The High Yield Dividend Stocks You Should Buy and Hold
We have created a list of the top 3 cheap high yield dividend stocks that will add value to your portfolio.
For most who are investing in the market, the effort invariably is to spend as less and get as much return as possible. Given the recent gain in the market, most investors are at a loss to zero in on some value buys. While the value of their existing positions is very comfortable, the possibility of creating new positions is what’s been seen as a challenge.
What Are Those High Yield Dividend Stocks You Can Buy Now?
Please note that what you read below is just the analysis of some companies and their stock markets. We can’t gurantee any profit and you trade and invest at you own risk.
1) General Motors Is One of the High Yield Dividend Stocks
One of the most well-known international automotive brands, this one is no doubt one of the best high yield dividend stocks at the moment.
But you can question how you assess value in a cyclical industry like the automobiles. Well, surely it is challenging no doubt but the business fundamentals and the top turnover trends will sure ease decision making for you.
Determining whether a company will yield value especially within a cyclical industry like autos can be challenging. This is because the automobile sales are cyclical or event based. In different parts of the world, they peak at different times depending on the occasion. So, technically a stock that might look to be right could be almost at the bottom of the earnings cycle just because the peak sales time has not arrived. Similarly, a stock which might look reasonable might seem very expensive once the right earnings are incorporated.
Therefore, the average valuation metrics that you would use to decide on a stock is not really ideal for this type of stocks. But that in no way makes them unattractive in the market. If you look at the current price to earnings ratio of the General Motors stock, it is pretty meager at 4.2 and given the inventories build up you might even conclude that sales are flattening out and it can’t get any better for the stock. Well, you are actually mistaken. After all, GE is one of those stocks that have presence in markets across the world.
Two valid resistance breakouts and retesting on General Motors stock weekly chart, indicates that this market is going to go higher:
Why General Motors Is Among the Cheapest High Yield Dividend Stocks?
The reason that it is among the cheapest high yield dividend stocks is because it is registering modest gains in international markets like Europe and China. It is particularly heartening because not only is the sales number improving, sales of some of the high margin products like trucks and SUVs are very promising. While sales from markets outside the US may not totally offset the impact of a potential flattening of sales here, it surely keeps overall performance parameters in place.
On the whole, if you see the earnings outlook too is rather promising. The 5-year average earnings growth is seen close to 9%. The fact that the performance so far is significantly above the industry average is a major positive. This indicates the automobile major is in top gear and is set to remain on the fast track going forward. The consensus earnings forecast too signals that General Motors is set to continue its track of recording better than industry trends.
It is needless to mention that brokerage views also give a big thumbs up to this cheap high yield dividend stock. The majority of brokerages have put a Strong Buy on the stock with an average price target around $36 level. This is on an average a 12-month price target and surely emphasizes a strong value for money proposition for you. It also signals that the company is likely to maintain the growth momentum. Therefore, as an investor, you would stand to gain by buying this stock for the long-term and logging in gains on a sustained basis.
2) One of the Cheapest High Yield Dividend Stocks: Ford Motors
The next one in our list of the cheapest high yield dividend stocks is, of course, Ford Motors. Being from the automobile sector, this stock is essentially a cyclical play. This is particularly for investors who are looking to book value without exposing to a huge risk. If you are wondering whether the dirt cheap valuations are the right parameters to bet on the stock, the street’s thumbs up surely is reassuring.
The one-year price target of this cheap high yield dividend stock is under $13. The stock also has a significantly reasonable room to expand in terms of average earnings prospects. The fact that its EPS was 30% above estimates clearly indicates that the stock has a sufficient surprise element. Investors can easily bank on this stock to surprise them on the upside and bring about reasonable gains.
This international player is registering sales and improved margins in the core home market in the US but also across Europe and Asia. Given the cyclical movement in these stocks and ahead of the festive seasons unfolding in China and India middle of next year, the room for growth seems quite pronounced.
Ford Motors stock has hit the bottom and has no way but going up now:
Average Earnings Higher than Estimates
Another reason why analysts are giving this stock a thumbs up as a cheap high yield dividend stock is also that they believe the company is on track to generate average earnings of $0.36, which is significantly ahead of industry estimates. The projected revenue and profit estimates also signal sufficient upside for you to take position over the longer term.
On the growth potential, investors can take heart in the reasonable upside seen in the company’s prospects. After maintaining a steady 5% plus growth in the last 5 years, the projection for the next five years clearly signals close to 2% growth for this automobile major. In fact, the 5-year growth number is seen very close to the 4% mark which is at par or at times even higher than the industry average for the automobile sector. This, therefore, is a key indicator of the fact that irrespective of the pace in which the industry will grow, Ford will move ahead at a steady pace.
In the interim, for the next two years, the stock’s earnings are likely to be in the negative zone. That should not be too much of a worry for long-term investors who are looking to invest in reasonable value plays. The overall idea of investing in this stock is the fact that this one has a comfortable marriage of growth coupled with a cheap valuation. Essentially this means as an investor you do not have to invest a lot of money to take advantage of the growth that this stock promises.
