On September 18, 2024, the Federal Reserve dropped its federal funds rate by 50 basis points (0.5%). Furthermore, the Fed has indicated that this is only the beginning of its campaign to lower interest rates through 2025.
Ironically, lower interest rates are likely to reignite inflation concerns. That makes this a good time to consider dividend-paying stocks. The steady income these stocks provide can act as a hedge against inflation. Dividends can also be a significant part of your total return.
The primary distinction between buying dividend stocks and growth stocks is the level of volatility involved. In general, dividend stocks tend to come from mature, established companies with strong fundamentals and a commitment to increasing shareholder value.
However, as with any investment, you don't want to pay more than you have to. In this special presentation, we're focusing on quality dividend stocks that you can buy for under $20 per share. This lets you build a substantial position with a nominal investment.
Quick Links
- Nintendo
- Energy Transfer
- Huntington Bancshares
- Orange
- Vale
- Host Hotels & Resorts
- United Microelectronics
#1 - Nintendo (OTCMKTS:NTDOY)
Nintendo Co. Ltd. (OTCMKTS: NTDOY) is a company best known for its leadership in the gaming industry. The company is the home of beloved titles such as Mario Bros., Pokémon, and Animal Crossing. The company generates approximately 43% of its revenue from hardware needed to support its video game platform.
A good example of this is the Nintendo Switch, which launched in 2017. Over 70% of users are over the age of 18 and roughly equally divided between male and female gamers. The next generation of the Nintendo Switch was set to come out in time for the holidays in 2024. When that launch got pushed back earlier this year, NTDOY stock dropped more than 25%.
But that has turned into a base of support that was tested, but not breached, after Nintendo reported earnings in August. With preorders ongoing for the Switch happening, it’s a good time to consider a position. Analysts give the stock a Moderate Buy rating and investors can collect a dividend that has a 2.01% yield.
About Nintendo
Nintendo Co, Ltd., together with its subsidiaries, develops, manufactures, and sells home entertainment products in Japan, the Americas, Europe, and internationally. It also offers video game platforms, playing cards, Karuta, and other products; and handheld and home console hardware systems and related software.
Read More - Current Price
- $14.70
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 2 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#2 - Energy Transfer (NYSE:ET)
If the rate of inflation does move higher, the energy sector may be the tell. First, lower interest rates reduce the opportunity cost of owning commodities like oil. Second, China just announced stimulative measures that may increase demand from one of the world’s largest oil consumers.
The likelihood of higher oil prices makes Energy Transfer LP (NYSE: ET) a name to consider. This is a midstream oil company, which means it’s a middleman of sorts between the drillers and the consumers.
The company owns and operates over 125,000 miles of pipeline spanning 41 states. It also signed a 20-year liquified natural gas (LNG) sale and purchase agreement with China related to its Lake Charles LNG project. And like many oil companies, Energy Transfer is working to develop renewable energy.
ET stock is up approximately 17% in 2024, slightly trailing the S&P 500. However, the stock pays a high-yield dividend of 7.93%. That complements a consensus price target of $19.14, which gives investors 18.6% upside.
About Energy Transfer
Energy Transfer LP provides energy-related services. The company owns and operates natural gas transportation pipeline, and natural gas storage facilities in Texas and Oklahoma; and approximately 20,090 miles of interstate natural gas pipeline. It also sells natural gas to electric utilities, independent power plants, local distribution and other marketing companies, and industrial end-users.
Read More - Current Price
- $18.86
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 10 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $20.55 (8.9% Upside)
#3 - Huntington Bancshares (NASDAQ:HBAN)
One question investors are asking is whether lower interest rates will signal an all-clear for the commercial real estate sector. The early results suggest that risk appetite may be increasing. If that’s the case, regional banks may begin to look attractive, and Huntington Bancshares (NASDAQ: HBAN) is one to consider.
Like many regional bank stocks, Huntington Bancshares stock cratered nearly 40% when the rate on the 2-year Treasury note hit 5% in March 2023. That signaled a flight to safety into fixed-income assets. But since the Federal Reserve hinted at rate cuts in October 2023, HBAN stock is on the rise backed by strong year-over-year revenue growth.
The key will be earnings growth. And with the cost of borrowing easing, that should come around in short order - at least that's what analysts seem to think. Morgan Stanley retained its Overweight on Huntington and boosted its price target to $18. That’s 15% above the consensus price target. Huntington also offers an attractive dividend that currently yields 4.30%.
About Huntington Bancshares
Huntington Bancshares Incorporated operates as the bank holding company for The Huntington National Bank that provides commercial, consumer, and mortgage banking services in the United States. The company offers financial products and services to consumer and business customers, including deposits, lending, payments, mortgage banking, dealer financing, investment management, trust, brokerage, insurance, and other financial products and services.
Read More - Current Price
- $16.32
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 13 Buy Ratings, 5 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $17.41 (6.7% Upside)
#4 - Orange (NYSE:ORAN)
If you’re willing to take on some international exposure, Orange S.A. (NYSE: ORAN) is one to consider. This is a French telecommunications company and, to be fair, it hasn’t been a great investment over the last five years. Despite a dividend yield of over 6%, ORAN stock has only delivered an average total return of 7.34% in the last five years.
