We recently compiled a list of the 10 Best Dividend-Paying Stocks Under $15. In this article, we are going to take a look at where Sirius XM Holdings Inc. (NASDAQ:SIRI) stands against the other dividend-paying stocks under $15.
During the bull market driven by the “Magnificent Seven” stocks, dividend stocks lagged in performance. Since the beginning of 2024, the Dividend Aristocrats Index has increased by only 5.50%, while the Nasdaq has risen by 13.6%. That said, the performance of tech stocks becomes less significant when considering the long-term returns of dividend stocks. Dividend-paying stocks with strong balance sheets and stable yields can offer investors consistent income, protection against market declines, and steady growth for their investments.
When investing in dividend stocks, it might seem logical to invest in stocks with the highest yields. However, according to analysts, concentrating solely on yield may not be the most effective investment approach. Not all dividend yields are equally secure, as companies under financial strain may suspend or cut their dividend payments. Therefore, investors are encouraged to prioritize the sustainability of dividends and, if possible, seek out companies with a track record of dividend growth. To know more about strong dividend payers, have a look at Best Dividend Stocks of All Time.
Historically, companies that consistently grow their dividends have outperformed those that do not pay dividends, while also exhibiting less volatility. Although dividends are not guaranteed and can fluctuate, just like in today’s time, they have played a major role in equity total returns over the decades. From 1930 to 2023, dividends and their reinvestment accounted for 40% of the annualized total return of the broader market, with the remaining return coming from capital appreciation.
Companies globally are distributing record dividends to shareholders, largely due to their robust balance sheets. With companies holding near-record levels of cash and liquid assets, they are increasingly returning this cash to investors through dividends. Global dividends grew from $1.23 trillion in 2020 to $1.66 trillion in 2023, according to a report by Janus Henderson. The firm forecasts total dividends to reach $1.72 trillion for 2024, up 3.9% on a headline basis.
A company’s dividend payout ratio is an important measure of how flexible its dividend policy is. Firms that only earn enough to cover their dividends or pay out most of their earnings as dividends might face risks from competitive pressures, as their cash flow may not be adequate to sustain operations. Moreover, companies with high dividend yields or, more critically, high payout ratios might be at risk of limited future growth, which could impact both share price appreciation and the potential for increasing dividends. According to data collected by Nuveen, stocks with the highest payout ratios have not been the strongest long-term performers. Over the past 20 years, companies with medium and medium-high payout ratios that paid dividends have generally delivered better performance.
Consistently growing dividends is a challenging target, as it requires companies to be financially very stable. For companies that are still in the growth phase and have lower share prices, evaluating dividend sustainability becomes a straightforward metric to consider. In this article, we will take a look at some of the best dividend stocks under $15.
Our Methodology:
For this list, we used a Finviz stock screener to find dividend stocks trading below $15 as of the close of July 31. From the initial list, we narrowed down the selection to companies that pay regular dividends to shareholders and possess strong dividend policies, ensuring consistent future dividends. From the resultant list, we picked 10 stocks with the highest number of hedge fund investors, using Insider Monkey’s Q1 2024 database of 920 hedge funds and their holdings. 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 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A close-up of a hand, counting the money from the subscription fees of the Entertainment Communication Services company.
Sirius XM Holdings Inc. (NASDAQ:SIRI)
Number of Hedge Fund Holders: 17
Share Price as of the Close of July 31: $3.45
Sirius XM Holdings Inc. (NASDAQ:SIRI) is an American broadcasting company that provides online radio and satellite radio services across the country. The company is currently facing difficulties due to the rising prominence of its competitors. Spotify, a global leader in digital music, recently reported an 18% increase in monthly active users in North America. In contrast, Sirius XM is struggling with its streaming platform, Pandora, which it acquired over five years ago. Pandora has seen a decline in subscribers, with self-pay subscribers for Pandora Plus and Pandora Premium dropping by 41,000 in the second quarter of 2024, ending the period with six million subscribers. Its overall revenue in Q2 also fell by 3% YoY at $3.18 billion. In addition to this, Sirius XM Holdings Inc. (NASDAQ:SIRI)’s own subscribers have fallen from 35 million in 2020 to 33 million in the most recent quarter.
That said, Sirius XM Holdings Inc. (NASDAQ:SIRI) is not in bad shape overall. It is actively pursuing acquisitions to navigate this difficult period. The company’s strategic investments in technology and automation are helping to lower costs, boost team efficiency, and improve the customer experience. The company anticipates completing the announced transaction with Liberty Media after the market closes on Monday, September 9th, and remains focused on achieving a long-term leverage ratio of mid-to-low three times adjusted EBITDA.
On July 24, Sirius XM Holdings Inc. (NASDAQ:SIRI) declared a quarterly dividend of $0.0266 per share, which was consistent with its previous dividend. The company maintains a seven-year streak of consistent dividend growth, which makes SIRI one of the best dividend stocks on our list. In the most recent quarter, the company returned $103 million to shareholders through dividends. The stock has a dividend yield of 3.43%, as of August 1.
According to Insider Monkey’s database of Q1 2024, 17 hedge funds owned stakes in Sirius XM Holdings Inc. (NASDAQ:SIRI), down from 22 in the previous quarter. These stakes have a total value of over $194.6 million. With nearly 37 million shares, Berkshire Hathaway was the company’s leading stakeholder in Q1.
Overall SIRI ranks 6th on our list of the best dividend-paying stocks to buy under $15. You can visit 10 Best Dividend-Paying Stocks Under $15 to see the other dividend-paying stocks that are on hedge funds’ radar. While we acknowledge the potential of SIRI as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is more promising than SIRI but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.