Dividend Stocks to Buy for Double-Digit Returns: General Motors (GM)
Dividend Yield: 4.5%
You might spit up your coffee upon reading this, but I believe that General Motors Company (NYSE:GM) — yes, General Motors, the chronically mismanaged American auto giant — is likely to deliver double-digit annual gains for a long time to come.
I know, I know. General Motors has been a train wreck for virtually my entire adult life. But it comes down to price. GM is so cheap right now, merely staying in business virtually guarantees a respectable return.
GM stock trades for less than 6 times forward earnings and for 0.3 times sales. Yes, I understand that General Motors is a highly cyclical company, and one that faces competitive threats from ride sharing companies like Uber and from driverless car technology. But at these prices, all of this bad news is more than priced in. You’d pretty well have to have a zombie apocolypse in order for GM’s sales to fall hard enough to justify that kind of a valuation.
GM sports a dividend yield of 4.5% and a low dividend payout ratio of just 25%. So there is plenty of room for dividend growth even its profit growth is sluggish in the years ahead.
Toss in a little P/E multiple expansion, and you’re easily looking at double-digit gains for years to come.