That’s the definition of a range-bound stock. The reason for that was a difficult regulatory environment in Europe. That’s not going to go away, but at this point the worst may be priced into the stock. If so, then investors should look at the company’s actions to mitigate costs, which should boost margins and earnings.
Institutional buying seems to support that idea. Buyers have outnumbered sellers by more than two-to-one in the last 12 months. And analysts give ORAN stock a consensus Buy rating with a consensus price target of $13.08 which would be a gain of around 9%.
About Orange
Orange SA provides various fixed telephony and mobile telecommunications, data transmission, and other value-added services to customers, businesses, and other telecommunications operators in France and internationally. The company operates through France; Spain and Other European Countries; The Africa and Middle East; Enterprise; Orange business; Totem; International Carriers & Shared Services; and Mobile Financial Services segments.
Read More - Current Price
- $0.00
- Consensus Rating
- Buy
- Ratings Breakdown
- 3 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#5 - Vale (NYSE:VALE)
Vale (NYSE: VALE) is one of the world’s leading producers of iron ore and iron ore pellets used in steelmaking. The need to build new multi-family homes, the need to rebuild our nation’s infrastructure, and the exploding demand for data centers are just three reasons to believe that demand for steel will remain strong. That demand should supersede any talk on tariffs from both the Biden administration and the Republican party nominee, Donald Trump.
But steel isn’t the only reason to consider Vale. The company also has an Energy Transition Materials unit that produces and extracts nickel, gold, silver, cobalt, and other metals like copper. All of which is to say VALE stock, which is down 30% in 2024, is a likely choice as a turnaround candidate with lower interest rates and cyclical demand.
The company’s dividend yield of 10.49% doesn’t offset the 30% decline in the company’s stock price, but it’s a good reason to start averaging into a position now.
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 - Host Hotels & Resorts (NASDAQ:HST)
When investors think about high-yield dividend stocks, real estate investment trusts (REITs) come to mind. These stocks are required to pay up to 90% of their earnings to shareholders. This usually comes in the form of a dividend.
Falling interest rates will help fan the travel sector, especially among high-income consumers, who have been better equipped to manage through inflation. That’s a good reason to consider Host Hotels & Resorts Inc. (NASDAQ: HST). The company is the largest lodging REIT and owns 72 properties in the United States and five properties internationally for a total of 42,000 rooms.
Another reason to consider HST stock is the company’s sound management, which gives the stock a rock-solid balance sheet which is reflected in revenue and earnings that are growing year-over-year. And the stock still trades at a very attractive forward P/E of around 9.3x.
Investors currently enjoy a dividend with a 4.32% yield. That yield pairs nicely with a consensus price target of $21.06, which gives the stock 13.9% upside.
About Host Hotels & Resorts
Host Hotels & Resorts, Inc is an S&P 500 company and is the largest lodging real estate investment trust and one of the largest owners of luxury and upper-upscale hotels. The Company currently owns 72 properties in the United States and five properties internationally totaling approximately 42,000 rooms.
Read More - Current Price
- $18.20
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 10 Buy Ratings, 3 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $21.39 (17.5% Upside)
#7 - United Microelectronics (NYSE:UMC)
The artificial intelligence revolution is at the beginning of what will be a multi-year trend. At this point, it’s still a good time to own stocks of companies that make the semiconductor chips required to run AI applications.
That may make you think of NVIDIA Corp. (NASDAQ: NVDA) and there are reasons for and against NVDA stock. But United Microelectronics Corp. (NYSE: UMC) may be an equally savvy choice for dividend-oriented investors. The Taiwanese-based company is one of the world’s most prominent semiconductor foundries. That means it designs and manufactures integrated circuits for customers worldwide.
UMC stock has roughly tracked the broader chip sector, which, with the exception of NVDA, has had a challenging year. That's reflected in the company’s revenue and earnings, which have been lower year-over-year in the first two quarters of 2024. That’s expected to change, making this a good time to consider getting on board with United Microelectronics and its 4.03% dividend yield.
About United Microelectronics
United Microelectronics Corporation operates as a semiconductor wafer foundry in Taiwan, China, Hong Kong, Japan, Korea, the United States, Europe, and internationally. The company provides circuit design, mask tooling, wafer fabrication, and assembly and testing services. It serves fabless design companies and integrated device manufacturers.
Read More - Current Price
- $6.53
- Consensus Rating
- Hold
- Ratings Breakdown
- 1 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $7.40 (13.3% Upside)
The list above is just a sample of quality dividend stocks under $20. It's important to perform your own due diligence to find the stocks that fit your investing style and risk tolerance. In addition to looking at a company's financial health, it's important to consider diversifying your portfolio of dividend stocks. Buying dividend stocks across a range of sectors helps lower your overall risk.
MarketBeat's Dividend Screener is a free tool you can use to find quality dividend stocks for your portfolio. The screener provides a broad range of filters that allow you to fine-tune your search for sectors, stock prices, dividend yields, three-year dividend growth, and more.
And once you find a stock for your portfolio or watchlist, MarketBeat has all the tools to keep you on top of news pertaining to that stock. It's one of many reasons that investors find MarketBeat to be a one-stop resource for their investment research.
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