I have identified three cheap dividend stocks that make sense to buy now. Each company boasts a different level of risk. Listed in order from least to most risk, choose the stocks to invest in based on your risk tolerance.
1. AVX Corporations (NYSE: AVX)
Yielding just under 3%, AVX has set up to be an ideal long-term hold for the dividend and growth investor. The company boasts a $2.6 billion market cap with $1.6 billion in revenue and an ROE of nearly 6%.
AVX is a leading international manufacturer and supplier of advanced electronic components, including capacitors, inductors, filters, resistors, couplers, diodes, and circuit protection devices, as well as a broad range of the innovative sensor, control, interconnect and antenna solutions.
Based in South Carolina, the firm's infrastructure includes 29 manufacturing facilities in 16 countries around the world.
AVX has suffered from the loss of its Kyocera resale product resulting in slightly lower metrics, but I am very bullish for the new fiscal year.
The company acquired Ethertronics and KUMATEC recently which will more than makeup for the loss of Kyocera.
Ethertronics is a leader in advanced antenna system technology and manufactures antenna products for wireless applications. The acquisition allows AVX to expand its extensive electronic product offering into the rapidly growing Internet of Things ( IoT) wireless connectivity space. I firmly believe IoT represents the future in the sector, and AVX is now positioned to capture the growth.
Next, the acquisition of KUMATEC provides AVX access into the hydrogen fuel generation and delivery business -- another sector poised for aggressive growth.
Buying AVX now in the $15.50 per share zone with stops at $13.93 per share and a target price of $22.00 per share makes investment sense.
2. Ford (NYSE: F)
Certainly not for the growth investor, Ford represents a solid dividend yield at an attractive price for the long-term income investor. Boasting a massive market cap of over $45 billion, revenue of nearly $160 billion and an ROE approaching 22%, this legacy automaker remains a leader in its field.
Shares are trading lower by nearly 8% in 2018 resulting in the respectable dividend yield of over 5%.
The reason I think the shares will stay steady at the very least is based on four factors. First, Ford is aggressively dialing back expenses by narrowing its U.S. auto portfolio so it can focus on the top-selling marks. Secondly, China offers a chance at improving the bottom line over the long term. Thirdly, the foray into electric vehicles may lead to substantial future revenue streams. Finally, the new CEO Jim Hackett has exciting ideas for global growth and is adding a new vigor to the company.
Showing confidence, the company declared a special dividend in January as profitability improved thanks to the cost-cutting measures.
While there may not be sharp upside potential, I like Ford in the mid $11.00 trading range and think it will make a great addition to your long-term income portfolio.
3. Frontier Communications (Nasdaq: FTR)
This is the highest yielding stock on the list with an astounding 31%-plus dividend yield! By the same token, Frontier shares are an ultra-high risk, suitable for risk-embracing investors only.
Connecticut-based Frontier is a provider of communications services in the United States. The company offers a portfolio of communications services for residential and business customers. Its products and services include data and Internet services, video services, voice services, access services and customer premise equipment.
Despite boasting revenues of $9 billion, the company has an ROE of negative 82 %, a scary net margin of more than negative 28%, and an EPS of nearly negative 25. It's surprising the company can still operate.
However, things appear to be turning around, creating a risky but compelling investment case.
Shares are higher by over 13% this year despite being lower by over 60% during the last 52 weeks due to substantial improvements.
The company posted revenue of over $2 billion in the first quarter along with sequential growth in consumer revenue. At the same time, Frontier experienced improved broadband trends.
CEO Dan McCarthy stated, "In the first quarter we achieved growth in consumer revenue, reflecting the early results of the substantial initiatives we have underway across the company."
The company has plans to reduce its crushing debt load by over $3 billion in the next four years by utilizing its free cash flow. It hopes to accomplish this goal by cutting expenses and increasing revenue. If the initiative is successful, investors could easily see 300% plus returns over the next several years.
I like Frontier as a monster dividend payer, and it has extreme growth potential from its current level. Suggest buying in the $7.60 per share range with a target of $22.00 per share and initial stops placed at $4.57 per share.
Please remember that Frontier shares could easily drop substantially in value. Use only money allocated for high risk for this dividend and growth play!
Risks To Consider: No one knows the future. Anything and everything can happen in the stock market. Always use stops and position size wisely no matter how confident you are in a stock.
Action To Take: Consider adding one or more of the above stocks to your dividend-paying portfolio.
Editor's Note: Is This Taking Income Investing Too Far?
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