In this article, we will take a look at some of the best dividend stocks to buy now.
Many investors lean toward income stocks because of their enduring appeal. Morgan Stanley has pointed out that dividends help investors remain committed during uncertain times. In a note dated August 14, strategist Todd Castagno observed that in periods of heightened risks and stretched valuations, dividends take on a bigger role in overall returns by easing volatility and offering some stability to share prices. He added that slower growth and falling interest rates also make reliable, higher-yielding dividends more attractive, particularly when cash and fixed income investments become less rewarding.
However, he cautioned that chasing the highest-yielding stocks may not be wise, since elevated payouts can sometimes signal trouble within a company. Instead, a growing number of investors prefer focusing on dividend growth. Castagno highlighted that Morgan Stanley’s research showed companies announcing dividend hikes tended to outperform by an average of 3.1% in the following six months. One way to ensure exposure to such names is through dividend aristocrats— S&P 500 firms that have raised their payouts consistently for at least 25 years.
Jack Ablin, chief investment strategist at Cresset, also underscored the importance of focusing on dividend growers, though he did not restrict himself to the aristocrats. He emphasized companies with long records of maintaining and expanding dividends, explaining that if payout ratios remain steady, earnings often grow faster than inflation. Ablin noted that his process goes beyond just reviewing cash flow. He also considers leverage ratios to gauge debt reliance, liquidity levels, and whether a company operates in less cyclical industries with solid margins. In his view, the goal is to identify businesses that can weather both downturns and expansions while sustaining their dividend policies.
Given this, we will take a look at some of the best dividend stocks that are cheap.
Our Methodology
For this list, we used a Finviz screener and identified dividend companies with forward P/E ratios below 20, as of September 19. The low price-to-earnings ratio shows that they are traded below their intrinsic value. From the resultant dataset, we selected 13 companies with strong dividend histories and solid balance sheets. The stocks are ranked according to their forward P/E ratios.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
13. Applied Materials, Inc. (NASDAQ:AMAT)
Forward P/E as of September 19: 19.49
Applied Materials, Inc. (NASDAQ:AMAT) supplies equipment, software, and services that help manufacturers produce semiconductors and display panels. Its core offerings include systems for wafer fabrication, tools for display production, and a wide range of engineering support.
Applied Materials, Inc. (NASDAQ:AMAT)’s performance relies on several key factors. It needs to stay ahead in materials engineering, maintain strong ties with customers, manage its global supply chain effectively, adapt to regulatory changes, and continue investing in its workforce. In the third quarter, Applied Materials allocated $901 million to research and development, backing advancements in chip technologies such as gate-all-around transistors and next-generation memory.
On September 12, Applied Materials, Inc. (NASDAQ:AMAT) declared a quarterly dividend of $0.46 per share, which was in line with its previous dividend. Overall, the company has raised its payouts for eight years in a row, which makes it one of the best dividend stocks on our list. The stock has a dividend yield of 0.97%, as of September 19.
12. American Express Company (NYSE:AXP)
Forward P/E as of September 19: 19.46
American Express Company (NYSE:AXP) is one of the most well-known payment card brands, both in the US and globally. The company has built a massive customer base and operates a business that remains reliably profitable and steadily expanding.
Every Amex card benefits from the brand’s premium image. American Express Company (NYSE:AXP) reinforces this by offering some of the most attractive rewards and perks in the industry. Even its entry-level cards allow users to earn bonuses on travel, shopping, and other everyday spending. In the last five years, the company’s revenue has climbed sharply, rising from a little over $38 billion to above $74 billion. Even more impressive, net income has more than tripled during the same period, increasing from $3.1 billion to just over $10 billion.
American Express Company (NYSE:AXP) is a strong dividend company, making regular payments to shareholders for years. The company currently offers a quarterly dividend of $0.82 and has a dividend yield of 0.96%, as of September 19.
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