This cheap high yield dividend stock has a market capitalization of
- It has a return on asset of over 3%
- The stock is trading slightly above its 52-week low indicating higher room for value addition
- The return on equity for the stock is close to 27%
- YTD the stock’s performance is in negative and the trend indicates that the momentum is building for a significant upside
- It’s monthly volatility rate is just 1.95% indicating that this stock is not hugely volatile and offers reasonable prospect
Overall this manufacturer of cars and trucks is an extremely attractive cheap high yield dividend stock. The fact that they are also engaged in several other related businesses like automotive component manufacturing, financing and renting makes them well hedged to handle the uncertainties in this cyclical industry. Essentially this keeps the company well supported to tackle any type of earnings de-growth that might be seen.
Ford Motors Earnings:
3) The Last Cheapest High Yield Dividend Stock: Terra Nitrogen
From automobile to agriculture the quest for cheap high yield dividend stock, Terra Nitrogen is another value buy that can yield a significant return over the longer term. Though you would argue the agriculture product business is in a significant trough, you must appreciate the cyclical nature of the business. The stock price is close to its all-time lows and promises a robust recoup in prices going forward. There are many reasons why this stock is a strong contender for robust value buy and promises strong gains going forward for its investors.
Like a lot other commodity plays associated with the agriculture sector, this stock ran up quite a bit in the past few years on the back of demand from China and other active commodity markets. But then the average demand profile slowed down significantly. In fact, prices slumped close to $300 a ton in just four years.
The use of cheap natural gas to manufacture urea was another key factor that helped offset the overall demand slowdown. The lower cost ensures that despite the slowdown Terra Nitrogen recorded over 30% net income growth on the whole. The lower input cost also ensured strong cashflow for the company and continued to provide value for the stockholders of Terra Nitrogen.
On the valuation metrics, this stock with a market cap of $1.93 billion has a reasonably modest 6.7x EV-EBITDA ratio. Though the company has a history of variable payout, the distribution yield of 9.9% looks rather reasonable, and this makes it an attractive cheap high yield dividend stock.
- On a trailing basis, it has a PE ratio of 12.49
- The trailing EPS for the stock is 8.25/share
- The dividend payout is 7.08% and yield 6.85%
- The profit margins are faring above 30% number, and the operating margins are comfortably above the 50% mark.
- The return on assets around 37%
- While the return on equity fares around 66%.
This clearly underlines the fact that analysts are bullish on Terra Nitrogen not just because it is a cheap high yield dividend stock but also because this stock boasts of strong fundamentals going forward and can result in significant value for investors who are betting on this counter going forward. The possibility of strong returns and their availability at a significantly attractive rate makes it a strong contender for sustained gains.
Terra Nitrogen stock price has also reached almost the lowest level. If it breaks above the resistance (on the below chart at the left), it is a good chance to buy and hold, because it seems Terra Nitrogen is recovering:
The Strong Catalyst
The fact is that these high yield dividend stocks are attractive not just because of the strong dividend payout and related yield but also because of the robust fundamentals that they boast of. Here is a quick rundown of the key catalysts:
Return on Equity
Whether you are considering Terra Nitrogen, Ford or even General Motors, the fact is that all these counters have a rather robust return outlook. This essentially means that investors have a promising scope for strong returns on the money that they are planning to invest in buying this counter.
Attractive Entry Point
Another key factor is at a time when the markets are rather on the upmove and stocks are trading at a reasonably high rate; these stocks are still close to their significant all time low levels. That means that as an investor, you get the opportunity to bet on strong growth stories without compromising on the valuation metrics. You can easily take advantage of the strong internals along with the growth prospects to bet on convincing long-term stocks.
Whether you consider the automobile industry or the agriculture-related commodity stocks, these sectors are showcasing high growth momentum going forward. After tackling headwinds and slowdown over the past few years, they are now gearing up for sustained upward movement. That surely is encouraging for investors who are keen to bet on stocks that can lead the growth bandwagon. What is particularly encouraging is for most of these counters, their average growth is significantly larger than the overall industry.
Price to Earnings
This is a key measure for any stock that represents value. The fact that these cheap high yield dividend stocks all have a reasonably attractive price to earnings number make them extremely attractive in the war of valuation. Therefore an investor who is looking to bet on value, these stocks are often the best bets to look forward to.
High Yield Dividend Stocks Compared To Stock Market Returns:
Overall if you are looking at value buys, there are many elements to decide on a stock apart from just one factor that is high dividend yield. If you are a seasoned investor, you already know that the best value can be only derived from taking a comprehensive view of the stock. Just one factor alone cannot be sufficient for adding value to a stock’s overall lucrative aspect. It is very important that there is a perfect marriage of growth and value.
Whether you are considering General Motors, Ford or Terra Nitrogen, they do not just represent great dividend yield but also great value in absolute terms. Additionally, the strong earnings outlook and robust brokerage view go on to establish the pure value they represent. It shows that the momentum in these stocks is unlikely to come down anytime soon and investors can reap rich benefit over a significantly longer duration of time going forward. Investors can easily bet on these high yield dividend stocks to take advantage of the growth bandwagon they represent.
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