While passive income offers an essential backstop for your portfolio, you shouldn’t overpay for the privilege, which brings us to cheap dividend stocks for smart investors. Perhaps due to the unusual circumstances of the post-pandemic environment, you’ll be surprised at the deals you can grab.
For example, artificial intelligence has become one of the hottest – if not the hottest – ticket on Wall Street. Technology juggernauts like Nvidia (NASDAQ:NVDA) have enjoyed blistering gains, with retail investors continuing to believe that strength will beget strength. Maybe it will for NVDA. However, the smart thing to do right now would be to target high dividend low-cost stocks.
Basically, we’re talking about zigging while everyone else zags. You’re not going to see me trash AI, for example. But I’m also not going to pay a ridiculous multiple for the privilege, not with the present economic challenges. Therefore, I’d rather go the path least traveled.
In this case, that path leads to cheap dividend stocks. Below are some compelling names to consider.
With the eyes of global investors focused on far more exciting enterprises, Toyota (NYSE:TM) has slipped beneath the radar. However, that will suit investors seeking cheap dividend stocks just fine. Fundamentally, the company has the right ingredients for long-term success, pivoting to relevant businesses such as electric vehicles while banking on its powerful reputation.
As for the passive income, Toyota commands a forward yield of 2.97%. Granted, that’s not the highest yield you can get. However, it does rank above the consumer discretionary sector’s average yield of 1.89%. Also, the automaker’s payout ratio sits at 28.91%, translating to high confidence in yield sustainability. Thus, TM ranks among the dividend stocks for smart investors.
Further, the market prices TM at a trailing earnings ratio of 12.73x, ranking favorably lower than 62% of its peers. Also, its forward multiple of 10.24 is attractive, at least compared to the sector median stat of 12.82X. Thus, it makes a solid starting case for high dividend low-cost stocks.
Fresh Del Monte Produce (FDP)
One of the world’s leading vertically integrated fresh food producers, Fresh Del Monte Produce (NYSE:FDP) makes an excellent case for cheap dividend stocks for smart investors. Fundamentally, people must acquire nutritional sustenance. Further, a company like Fresh Del Monte benefits from consumer prioritization. Basically, when the proverbial brown matter hits the fan, people inherently focus their purchases on the essentials.
Even better, Fresh Del Monte brings a balanced dividend profile to the mix, carrying a forward yield of 3.01%. That ranks noticeably higher than the consumer staple sector’s average yield of 1.89%. Also, the payout ratio sits at 34.86%, which is great. Investors won’t have to fret too much about the sustainability of the yield.
As well, the food producer justifies inclusion on this list of high dividend low-cost stocks with its valuation. Presently, the market prices FDP at a trailing multiple of 11.46. As a discount to earnings, Fresh Del Monte ranks better than nearly 74% of companies in the consumer packaged goods industry.
Moving the needle into the riskier side of cheap dividend stocks, ManpowerGroup (NYSE:MAN) is the third-largest staffing firm in the world, according to its public profile. However, that’s not necessarily a great thing in a tight labor market. Sure enough, since the beginning of the year, MAN stock slipped over 6%. However, the Federal Reserve’s disinflationary goal may slacken the jobs sector, which might add relevance to ManpowerGroup.
In all fairness, it’s speculation, I completely understand. However, what’s not speculation is the company’s forward yield, which stands at a stout 3.73%. Again, that’s significantly higher than the broader consumer discretionary sector’s average yield of 1.89%. What’s more, the payout ratio, while more elevated, is quite reasonable at 42.68%. Plus, it’s one of the dividend stocks for smart investors because of its valuation. Right now, shares trade at a trailing multiple of 13.41, favorably below 63% of the competition.
LyondellBasell Industries (LYB)
A multinational chemical company, LyondellBasell Industries (NYSE:LYB) offers everyday relevance for various industries. Per its public profile, LyondellBasell is the largest licensor of polyethylene and polypropylene technologies. It also produces ethylene, propylene, polyolefins, and oxyfuels. In other words, LYB won’t be confused as an exciting investment. However, it’s one of the cheap dividend stocks for smart investors.
