Generally it is a good idea to overweight dividend stocks in low interest rate environments. Currently Treasury bonds are unbelievably expensive and have paltry yields. Somebody has to suffer huge losses when investors start demanding higher interest rates. Everybody thinks the loser is going to be the Federal Reserve. We think individual investors should focus on cheap, safe dividend stocks to achieve higher returns by assuming little risk. This article will review five cheap dividend stocks that pay solid dividends and trade at attractive earnings multiples. I have one of these stocks in my portfolio and I am looking to buy another one.
BP Plc (BP): BP had its share of troubles during the past 18 months. Currently it has a market cap of $144 billion with a price to earnings ratio of 7.3. For the year, shares of BP have gone up by 4%. It directly competes with other integrated global oil companies like Exxon (XOM), ConocoPhilips (COP), Total S.A. (TOT) and Chevron Corp (CVX). Most of these stocks track the performance of oil prices. Investors were concerned that oil prices would decline on fears of a global recession.
At the current price of $45, BP is trading at 6.6 times next year’s earnings. It is selling at the very bottom of its five-year valuation range. It also carries a dividend yield of 3.9%. Its earnings are expected to grow at a 4% rate. In contrast, CVX trades at 7.9 times forward earnings and has a 2.9% dividend yield. However CVX is expected to grow faster than BP.
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