Dividends matter and we will show you that with our list of the 10 best dividend paying stocks to buy under $50. This can get you on your feet in investing or help you expand and diversify your portfolio.
As to why dividends matter – think about it – stocks can very rarely stay stable in a falling market (as we’ve been experiencing since the start of the COVID pandemic) but dividends usually pay out whether the market is up or down. Thus, a steady dividend stream can balance out your portfolio in times like these. Take a company like Stanley Black & Decker (SWK) – a company that has paid dividends since not long after the civil war. Since 1876 they have paid out yearly dividends no matter how the market has been performing. And you probably have lived through enough economical crises in a lifetime much shorter than that.
However, as the old saying goes – there are no free lunches at the stock markets. Stocks that pay dividends adjust downwards due to lowering the market cap of their company. Sometimes it’s hard to notice these fluctuations in the daily ebb and flow of any given stock but it’s always there. Some traders usually try to outsmart this natural motion by using dividend-capture strategies where they try to rake in the payout and sell just before closing on the ex-dividend date and hoping the stock closes still high.
Copyright: jirsak / 123RF Stock Photo
We aren’t after short-term gains. We invest in dividend stocks because we expect these stocks deliver meaningful capital gains and we don’t mind getting paid dividends while we wait for the stock’s price go up. Right now there are nearly $5 trillion parked in money market funds earning next to nothing. Some of the money market investors will start looking for higher returns once they start feeling more secure about the pandemic. We believe that day is near as the FDA approved the first COVID-19 vaccine (Pfizer’s vaccine) and a large enough percentage of Americans will probably get vaccinated over the next months, helping us achieve herd immunity. Dividend stocks offer one of the best alternative for these investors. Some dividend stocks are still very cheap and will start to take off as more and more investors get in.
No matter how you choose to play your cards, you might want to know how we came up with this list. We picked the 10 most popular dividend paying stocks under $50 among hedge funds. Our research has shown that hedge fund sentiment data is a very useful way to identify stocks with huge upside potential. We have been recommending a portfolio of 12-20 stocks (using hedge fund sentiment data in our selection process) in our premium monthly newsletter since March 2017. Our diversified portfolio of stock picks returned 145% vs. 67% gain for the S&P 500 ETFs. You can download a free sample issue here. Since hedge fund sentiment data was helpful in identifying market beating stocks, we decided to use this data to identify the 10 best dividend paying stocks to buy under $50.
10. Marathon Petroleum Corp. (NYSE: MPC)
Hedge Funds: 56
Total Hedge Fund Holdings: $1.71 billion
Dividend Yield: 5.41%
Price (at the time of writing): $42.19
Marathon Petroleum Corporation is a spin-off from the Marathon Oil Corporation and its name makes its area of operation quite obvious. In recent months it has undergone a slight decrease in investor interest. The number of hedge fund portfolios where you can find it took a dip from 62 to 56.
Currently, Brandon Hale’s Holocene Advisors is the number one hedge fund investor for MPC with $95 million in shares. The company reported a net income of $9 million, or $0.01 per diluted share, for the second quarter of 2020, compared to $1.1 billion, or $1.66 per diluted share, for the second quarter of 2019. Their Q3 performance announcement is yet to come.
MPC lost about a third of its value since hitting a 52-week high of $62. Most investors don’t expect oil prices to go back above $60 any time soon. However, we aren’t as pessimistic. A large number of energy companies are financially troubled and cut back their investments across the board. If life goes back to normal as we expect sooner than most investors do, given the limited investment in new oil wells, we can see oil prices to go above $60. This means MPC shares could go back above $60, giving the stock an upside potential of 40-50% over the next 12 to 18 months. We researched several energy stocks to buy in the November issue of our monthly newsletter and Marathon Petroleum Corp was one of the stocks we looked into. We like it as an investment, but we found four other energy stocks that are less risky and offered an average upside potential of 110%. That’s why we didn’t recommend a position in MPC to our premium subscribers. However, we are confident that MPC will outperform the market over the next year or so, and it pays a dividend yield of north of 5% while you wait for MPC shares to appreciate.
9. Freeport-McMoran, Inc. (NYSE: FCX)
Hedge Funds: 57
Total Hedge Fund Holdings: $1.57 billion
Dividend Yield: 0.81%
Price (at the time of writing): $24.61
The often called just “Freeport” company’s main are of operation is mining. In 2019, 79% of its revenues came from the sale of copper, 11% were from the sale of gold, and 8% were from the sale of molybdenum even though it is the largest producer of molybdenum currently.
In recent months, hedge funds were eager to invest in the stock. The number of long hedge fund bets moved up by 4 recently. Freeport is in 57 hedge funds’ portfolios currently. The all time high for this statistics is 55. This means the bullish number of hedge fund positions in this stock currently sits at its all time high.
8. FirstEnergy Corp. (NYSE: FE)
Hedge Funds: 58
Total Hedge Fund Holdings: 1.28 billion
Dividend Yield: 5.13%
Price (at the time of writing): $30.38
FirstEnergy’s ten companies make up one of the larges investor-owned utilities in the US, serving over six million customers. reported third quarter 2020 GAAP earnings of $454 million, or $0.84 per basic and diluted share of common stock, on revenue of $3 billion.
This year has been good for FE’s performance in terms of hedge fund investments. It was at its all time high number of bullish hedge fund positions (59) in the end of September, the previous all time high number on our record is 44. This means the company is still experiencing increased investor interest.
