Most stocks trading at under $20 per share are valued that way for a reason. Either they have not yet proved their worth (as z. B. A biotech company in the clinical phase) or they had financial difficulties.
Making it hard to find cheap dividend stocks. Yes, there are many stocks with high dividend yields. However, many of these shares received this high return due to sharply lower share prices. The return on investment may therefore not be sustainable.
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To find a favorable dividend stock, you should rely on a simple screening process for selection. You want shares that are cheaply valued compared to the competition, but have a dividend yield of over 5% and a share price of 20 US dollars or less. Also helping are stocks whose share prices have fallen over the year – and are probably on the upswing again.
Vodafone (WKN: A1XA83) and annaly capital management (WKN: 909823) meet exactly these criteria. It's a dividend stock that is an attractive buy right now.
1 vodafone
Vodafone, based in london, is the largest telephone company in europe. The share price fell by more than 15% last year. But in the last three months, it has increased by more than 17% due to improved financial ratios.
The company's report for the second quarter of 2021 showed that in the first six months to 30. September is down 2.3% from the previous year. The company cited a pandemic-related slowdown in travel as the reason for lower revenue from roaming charges. Excluding this expected revenue, however, service revenue grew 1.5%. During the reporting period, the number of european customers increased by 1.8% to 65 million and the number of broadband customers increased by 3% to 25.4 million.
Despite the decline in revenue, vodafone reported a profit of 1.6 billion euros for the first six months. Euro, which represents an increase of 182% compared to the previous year. Vodafone reported that adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) also increased by 2.5% to 44.6.
The company raised its guidance for the full fiscal year (ending in march 2021) from "down or flat" to "flat or up". It said it expects adjusted core earnings of 14.4 to 14.6 billion. Euro. 2020 it was 14.5 billion. Euro.
Vodafone also said it plans to spin off the servicetower division in the initial public offering to vantage towers later this year. This could cost the company 20 billion. Euros, provided that it tightens the business.
Vodafone's improved outlook is one reason to buy the stock, and the dividend, with a yield of 5.94%, is certainly another. The stock is favorably valued with a future price-earnings ratio (P/E) of 17.44. The average for the mobile industry as a whole is around 30.
I still have two concerns about vodafone. The company cut its dividend by 40% for the first time in 2019. But at least this move has lowered the payout ratio to a sustainable 25.67%. The company also has too much debt, with a debt-to-equity ratio of 1.179. But that will probably change when the company spins off its tower business.
2 annaly capital management
Annaly capital management is a different kind of real estate investment trust (REIT) in that it does not own real estate, but rather residential mortgage debt. When the pandemic crippled the economy, the company's stock fell. Investors worried about whether there would be massive mortgage defaults, as there were during the housing crisis of 2007 to 2010.
This explains why the share price at the close of trading on 13. The share price stands at just 8.21 US dollars on january 1 and has fallen by more than 14% over the course of the year. (although it has increased by more than 12% in the last three months.) however, the risk was overstated. Annaly's mortgages are protected by the u.S. Federal government through fannie mae, ginnie mae and freddie mac. There were no massive mortgage defaults, despite economic problems caused by the coronavirus pandemic.
However, the company suffered a financial setback last spring. In april, the company estimated that its book value on 31. March was between 7.40 and 7.60 U.S. Dollars per share. That's down from its book value of $9.66 per share as of 31. December 2019.
In the third quarter, the company's book value per share of $8.70 showed a 4% increase from the previous quarter, but a 5% decrease year over year. The company's net income of nearly 1 billion. U.S. Dollar was $0.70 per share, up 21% from the previous quarter and a big improvement from the year-over-year loss of $0.54 per share.
Annaly's dividend yield of 11.04% is outstanding. If home purchases continue to increase this year as they did last year, that's good news for the company. As it stands, annaly is well valued compared to other popular reits based on price-to-book ratio.
My biggest concern is not so much the financial health of the company, but the tendency to cut the dividend. Last year, it cut its dividend by 12% to $0.22 per share. This was justified by the need to keep the dividend sustainable in comparison to core earnings.
The choice is easy here
Although i think these are both good, cheap dividend stocks, i see annaly capital management as the better choice. It offers a better dividend and a stronger financial cushion for investors.
It is also simply cheaper with a P/E of 7.71 compared to 17.69 for vodafone. Of course there are many risks when looking for a "cheap" dividend stock. But when you look at annaly's track record and much higher dividend, it seems like the better choice of the two.
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The motley fool does not own any of the stocks listed. Jim halley does not own any of the shares listed. This article was published on 19.1.2020 on fool.Com and has been translated for our german readers.
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