Best Dividend Stocks to Buy at the Market Bottom
These Stocks Are Cheap but Going Up
3 More Cheap Dividend Stocks to Buy Now
Yesterday I wrote about my top dividend-paying stocks for this market environment (click here if you missed the Cabot Wealth Advisory), and today I want to share another three of the best dividend stocks to invest in right now.
As I explained yesterday, the best dividend stocks to buy at times like these are those that have already completed a long bottom-building process and are now beginning to pull ahead as the market recovers. They carry lower risk than stocks that have recently broken down (or are still lagging), but have just as much potential, especially if the market recovery continues.
Today’s selections are each quite different from yesterday’s. If you’re looking to add top dividend stocks to your portfolio at good prices, you should be able to find one or more that works for you below.
Top Dividend Stock #4: Donaldson Company (DCI)
Donaldson is as boring as they come—the company makes air filtration systems for engines and industrial applications. But the company is one of the best dividend-paying stocks in the market. It’s a Dividend Aristocrat, increasing its annual payout every year since 1985, and currently yielding 2.3%.
However, the stock’s performance has not been as reliable lately: revenue has been declining since 2012, and DCI has declined 23% in the past year. Analysts expect revenue to contract 5.7% this year (ending in July 2016), driving a 1.9% EPS contraction, before rebounding 3% in 2017.
Over the past 30 days, the company has hired a new CFO and the stock has rebounded 10%, suggesting that value experts think DCI is once again an interesting stock to invest in.
Top Dividend Stock #5: Gap (GPS)
It may be a little too early to invest in Gap stock, which has fallen 35% over the past 12 months due to declining revenues and the company’s struggle to meet earnings estimates.
Management is working to turn things around, making big bets on activewear and “athleisure” clothing (think of yoga pants you wear to the mall or sweats for lounging around the house).
But analysts think recovery is still a ways off—the consensus estimate calls for Gap to report 3.5% lower revenue and a 14.5% contraction in EPS this year, followed by 0.4% growth in EPS on flat revenues next year.
But the stock has delivered six consecutive years of dividend growth and trades at a very reasonable P/E of 11.
Top Dividend Stock #6: Wynn Resorts (WYNN)
Casino company Wynn was down 50% over the past year, but has bounced 34% in the past month. The company has been facing declining revenue at its Macau casino, but the latest quarterly report got investors’ hopes up. Macau betting revenue fell 27%, the smallest year-over-year decline in over two years, and revenue growth in Las Vegas was strong, contributing to adjusted EPS of $1.03, well ahead of the consensus estimate of $0.76. And CEO Steve Wynn has been aggressively adding to his stake in the company, buying over $90 million worth of the company’s stock over the last few months, ahead of the opening of the new Wynn Palace in Macau in June.
Wynn isn’t one of the best dividend-paying stocks in our universe—the company slashed its dividend by two-thirds less than a year ago, when lower revenue from Macau started cutting into earnings. Steve Wynn argued that the company didn’t want to “issue dividends on borrowed money,” which is a good policy.
But the dividend cut is still a signal to income investors that WYNN’s dividend income isn’t as secure as the payouts of more conservative companies, like high dividend blue chip stocks.
For now, these companies are all relatively early in their turnaround processes, so none of their rebounds is a sure thing yet. That raises risk for investors who choose any of these stocks to invest in today—but it also increases your potential reward.
Chloe Lutts Jensen
Chief Analyst of Cabot Dividend Investor
P.S. Cabot’s Best Retirement Stocks
If you’re looking to add the best dividend stocks, Cabot Dividend Investor is where you’ll find them.
I constantly monitor the markets to protect my subscribers’ nest eggs from being sacked by inflation, recession, market downswings and rising interest rates.
That’s why I created the computerized stock-ranking system to bring you the super-safe investments that can pay you 3% to 10% a year along with the promise of 15% to 20% annual total returns—no matter what is happening in the overall market.