These dividend stocks won’t break the bank.
The U.S. economy is rebounding, and inflation levels are the highest in decades, but investors may still be waiting a while for higher interest rates. The U.S. Federal Reserve recently said that it began tapering its monthly asset purchases, but it will likely not complete the tapering process until mid-2022. In the meantime, dividend stocks are one of the few places for income investors to generate meaningful yield. Fortunately, there are plenty of dividend stocks out there that don’t cost an arm and a leg. Here are eight of the best dividend stocks under $20, according to CFRA Research.
Ford Motor Co. (ticker: F)
U.S. auto giant Ford recently made the controversial decision to reinstate a 2% dividend after it suspended dividend payments in 2020. Critics of the move questioned Ford’s focus, given that the company has also pledged to invest $30 billion in vehicle electrification technology by 2025. Analyst Garrett Nelson says Ford appears to have turned a corner from an operations standpoint and has an impressive lineup of new vehicles. Nelson is particularly bullish on the Mustang Mach-E electric vehicle, Bronco reintroduction and F-150 Lightning EV. CFRA has a “buy” rating and a $24 price target for F stock, which closed at $19.86 on Nov. 17.
Vale SA (VALE)
Vale is a Brazilian mining company and one of the world’s largest iron ore and nickel producers. Analyst Matthew Miller says Vale has an impressive free cash flow profile. He says the company’s new management team has prioritized mine safety, which should reduce future liability risk following Vale’s 2019 Brumadinho dam disaster that killed more than 250 people. Vale has a strong balance sheet, which Miller says will allow the company to return capital to shareholders via buybacks and its hefty dividend. CFRA has a “buy” rating and a $20 price target for VALE stock, which closed at $11.81 on Nov. 17.
Vodafone Group PLC (VOD)
Vodafone is a global wireless telecom company that has a strong presence in Western Europe, India and Africa. Analyst Adrian Ng says Vodafone’s diverse business profile creates growth opportunities. The company’s cost-savings initiative has helped Vodafone generate consistent margin expansion. CFRA projects $1 in earnings per share in 2022, which would be Vodafone’s highest EPS since 2018. Vodafone has a 6.8% dividend yield, but Ng says it will generate $5.9 billion in free cash flow in fiscal 2022 to support its dividend payouts. CFRA has a “buy” rating and a $20 price target for VOD stock, which closed at $15.70 on Nov. 17.
Orange SA (ORAN)
Orange is a diversified French telecom company. Orange shares are down more than 30% over the past three years, but Ng says risks associated with a challenging European regulatory and operational environment are now fully priced into the stock. Ng says cost cutting can support margins, and the monetization of Orange’s tower assets can fund further investments. European revenue was down 1.1% in the third quarter, but revenue from Africa and the Middle East was up 12%. Orange has a 9.8% dividend yield. CFRA has a “strong buy” rating and a $14 price target for ORAN stock, which closed at $11.06 on Nov. 17.
Telefonica SA (TEF)
Spain’s Telefonica is another attractive international telecom dividend stock trading under $20. Ng says the company has made several key strategic moves in recent years, including buying E-Plus Inc. in Germany, exiting Central America and acquiring GVT SA in Brazil. Ng says that Telefonica’s acquisition further established its footprint in key markets and reduced its debt load. He says the company’s focus on more stable markets could unlock value for investors, and Germany has been particularly solid. Telefonica has a 10.6% dividend yield. CFRA has a “buy” rating and a $5.50 price target for TEF stock, which closed at $4.45 on Nov. 17.
Hewlett Packard Enterprise Co. (HPE)
Hewlett Packard Enterprise provides enterprise server and storage technology. Analyst Angelo Zino says HPE’s shift toward recurring revenue makes the stock an attractive investment. Edge computing and high-performance computing account for about 23% of total revenue and should grow at more than 10% annually through at least fiscal 2023, Zino says. HPE’s core computer business will remain a risk, but Zino says he is bullish on the company’s flash storage business and its growth momentum in cloud computing. HPE pays a 3.3% dividend. CFRA has a “buy” rating and a $19 price target for HPE stock, which closed at $14.56 on Nov. 17.
Viatris Inc. (VTRS)
Viatris is a generic and biosimilar pharmaceutical company formed from the combination of Mylan and Pfizer’s Upjohn business. Analyst Paige Meyer says Viatris is an attractive long-term investment as it leverages its scale advantages. Management has committed to devoting at least 25% of the company’s free cash flow to its dividend, which yields 3.2%. Working capital improvements helped boost free cash flow further in the third quarter, and Meyer expects the company to use excess cash flow to pay down debt in coming years. CFRA has a “buy” rating and a $17 price target for VTRS stock, which closed at $13.65 on Nov. 17.
First Horizon Corp. (FHN)
First Horizon is a U.S. regional bank that operates primarily in Tennessee. Nelson says First Horizon has a diversified product portfolio that generates a high level of fee income, and the bank’s profitability is growing. First Horizon is focusing investments on higher-growth, higher-return opportunities. Low interest rates will likely continue to pressure net interest margins in the near term, but Nelson says the stock has an attractive valuation given its sizable countercyclical fixed-income and mortgage warehouse lending businesses. First Horizon pays a 3.5% dividend. CFRA has a “buy” rating and a $22 price target for FHN stock, which closed at $17.17 on Nov. 17.
