal government is now pledging to bear much, if not all, of the cost to repair the Francis Scott Key Bridge in Baltimore. In addition to iron, Vale mines copper, which will be needed to build out our country's aging electric infrastructure.
Trading at 4.6x earnings, VALE stock is cheap, period. However, when you consider that it has a dividend yield of 9.88%, you have a stock with tremendous upside at its current price.
About Vale
Vale SA, together with its subsidiaries, produces and sells iron ore and iron ore pellets for use as raw materials in steelmaking in Brazil and internationally. The company operates through Iron Solutions and Energy Transition Materials segments. The Iron Solutions segment produces and extracts iron ore and pellets, manganese, and other ferrous products; and provides related logistic services.
Read More - Current Price
- $8.90
- Consensus Rating
- Hold
- Ratings Breakdown
- 3 Buy Ratings, 6 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $14.38 (61.6% Upside)
#6 - Big 5 Sporting Goods (NASDAQ:BGFV)
Another cheap dividend stock that recently cut its dividend is Big 5 Sporting Goods (NASDAQ: BGFV). The cautious note for investors is that Big 5 didn't just cut its dividend once but twice. Investors will get a chance to see how the cuts are impacting the bottom line when the company reports earnings in May.
That allows investors to focus on the company's dividend yield, which is over 5% and a balance sheet with no debt and the ability to invest in growth, including several planned new store openings even as it closes others. It also includes enhancing its e-commerce business. The company is behind its competitors in this regard. But this is an area where it can catch up quickly.
Down 56% in the last 12 months, BGFV stock is now trading as a penny stock at just $3.41. However, the stock is likely at a level where it's so sold off there's nowhere to go but up.
About Big 5 Sporting Goods
Big 5 Sporting Goods Corporation operates as a sporting goods retailer in the western United States. Its products include athletic shoes, apparel, and accessories. The company also offers a selection of outdoor and athletic equipment for team sports, fitness, camping, hunting, fishing, tennis, golf, and winter and summer recreation, as well as home recreation.
Read More - Current Price
- $1.77
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#7 - York Water (NASDAQ:YORW)
The last of the cheap dividend stocks on this list is the York Water Company (NASDAQ: YORW). York Water owns and operates three wastewater collection systems, ten wastewater collection and treatment systems, and two reservoirs.
Utility companies are among the best dividend stocks that investors can own. And York presents a particularly strong case for investors. Not only has the company increased its dividend payment for 26 consecutive years, but in 2023, the company extended its yearly streak of uninterrupted dividends to a whopping 208 years.
Along with the safety of that dividend, York is posting increasing revenue and earnings. Investors have overlooked that in the last 12 months, the stock has gone down 22%. However, as investors may start looking for more value, ignoring the value YORK stock provides will be difficult.
About York Water
The York Water Company impounds, purifies, and distributes drinking water. It owns and operates three wastewater collection systems; ten wastewater collection and treatment systems; and two reservoirs, including Lake Williams and Lake Redman, which hold approximately 2.2 billion gallons of water. The company also operates a 15-mile pipeline from the Susquehanna River to Lake Redman; and owns satellite groundwater systems in York, Adams, and Lancaster Counties, as well as two impounding dams on primary system located in York and Springfield Townships.
Read More - Current Price
- $33.43
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
Are you interested in finding more cheap dividend stocks? MarketBeat can help. MarketBeat offers a free tool that provides an updated list of stocks that meet the same criteria as the stocks in this presentation.
You can access this list under the Financial Calendars tab on Marketbeat.com. Once you're there, simply click on the link for Cheap Dividend Stocks. The page operates as a screener, letting you filter for a variety of metrics that are important to you.
And remember, dividend yield may not be the most important consideration when looking at dividend stocks. Some investors prefer to look for companies that have a history of increasing their dividend year after year. These stocks take many names, such as Dividend Achievers, Dividend Aristocrats and Dividend Kings. Each name defines the number of consecutive years a company has increased its dividend.
One final note: like any stock, success with cheap dividend stocks is about having the patience to hold the stock for a length of time that allows the power of compounding to work for you. Over time, the ability for both capital gains and dividend growth is one of the best pathways to wealth.
More Investing Slideshows:
