Stocks rebounded sharply in 2023 despite recession clouds and macro uncertainty. This development did not bode well for dividend investors who were bracing for impact. After the beginning of a strong bear market in 2022, investors injected a whopping $60 billion in dividend-focused ETFs. But these ETFs failed to perform in 2023 as a strong rally led by AI boom saw investors flocking to technology stocks. But does this development make dividend stocks unattractive? Data shows that dividends stocks like The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL) and PepsiCo, Inc. (NASDAQ:PEP) outperform when markets are going through uncertainty and events have proved that the US economy is still not out of the woods. If we analyze the long-term performance of dividend stocks by overlooking the short-term market cycles, it’s clear that dividend stocks have performed impressively in the past.
From 1960 through 2022, 69% of the total return of the S&P 500 Index came courtesy of dividend investing and compounding, according to a report by Hartford Funds entitled “The Power of Dividends.”
The report also said that from 1930 to 2022, dividend income’s contribution to the total return of the S&P 500 Index on average came in at 41%.
In this backdrop, it would make sense to take a look at some dividend stocks that are trading at low prices with healthy yields.
Photo by Dan Dennis on Unsplash
Methodology
For this article we first used a stock screener to identify dividend stocks with over 3% dividend yield and stock prices less than $15 as of December 15. From the resultant dataset we picked 13 stocks with the highest number of hedge fund investors.
13. Huntington Bancshares Incorporated (NASDAQ:HBAN)
Number of Hedge Fund Investors: 27
Ohio-based Huntington Bancshares Incorporated (NASDAQ:HBAN) ranks 13th in our list of the best low-priced dividend stocks to buy according to hedge funds.
Out of the 910 hedge funds in Insider Monkey’s database, 27 funds had stakes in Huntington Bancshares Incorporated (NASDAQ:HBAN).
During Q3 earnings call, Huntington Bancshares Incorporated (NASDAQ:HBAN) talked about its future expectations:
As we think about Q4, our expectation is to have to see a NIM of between 305 basis points and 310 basis points, which is around 5 basis points or 10 basis points better than I would have thought this time last quarter. And it’s really driven by the benefits we’re seeing coming through from the higher for longer rate scenario, which as we’ve noted, we would expect to be accretive to overall NIM, and that is bearing fruit. Based on the trends we’re seeing in earning assets, I expect the dollars of NII in Q4 will be down around 4% to 5% from Q3 and informing a trough both in NIM ratio and the NIM and net interest income dollars in the fourth quarter then trending higher from there. The NIM outlook for 2024, I expect to be flat to rising, as I noted.
And I think the things you’re going to see are continued really solid progress on the fixed asset repricing, major asset categories on the fixed side this quarter are seeing, again, sequential increases since Q3 and we’ll expect to see that continuing on, particularly in the higher for longer scenario.
Unlike The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL), and PepsiCo, Inc. (NASDAQ:PEP), which are mature dividend stocks with dividend growth history, HBAN is a small company that is not highly popular among hedge funds.
12. Western Union Co (NYSE:WU)
Number of Hedge Fund Investors: 27
Financial services company Western Union Co (NYSE:WU) shares have lost about 15% year to date through December 16. It is among the high-yield dividend stocks in our list, with a dividend yield of over 7% as of December 16.
A total of 27 hedge funds in Insider Monkey’s database had stakes in Western Union Co (NYSE:WU).
Ariel Focus Fund made the following comment about The Western Union Company (NYSE:WU) in its third 2023 investor letter:
“Global leader in money transfer services The Western Union Company (NYSE:WU), also advanced following a top- and bottom-line earnings beat and subsequent raise in full-year guidance. These results were aided by regulatory change in Iraq and margin expansion in the retail business. Meanwhile, management continues to return capital to shareholders through dividends and share repurchases. Although the company anticipates the macroeconomic environment will continue to slow, it reminded investors remittances have proved resilient in prior periods of economic contraction. At current levels, WU is trading at a discount to our estimate of private market value.”
11. Newell Brands Inc (NASDAQ:NWL)
Number of Hedge Fund Investors: 27
Consumer products company Newell Brands Inc (NASDAQ:NWL) ranks 11th in our list of the best low-priced dividend stocks to invest in according to hedge funds.
Insider Monkey’s database of 910 hedge funds shows that 27 funds had stakes in Newell Brands Inc (NASDAQ:NWL). The biggest stakeholder of Newell Brands Inc (NASDAQ:NWL) during this period was Richard S. Pzena’s Pzena Investment Management which owns a $495 million stake in Newell Brands Inc (NASDAQ:NWL).
10. Algonquin Power & Utilities Corp (NYSE:AQN)
Number of Hedge Fund Investors: 28
Canadian renewable energy and utility company Algonquin Power & Utilities Corp (NYSE:AQN) ranks 10th in our list of the best low-priced dividend stocks to buy now. In November, Algonquin Power & Utilities Corp (NYSE:AQN) declared a dividend of $0.1085 per share. Dividend yield at the time came in at 7.76%.
A total of 28 hedge funds in Insider Monkey’s database were long Algonquin Power & Utilities Corp (NYSE:AQN). The biggest hedge fund stakeholder of Algonquin Power & Utilities Corp (NYSE:AQN) was Jeffrey Smith’s Starboard Value LP which owns a $346 million stake in Algonquin Power & Utilities Corp (NYSE:AQN).
9. Organon & Co (NYSE:OGN)
Number of Hedge Fund Investors: 33
With a dividend yield of about 8%, New Jersey-based pharmaceutical company Organon & Co (NYSE:OGN) ranks 9th in our list of the best low-priced dividend stocks.
Of the 910 hedge funds in Insider Monkey’s database, 33 fund had stakes in Organon & Co (NYSE:OGN).
Organon & Co’s (NYSE:OGN) CFO Matthew Walsh, while answering a question about Organon & Co’s (NYSE:OGN) dividend safety and FCF, said in Q3 earnings call:
And when you combine that with the fact that we expect to see lower onetime costs from the separation next year, we’re actually quite optimistic about what next year’s free cash flow number will look like and when we guide to that in February.
In terms of capital allocation, we’ve been, since the spin-off, trying to achieve a balance of capital allocation between investments and growth for the future, and balancing that against the near term and certain benefits of leverage reduction. That equation has been tilted a little bit more, given where interest rates have gone, the near-term benefits of debt reduction look more attractive. So as we’ve said in the past a few times, it raises the bar on the type of business development and M&A transactions that we would execute. And that’s one of the reasons why you’ve seen, relatively speaking, a lower level of activity in BD in 2023 than you saw in 2022. We continue to believe that the business — the cash flow profile that the business exhibits supports a dividend, certainly at the level that we have.
Read the entire earnings call transcript here.
Miller Value Income Strategy made the following comment about Organon & Co. (NYSE:OGN) in its Q3 2023 investor letter:
“Organon & Co. (NYSE:OGN) reported 2Q23 revenue of $1.61B, +1.5% Y/Y, ahead of consensus of $1.57B, and Adjusted EPS from continuing operations of $1.31, +4.8% Y/Y, well ahead of consensus of $1.00. Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) for the quarter came in at $530MM, or a margin of 33.0%, +66bps Y/Y. Biosimilars revenue increased 14% Y/Y (+15% excluding the impact of foreign currency (ex-FX)), driven by a 20% Y/Y ex-FX increase in Renflexis sales, while the Women’s Health segment saw top-line growth of 8% (+10% ex-FX), driven primarily by Nexplanon sales growth of 12% ex-FX. The company maintained a quarterly dividend of $0.28/share, or an annualized yield of ~6.5%. Management revised FY23 guidance for revenue of $6.35B (vs. prior guidance of $6.30B), and an Adjusted EBITDA margin of 32.3% (vs. prior guidance of 32.0%), at the respective midpoints, implying FY23 Adjusted EBITDA of $2.05B, or an Enterprise Value (EV)/EBITDA multiple of ~6.3x.”
8. Vale SA (NYSE:VALE)
Number of Hedge Fund Investors: 34
Mining company Vale SA (NYSE:VALE) is a notable dividend stock in our list. In November Vale SA (NYSE:VALE) stock was upgraded by Goldman Sachs to Buy from Neutral.
“The story is now too attractive to ignore and investors will slowly increase exposure as confidence around iron ore supply/demand balance in 2024 increases,” Goldman’s Marcio Farid said in a report.
7. Energy Transfer LP Unit (NYSE:ET)
Number of Hedge Fund Investors: 34
Energy Transfer LP Unit (NYSE:ET) is a high dividend yield stock in our list of the best low-priced stocks to buy for dividends.
As of the end of the third quarter of 2023, 34 hedge funds were long Energy Transfer LP Unit (NYSE:ET). The most significant stake in Energy Transfer LP Unit (NYSE:ET) belongs to David Abrams’ Abrams Capital Management which owns a $250 million stake in Energy Transfer LP Unit (NYSE:ET).
Like The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL) and PepsiCo, Inc. (NASDAQ:PEP), ET is a dividend stock popular among hedge funds.
6. New York Community Bancorp, Inc. (NYSE:NYC)
Number of Hedge Fund Investors: 35
With a dividend yield of 6% and a stock price of $10.96 as of December 16, New York Community Bancorp, Inc. (NYSE:NYC) ranks 6th in our list of the best low-priced dividend stocks to invest in according to hedge funds.
During the third quarter of this year, New York Community Bancorp, Inc. (NYSE:NYC) earned $0.36 per share, beating estimates by $0.01. Revenue in the quarter jumped 203% year over year.
5. Petroleo Brasileiro ADR Reptg 2 Ord Shs (NYSE:PBR)
Number of Hedge Fund Investors: 36
Brazilian energy company Petroleo Brasileiro ADR Reptg 2 Ord Shs (NYSE:PBR) has a dividend yield of a whopping 19% as of December 16.
Petroleo Brasileiro ADR Reptg 2 Ord Shs (NYSE:PBR) recently said it plans to spend $102 billion before the end of 2028. About 72% of this spending will be allocated to oil and gas exploration.
In August Petroleo Brasileiro ADR Reptg 2 Ord Shs (NYSE:PBR) talked about its new policies regarding dividends:
Another important fact was we reviewed the shareholders’ remuneration policy.
In this policy review – we will maintain important aspects that will guarantee the financial soundness of the company, the control of that. We maintained the same periods, we continue with the same guides of indebtedness. We have a reference, we have our gross debt and how we pay out quarterly our dividends. And we’ve reformulated our formula going from 60% to 45% of free cash flow designated to dividend pay-out. This level is in line with the major worldwide enterprises. I am here considering independent enterprises and also state companies. Remuneration to shareholders, I would like to highlight the main dates that were already announced to the market here for the second quarter remuneration. The base data will be August 21. The first tranche will be paid of – the person will be paid November 21 and the second December 15.
We continue controlling our debt using capital principle that is part of the guidance of the company. And we continue committed to generate and to distribute value. Now our buyback program. Well, Petrobras is one of the companies that communicates most with the market in Brazil and abroad. These are the shares that are mostly traded abroad.
Read the entire earnings call transcript here.
Fairlight Capital made the following comment about Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) in its Q3 2023 investor letter:
“Throughout the year, we have reviewed thousands of companies, including many in the oil sector. While we are generally cautious about commodity-based businesses where the company lacks control over the price of what it produces, the valuations in several cases have reached extremely compelling levels. For example, Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) and Ecopetrol (EC). Petrobras has distributed dividends of over $2.30 paid this year3 , while Ecopetrol has traded as cheaply as the $9-$10 range (close to our purchase price) and is paying approximately $2.50 in dividends this year.
We factor in the potential cost of FX movements over time, but even under the most pessimistic scenarios the investments should work out well. We initially came across these ideas while looking at South American stocks in general. We saw that many market commentators had expressed concerns that Ecopetrol’s dividends might be halted, especially following the election of Gustavo Petro as president of Colombia in June 2022. Similarly, there have been reservations about the sustainability of Petrobras’s dividend. However, the government owns substantial controlling stakes in these companies and is also a recipient of their dividends. For Ecopetrol, the Colombian government owes money to Ecopetrol due to the Fuel Price Stabilization Fund (FEPC). This fund aims to stabilize fuel prices for Colombian consumers. It bridges the gap between international and national Colombian consumer prices by compensating producers and importers for this price difference. The primary goal is to cushion the impact of global oil price fluctuations on the Colombian market. This is achieved either through cash payment or by forgoing dividend payments due from the government’s stake in these companies. In Ecopetrol’s case, the dividends paid (or those that would be paid to the government) are applied against the outstanding balances…” (Click here to read the full text)
4. KeyCorp (NYSE:KEY)
Number of Hedge Fund Investors: 42
Financial services company KeyCorp (NYSE:KEY) was among the list of stocks recommended by Citi earlier this month for the next 12 months.
Citi Research’s Focus List North America report said these are “actionable stocks by excluding those with low liquidity; preference for stocks that did not score poorly on Citi’s multi-factor quant model; and bold stock calls that were significantly different from the Street in expected total returns, earnings forecasts, or analysis.”
3. Ford Motor Co (NYSE:F)
Number of Hedge Fund Investors: 43
Car giant Ford Motor Co (NYSE:F) is one of the best low-priced dividend stocks to buy according to hedge funds.
Recently, Ford’s Chief EV, Digital & Design Officer Douglas Field bought 182K shares of Ford Motor Co (NYSE:F) at $11.04 per share.
2. Viatris Inc (NASDAQ:VTRS)
Number of Hedge Fund Investors: 43
Healthcare company Viatris Inc (NASDAQ:VTRS) ranks 2nd in our list of the best low-priced dividend stocks to buy according to hedge funds.
As of the end of the third quarter of 2023, 43 hedge funds had stakes in Viatris Inc (NASDAQ:VTRS). The most significant stakeholder of Viatris Inc (NASDAQ:VTRS) was James E. Flynn’s Deerfield Management which owns a $196 million stake in Viatris Inc (NASDAQ:VTRS).
Here is what Davis New York Venture Fund has to say about Viatris Inc. (NASDAQ:VTRS) in its Q3 2023 investor letter:
“In the attractive healthcare sector, we look beyond the obvious to identify businesses that simultaneously have exposure to this growth industry and also trade at low prices. We’re especially drawn to companies like Viatris, whose products or services play a part in helping to mitigate healthcare’s constantly rising costs. The healthcare industry has been a growing part of the U.S. economy for decades. As a result, many companies in this sector trade at high valuations reflecting their robust but well-known reputation for growth. For value-conscious investors like us, investing in healthcare requires looking beyond the obvious to identify businesses that have exposure to this growth industry but which trade at low prices. Furthermore, recognizing that the constantly rising cost of healthcare cannot go on forever, we have been particularly drawn to companies whose products or services play some role in managing or reducing the cost of care. As a result, we have positions in Viatris, a leading manufacturer of low-cost branded generic drugs.”
1. First Horizon Corp (NYSE:FHN)
Number of Hedge Fund Investors: 48
First Horizon Corp (NYSE:FHN) is a popular stock among hedge funds. A total of 48 hedge funds tracked by Insider Monkey had stakes in First Horizon Corp (NYSE:FHN). The biggest stake in First Horizon Corp (NYSE:FHN) was owned by D. E. Shaw’s D E Shaw which owns an $108 million stake in First Horizon Corp (NYSE:FHN).
ClearBridge Small Cap Value Strategy made the following comment about First Horizon Corporation (NYSE:FHN) in its Q2 2023 investor letter:
“The financials sector was also a positive contributor to relative outperformance during the quarter as fears of further contagion of March’s bank crisis eased and allowed for a rebound in many of the higher-quality small and regional banks caught up in the panic. For example, as investor pessimism dissipated, Bank OZK exceeded analyst expectations and raised its quarterly dividend, highlighting continued improvement in its net interest income margin in the first quarter. We capitalized on the retreat in bank stocks early in the quarter to initiate a new position in regional bank First Horizon Corporation (NYSE:FHN), which reflected a unique opportunity to buy a bank with an extremely strong capital and liquidity profile at a distressed value after its deal to be acquired by Toronto Dominion was canceled through no fault of First Horizon. While we continue to be vigilant for signs of further deterioration in the sector, we have high conviction in our holdings and believe that they will continue to be positive contributors to our long-term performance.”
Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below. You can also look at the 15 Best Low Priced Stocks to Buy Now and the 12 Best Gold Stocks With Dividends.
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Disclosure. None. 13 Best Low-Priced Dividend Stocks To Invest In was initially published on Insider Monkey.
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