On the passive income side, LyondellBasell is quite generous, carrying a forward yield of 5.11%. That’s well above the materials sector’s average yield of 2.82%. Not only that, the payout ratio sits at 46.32%. Although a bit higher than some other enterprises, the robust yield more than makes up for it. Also, the company enjoys 12 years of consecutive dividend increases.
Another factor that makes LYB attractive as one of the high dividend low-cost stocks is the forward earnings multiple of 11.15. As a discount to projected earnings, LyondellBasell ranks better than 71% of companies in the chemicals industry. Combined with decent revenue growth and consistent profitability, LYB belongs on your radar.
Sibanye Stillwater (SBSW)
A multinational mining and metals processing firm, Sibanye Stillwater (NYSE:SBSW) offers a diverse range of operations and projects. According to its public profile, Sibanye is one of the world’s largest primary producers of platinum, palladium, and rhodium. It’s also a top-tier gold producer. Fundamentally, SBSW makes a compelling but speculative case for cheap dividend stocks due to the fear trade.
Essentially, concerns about broader social and economic stability could see an increase in safe-haven demand. Even without the fear trade, Sibanye’s forward yield of 7.52% will make investors stop what they’re doing and consider picking up a couple of shares. Also, its payout ratio is relatively reasonable at 49.37%, providing confidence regarding yield sustainability.
To be fair, SBSW slipped nearly 35%. Notably, investment data aggregator Gurufocus warns that Sibanye could be a value trap. Thus, you want to take its forward multiple of 5.23 with some grain of salt. Still, the company does enjoy strong revenue growth and high-profit margins. If you’re willing to gamble, SBSW could rank among the high dividend low-cost stocks.
Himax Technologies (HIMX)
A leading supplier and fabless semiconductor manufacturer, Himax Technologies (NASDAQ:HIMX) offers incredible relevancies. With innovations such as artificial intelligence requiring advanced semiconductors, Himax stands poised to deliver pertinent solutions. While consumer economy concerns have weighed on the chip sector recently, over the long run, the space should bounce back. Thus, I like HIMX as one of the cheap dividend stocks to buy.
Although tied to the risky component of the passive income equation, Himax will surely entice some speculators. Currently, it offers a forward yield of 7.06%. However, confidence in the sustainability of the yield will be somewhat challenging as the payout ratio stands at a lofty 72.43%. It’s not horrendous but it’s very elevated. Still, the tech sector’s average yield is only 1.37%.
On the financials, Himax delivers a three-year revenue growth rate of 20.8% on a per-share basis, beating out nearly 71% of its peers. Also, it’s consistently profitable with a net margin of 13.17%. Even better, HIMX trades at a forward multiple of 15.12, lower than 74.44% of sector rivals.
ASE Technology (ASX)
A leading provider of semiconductor manufacturing services in assembly and testing, ASE Technology (NYSE:ASX) specializes in turnkey solutions covering front-end engineering tests, wafer probing, and integrated circuit packaging and modules, among others. Again, given the rise of various digital innovations, ASE should enjoy a long upside pathway. Therefore, it ranks among the dividend stocks for smart investors.
While it’s a risky proposition, ASE certainly offers a generous forward yield at 7.04%. In addition, the payout also increased, piquing interest among market gamblers. However, some drawbacks exist. First, ASE only features three years of dividend increases. More importantly, the payout ratio stands at 79.31%, which is up there.
Nevertheless, investors might forgive ASX for these flaws because of the overall financial profile. Its three-year revenue growth rate pings at 17%, above 63% of its peers. Also, it’s consistently profitable, year in and year out. Lastly, ASX trades at a forward earnings multiple of 14.75, far lower than the semiconductor sector’s median yield of 26.11X.
On the date of publication, Josh Enomoto did not have (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.