7. Cisco Systems, Inc. (NASDAQ: CSCO)
Hedge Funds: 59
Total Hedge Fund Holdings: $3.93 billion
Dividend Yield: 3.25%
Price (at the time of writing): $44.32
Tech giant Cisco just announced its fiscal year results for 2020 with a revenue of $49.3 billion (decrease of 5% year over year). Over half of the company’s revenue this year was from software and services even though Cisco is known as a hardware provider. The FY results outline GAAP earnings per share at $2.64 and non-GAAP at $3.21. The former with a 1% year over year increase and the latter – 4%.
Brown Advisory briefly talked about Cisco in its Q2 investor letter:
“Networking equipment provider Cisco Systems gained after reporting solid quarterly results amid a challenging economic environment. The company’s security and video conferencing products are in greater demand due to the ongoing work-from-home trend, suggesting an improved business growth outlook for the remainder of the year.”
6. Altice USA Inc (NYSE: ATUS)
Hedge Funds: 62
Total Hedge Fund Holdings: $3.52 billion
Dividend Yield: 5.83%
Price (at the time of writing): $34.90
Altice USA is a cable provider that serves close to 5 million customers in 21 states. It has been seeing increased investor interest in this quarter and the year as a whole. Currently ATUS is featured on 62 hedge fund investor portfolios while the highest number we have in our data is 57. This means ATUS is currently at an all time high in hedge fund investor interest.
In Q3, Altice USA announced mainly flat (after adjustment) earnings year-over-year. However, there were positive tendencies in their reported results driven by broadband revenue growth of 15.6% year over year.
5. Pfizer Inc. (NYSE: PFE)
Hedge Funds: 66
Total Hedge Fund Holdings: $2.12 billion
Dividend Yield: 3.70%
Price (at the time of writing): $41.12
Pfizer has been enjoying a lot of media attention recently, given it is one of the front-liners in the battle for developing and releasing a wide-use COVID vaccine. Has it been enjoying the same amount of interest from investors, though? Our data shows that hedge fund investor interest has been flat at 66 portfolios, same as in Q2.
However, Pfizer has recently announced positive results in its vaccine trials and has been making steps to start vaccination in multiple nations. Pfizer stock was one of the first buys of Warren Buffet’s Berkshire Hathaway for Q3. Berkshire bought 3.91 million PFE shares during Q3, building an ownership stake valued at over $136 million as of September 30.
4. Intel Corporation (NASDAQ: INTC)
Hedge Funds: 66
Total Hedge Fund Holdings: $4.34 billion
Dividend Yield: 2.65%
Price (at the time of writing): $49.73
Microchip & hardware tech giant Intel’s Q3 announcements outlined $25.5 billion cash from operations, $15.1 billion of free cash flow and paid dividends of $4.2 billion.
At Q3’s end, a total of 66 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from the second quarter of 2020. Ken Fisher’s Fisher Asset Management currently holds the number one investor spot among hedge funds with $1.46 billion in share holdings.
3. Bank of America Corp (NYSE: BAC)
Hedge Funds: 88
Total Hedge Fund Holdings: 26.63
Dividend Yield: 2.52%
Price (at the time of writing): $28.57
Last month the Bank of America Corporation made it to our “10 Best Bank Stocks To Buy Right Now” list. BAC’s Q3 report states a net income of $4.9 billion, or $0.51 per diluted share. This beat the predictions which may have been lowered due to the credit panic that took over the stock market once the COVID pandemic hit.
2. Wells Fargo & Company (NYSE: WFC)
Hedge Funds: 90
Total Hedge Fund Holdings: $8.46 billion
Dividend Yield: 1.38%
Price (at the time of writing): $29.08
Even though Q3 saw WFC losing some interest by Warren Buffett’s fund, other hedge funds responded with greater interest. Even though it is not at its all time high, interest in Wells Fargo & Company enjoyed a slight increase in Q4, climbing to 90 from 84.
Buffett cut his stake in WFC by 46% during the third quarter but Berkshire Hathaway remains the larges shareholder among hedge funds. The second largest stake is held by Eagle Capital Management, led by Boykin Curry, holding a $1.1207 billion position; 4% of its 13F portfolio is allocated to the company.
1. Citigroup (NYSE:C)
Hedge Funds: 91
Total Hedge Fund Holdings: $5.5 billion
Dividend Yield: 3.5%
Price (at the time of writing): $58.93
Citigroup’s shares aren’t too far from $50 and we believe financial stocks offer some of the highest upside potentials in the market right now, so we made an exception. Financial stocks are definitely contrarian investments at the moment. If Citigroup’s stock price goes back to its 2020 high, Citigroup investors will generate more than 35% gains from these levels.
Generation PMCA talked about Citigroup in its Q3 investor letter. Here is what they said:
“Citigroup’s operations span more than 160 countries. Faced with record low interest rates, rising loss provisions, and subdued lending, the financial sector has been one of the worst performing groups year-to-date. However, earnings appear to have stabilized for the major banks. The company had its own internal issues too, having to pay significant fines for regulatory deficiencies. They are spending over $1 billion on compliance matters. With these issues being addressed and the company’s dominant network intact, it is well positioned to benefit from a global economic recovery. We have assumed a gradual recovery of earnings to former highs over the next few years. Return on tangible common equity should exceed 10% by 22, implying earnings per share above $8. While shares have risen recently, they still trade at only 6x our 2-year-out earnings estimate and yield just under 4%.”
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originally published at Insider Monkey. The previous version of this article included General Motors by mistake as GM suspended its dividend payments.
