2 Dividend Stocks That Are Very Cheap Right Now
As investors today contemplate the steep declines in their portfolios amid this general market downturn, more and more of them are turning to dividend-paying stocks to provide some security.
Also keep in mind that these terms provide the opportunity to pick up good dividend-paying stocks at cheap valuations. If you’re looking to do this, the key is to make sure the ones you buy have strong underlying businesses and can be expected to maintain their payouts even during bear markets and economic turmoil. . Here are some good options.
1. JPMorgan Chase
When conditions are uncertain on Wall Street, there is usually a flight to quality to large, stable, industry-leading companies that have weathered previous corrections and bear markets. This description fits JPMorgan Chase (JPM 1.37%) to a T.
JPMorgan Chase is the largest bank in the United States with approximately $3 trillion in assets under management, and it has consistently outperformed its peers over the past decade. The focus on its “fortress” balance sheet keeps cash high and debt low, enabling it to weather downturns and continue to support its dividend.
It has $1.7 trillion in liquidity sources and a debt-equity ratio of 0.80, which means that its assets are mostly funded by equity rather than debt.
“Our longstanding capital hierarchy remains the same – first and foremost, to invest in and grow our market-leading businesses; second, to pay a sustainable competitive dividend; and second, to return any remaining excess capital. to shareholders through share buybacks,” CEO Jamie Dimon said in the first-quarter earnings report released April 13.
JPMorgan Chase has seen its valuation plummet with its forward price-to-earnings ratio falling to its current level of 10.5 from 15 at the start of 2022, and its stock price is down 26.8% since the start of the year. However, it increased its Q4 2021 payout by 11% to $1 per share, and it has maintained it for both payouts since then. At the current share price, it offers a high yield of 3.4%, with a payout ratio of around 29%, which means that 29% of the profits are dedicated to financing the dividend. This is a very sustainable percentage and should allow JPMorgan Chase to continue to increase its distributions. This will be the 10th consecutive year that JPMorgan Chase has raised its annual dividend, and that streak will likely continue.
2. PNC Financial Services Group
The banking sector should benefit from higher interest rates, provided inflation is kept under control and the country does not fall into recession. Those are big “ifs” – but bull markets in the US have historically lasted longer than bear markets, and over the long term, the stock market has averaged an annualized total return of around 10%.
The bank with perhaps the best dividend right now is PNC Financial Services Group (PNC 0.99%) — the sixth largest bank in the United States In the second quarter, it raised its quarterly dividend by 20% to $1.50 per share. At its current share price, that gives it a yield of 3.35%, one of the highest among its peers. It has a payout ratio of around 37%, which is in a comfortable range where it has been for the past decade. A model of regularity, it has increased its distribution annually over the past 12 years.
PNC Financial’s stock price is down 22% year-to-date, but its valuation is low with a current price-to-earnings ratio of 11, down from 15 at the start of 2022.
Rising interest rates should provide a nice revenue boost for PNC, and Wall Street analysts have a 1-year median price target of $210 on the stock, about 34% higher than its current price. .
Like JPMorgan Chase, PNC has a fortress-like balance sheet with an extremely low leverage ratio of 0.35% and $56 billion in cash. Both of these banks offer high yields and have good financials, excellent track records, and sustainable dividends.