The lowest-paying dividend stocks don’t have the same cachet as their high-yielding counterparts.
After all, if you are looking for your portfolio to generate steady returns and/or steady income, you obviously want to find the stocks that can provide the highest risk-adjusted return. However, if capital growth, not income, is your top investing priority, it may still be worth inspecting stocks that barely qualify as dividend-paying.
For one, there may be a good reason these companies are making de minimis payouts. To maximize shareholder value, management of these companies may find it more beneficial to repurchase shares and/or reinvest earnings back into the business.
Alongside this, just because a stock offers a super-low dividend today, doesn’t mean that will be the case tomorrow. Paying out such a small percentage of earnings, these names may have greater potential to implement high dividend increases in the future.
According to Finviz.com, these are the seven lowest-paying dividend stocks currently listed on major U.S. stock exchanges. Let’s explore each one, and see whether other factors make up for their respective tiny payouts.
|AMG||Affiliated Managers Group||$132.84|
|COO||The Cooper Companies||$340.54|
|WTM||White Mountains Insurance Group||$1349.45|
Affiliated Managers Group (AMG)
Based in West Palm Beach, Florida, Affiliated Managers Group (NYSE:AMG) is a financial services company that owns interests in a myriad of independent investment management firms.
This partnership-based approach has worked out well, as evinced by AMG’s earnings growth in recent years.
But while at one point paying much of these earnings out as dividends, that ceased being the case with AMG stock in 2020. In response to the onset of the Covid-19 pandemic, the company slashed its payout by 97%, and has yet to re-raise it. At current prices, AMG’s penny-per-share quarterly dividend gives the stock a forward yield of just 0.03%.
There is a silver lining, however. While AMG’s dividend may still be extremely low, the company has been aggressively buying back stock. Last year, it bought back $475 million worth of shares. Not too shabby, relatively to Affiliated Managers Group’s $4.87 billion market capitalization.
The Cooper Companies (COO)
The Cooper Companies (NYSE:COO) is primarily known as a leading manufacturer of contact lenses, but the healthcare products company also has a large operating unit that produces products and diagnostics used in family/women’s health care.
Large and established, one would expect COO stock to offer investors a decently sized dividend. However, that is not the case. At current prices, COO has a forward yield of 0.02%. Long-term investors in the company, however, likely are not complaining.
Why? According to Seeking Alpha, COO cut its payout in 2002 (from 5 cents semiannually to 3 cents semiannually), and has never re-raised it. Putting its earnings to work in other ways (namely, by reinvesting into the business), this stock has produced outsized returns. If you bought COO in July 2022, when it last paid a higher dividend, you would be up 1500% on your position.
MGM Resorts (MGM)
Like AMG, MGM Resorts (NYSE:MGM) is another name that became one of the lowest-paying dividend stocks because of Covid. When the virus went global in early 2020, the casino and i-gaming operator reduced its dividend to 0.25 cents per share quarterly, or just a penny per year.
Thanks to the 2021 “revenge travel”‘ recovery, plus the rapid rise of online sports betting and casinos in the U.S., MGM stock has not only bounced back from its initial pandemic plunge. Shares today well above pre-Covid price levels. However, the company for now appears to be maintaining its meager payout rate.
This alone isn’t a deal breaker for MGM shares, but one area of concern might be with its rich valuation. With its 2022 earnings ($3.49 per share) skewed by one time gains, MGM trades for around 65.8 times forecasted 2023 earnings.
Nvidia (NASDAQ:NVDA) is a growth stock, but unlike other big tech names, this chip maker provides investors with a quarterly dividend. However, the rate of payout is tiny.
At 4 cents per share quarterly, this dividend gives NVDA stock a forward yield of only 0.06%. With shares up over four-fold over the past five years, even after last year’s tech stock sell-off, long-term shareholders likely aren’t complaining. Still, while shares have a winning track record, that doesn’t mean buying today will produce solid returns.
NVDA stock’s recent bounce-back can be chalked up to “A.I. mania.” Even if the company has big exposure to mass adoption of artificial intelligence/machine learning, it’s possible the market has gone overboard pricing this catalyst into the stock, which today trades for around 57.1 times forward earnings.
Vertiv Holdings (VRT)
Vertiv Holdings (NYSE:VRT) is a manufacturer of power and thermal management products used by data centers. In 2020, Platinum Equity, Vertiv’s private equity owner, took it public, via a special purpose acquisition company (or SPAC) merger.
With a leveraged balance sheet from its private equity days, it’s no surprise that VRT stock ranks as one of the lowest-paying dividend stocks out there. VRT pays its investors a dividend of 1 cent per share annually, which gives the stock a forward yield of just 0.07%.
Value investors may find VRT appealing. Shares trade for only 11.5 times forward earnings, and earnings are forecasted to grow by double-digits in 2024 and 2025. Increased earnings could enable the company to de-lever its balance sheet, implement a share repurchase program, and/or perhaps raise the current dividend. A low payout ratio (1.9%) provides plenty of dividend growth runway.
Encore Wire (WIRE)
As clear from its corporate name and ticker symbol, Encore Wire (NASDAQ:WIRE) is a manufacturer of electrical wire. WIRE is yet another situation where share price growth has far outpaced dividend growth.
The company first started paying shareholders 2 cents per share quarterly in January 2007, and has never raised this payout. Over this time frame, though, WIRE stock has delivered a total return of 667.5%, or 13.4% annualized.
Although Encore Wire has been aggressively buying back stock since 2020, perhaps a significant dividend increase is long overdue.
Currently yielding just 0.05%, WIRE has a payout ratio of only 0.22%. The company could easily raise its dividend by 1o or 20-fold. Even after an increase like that it would still have plenty of cash to fund its share repurchase efforts, but to fund future organic growth and/or acquisitions as well.
White Mountains Insurance Group (WTM)
Headquartered in Bermuda, White Mountains Insurance Group (NYSE:WTM) is mainly a property and casualty insurer, although the company also has subsidiaries and affiliates in the asset management and insurance technology (or insurtech) spaces.
With a forward yield of only 0.07%, no one is buying WTM stock for income. For growth-focused investors, however, it’s likely a different story. WTM has focused on steadily growing its book value per share for many years.
In 2022, the company handily achieved this goal, with adjusted book value per share increasing by 26% during the year.
This explains why WTM stock has rallied by over 30% over the past twelve months. White Mountains Insurance Group may not be able to grow book value per share by another 26% again this year, yet with its management’s focus on creating and keeping value, shares could continue to perform well over a long time horizon.
On the date of publication, Thomas Niel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.