This article presents an overview of 5 Best Affordable Dividend Stocks To Invest In Right Now. For a detailed overview of such stocks read our article, 15 Best Affordable Dividend Stocks To Invest In Right Now.
5. Kinder Morgan Inc (NYSE:KMI)
Number of Hedge Fund Investors: 42
Kinder Morgan recently announced a 2% hike in its dividend and gave strong guidance. The company said its natural gas business is expected to see growth driven by AI. Here is what the company’s management said during Q1 earnings call.
“The power needed for AI and the massive data centers being built today and plan for the near future, require affordable electricity that is available without interruption 24 hours a day, 365 days a year. This type of need demonstrates that the emphasis on renewables as the only source of power is fatally flawed in terms of meeting the real demands of the market. This is not a knock on renewables. We all know they will play a significant role in the future of electric generation. But it’s a reminder, all of us that natural gas and nuclear still have an extremely important role to play in order to provide the uninterrupted power that AI and the data centers will need.
The primary use of these data centers is big tech and I believe they’re beginning to recognize the role that natural gas and nuclear must play. They like the rest of us, realize that the wind doesn’t blow all the time, the sun doesn’t shine all the time, that the use of batteries to overcome the shortfall is not practically or economically feasible. And finally, that unfortunately, adding significant amounts of new nuclear power to the mix is not going to happen in the foreseeable future. In addition to all these factors, the market is now understanding that building transmission lines to connect distant renewables to the grid, typically takes years to complete and that’s a timeframe inconsistent with the need to place these data centers into service as quickly as possible.”
Read the full earnings call transcript here.
4. KeyCorp (NYSE:KEY)
Number of Hedge Fund Investors: 49
KeyCorp ranks fourth in our list of the affordable dividend stocks to buy according to hedge funds. The company recently posted Q1 results. Adjusted EPS in the period came in at $0.22, missing estimates by $0.01. Revenue fell 10.5% year over year to $1.53 billion, beating estimates by $20 million.
3. First Horizon Corp (NYSE:FHN)
Number of Hedge Fund Investors: 50
Tennessee-based banking company First Horizon shares recently jumped after the company increased its 2024 guidance for noninterest income and posted Q1 results better than estimates.
Carillon Scout Mid Cap Fund stated the following regarding First Horizon Corporation (NYSE:FHN) in its fourth quarter 2023 investor letter:
“First Horizon Corporation (NYSE:FHN) was the third-largest contributor. This bank holding company rose as the industry rallied due to the investor sentiment shift toward a soft economic landing or continued growth. A soft economic landing, should it occur, means that banks are likely to experience fewer loan losses than in a recession and steadier interest rate margins if extreme interest rate volatility is dampened.”
2. Hewlett Packard Enterprise Co (NYSE:HPE)
Number of Hedge Fund Investors: 50
Insider Monkey’s database of 933 funds shows that 50 hedge funds reported having stakes in HPE. The most significant stake in the company is owned by AQR Capital Management of Cliff Asness which had a $248 million stake.
1. AT&T Inc (NYSE:T)
Number of Hedge Fund Investors: 66
Topping our list of the best affordable dividend stocks is AT&T because of its low PE ratio, high hedge fund sentiment and its stock price being under $20. As of the end of 2023, the biggest stakeholder of AT&T was Citadel Investment Group of Ken Griffin which had an $851 million stake in the company.
Miller Value Income Strategy made the following comment about AT&T Inc. (NYSE:T) in its Q3 2023 investor letter:
“Our third-largest holding at quarter end was AT&T Inc. (NYSE:T), a leading provider of communications and connectivity services in the US. At $15/share, the stock trades at the same price it did almost thirty years ago. The share price is much less interesting to us in relation to where it has traded in the past than in relation to how much cash the company generates and what management is doing with it. At just over 6x earnings, the stock trades near its lowest price-to-earnings (P/E) multiple ever, also representing close to its largest-ever P/E discount to the stock market. The business converts most of its earnings to free cash flow, implying a forward free cash flow yield north of 15%. Just under half of free cash flow is going toward the dividend (7.5% yield), while much of the balance is going to debt paydown. In other words, if the stock does not fall below its lowest-ever valuation, investors clip a rock-solid 7.5% in cash, while owning a growing portion of a very steady business as management reduces debt outstanding. A discounted cash flow model will suggest that intrinsic value for shares begins with a “2,” suggesting the stock is undervalued on an absolute basis. The lack of volatility in the underlying fundamentals also makes it unique when compared to many other things we own, which reduces the probability of permanent capital impairment and argues for a significant weight in the portfolio.
AT&T looks particularly attractive when compared to some of the larger names dominating the S&P 500. Compare the stock to Apple, for instance, whose revenues and profits are likely to shrink this year, even as it trades at 29x this year’s earnings estimate. The ongoing return to rationality and capital accountability, along with extreme valuations in the megacap tech stocks, have us more excited about our portfolio’s prospects than we can remember for quite some time. As always, we remain the largest investors and welcome any questions or comments.”
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