13 Cheap DRIP Stocks To Buy Now

Published on January 27, 2023 at 9:51 am by Vardah Gill in Dividend Stocks, Hedge Funds, News

In this article, we discuss 13 cheap DRIP stocks to buy. You can skip our detailed analysis of dividend reinvestments and returns of dividend stocks over the years, and go directly to read 5 Cheap DRIP Stocks To Buy Now.

Dividend reinvestment plans, or DRIPs, allow investors to reinvest their dividend payouts into the company’s additional shares. Through this investment strategy, shareholders can gain long-term benefits because of the power of compounding. Many popular dividend companies like The Procter & Gamble Company (NYSE:PG), Bank of America Corporation (NYSE:BAC), and Johnson & Johnson (NYSE:JNJ) offer DRIP policies to investors without any additional charges.

Rising inflation and lingering threats of a possible recession have brought forward the importance of dividend stocks. Historically, dividends have shown strong performance in high-interest rates periods. Morningstar’s November report also mentioned that dividend stocks outperformed the broader market during the Great Inflation decade of the 1970s. Readers can also check out 14 Best Stocks To Buy Before A Recession to explore other investment options during these uncertain times.

According to a report by Hartford Funds, reinvested dividends represented 84% of the total return of the S&P 500 since 1960. The report also mentioned that companies that have raised their dividends for a certain period returned more than those that showed no change in their dividends or slashed their payouts. Dividend growers and initiators delivered an annual average return of 10.68% from 1973 to 2021, compared with a 4.79% return of non-dividend payers during the same period.

Another report by Welch & Forbes LLC also highlighted the long-term benefits of reinvested dividends. The report calculated that an investment of $1,000 in the S&P 500 from 1928 to 2021 would have resulted in final portfolio value of $380,250. However, the final portfolio’s worth would reach over $7 million with dividends reinvested.

Photo by Karolina Grabowska: https://www.pexels.com/photo/hands-holding-us-dollar-bills-4968630/

Our Methodology:

For this article we first used stock screeners to find dividend stocks with P/E ratios of less than 20 and share prices below $100, as of January 25. As expected the resultant list was huge. We then picked 13 stocks from the results that offer dividend reinvestment plans and have the lowest PE ratios. The stocks are ranked in descending order of their P/E ratios.

13. A. O. Smith Corporation (NYSE:AOS)

P/E Ratio as of January 25: 19.26

Share Price as of January 25: $60.52

A. O. Smith Corporation (NYSE:AOS) is an American manufacturing company that markets both residential and commercial water heaters and boilers. The company’s DRIP policy allows investors to reinvest and sell their shares directly through the plan. It is among the cheap DRIP stocks to buy on our list.

On January 18, A. O. Smith Corporation (NYSE:AOS) declared a quarterly dividend of $0.30 per share, which fell in line with its previous dividend. The company has been raising its dividends consistently for the past 29 years. As of January 25, the stock has a dividend yield of 1.98%. It can be added to dividend portfolios alongside other dividend stocks such as The Procter & Gamble Company (NYSE:PG), Bank of America Corporation (NYSE:BAC), and Johnson & Johnson (NYSE:JNJ).

In December, Citigroup presented a positive outlook on A. O. Smith Corporation’s (NYSE:AOS) future performance and raised its price target on the stock to $61 with a Neutral rating.

As of January 25, the stock has a P/E ratio of 19.26 with a $60.52 share price.

At the end of Q3 2022, 29 hedge funds tracked by Insider Monkey reported owning stakes in A. O. Smith Corporation (NYSE:AOS), worth $370.8 million. Impax Asset Management was the company’s leading stakeholder in Q3.

LRT Capital Management mentioned A. O. Smith Corporation (NYSE:AOS) in its Q2 2022 investor letter. Here is what the firm has to say:

“A.O. Smith is the largest US manufacturer of residential and commercial water heaters, boilers and water treatment products. The company generates close to $3 billion in annual sales. The majority of the company’s business (73%) is done in North America, with the balance coming from China and India. Approximately 80% of demand is replacing existing heaters and 20% is tied to new construction. The company continues to benefit from a shift towards higher efficiency, but more expensive, tankless heaters.

A.O. Smith generates returns on invested capital in the high teens. The company uses its earnings to consistently grow its dividends and share repurchases. Over the past three years the company’s performance has been hurt by its exposure to China as its business there suffered due to the US-China trade war and poor execution. We believe the China business is back on track and the all-important US business is doing better than ever as housing demand heats up in the US. The company beat earnings estimates over the past several quarters and is currently enjoying very good performance as the hot U.S housing market continues to be strong.¹⁹ A.O. Smith also recently increased its share repurchase authorization.”

12. Altria Group, Inc. (NYSE:MO)

P/E Ratio as of January 25: 17.41

Share Price as of January 25: $44.9

Altria Group, Inc. (NYSE:MO) is one of the world’s largest producers of tobacco and related products, based in Virginia. The company currently pays a quarterly dividend of $0.94 per share with a dividend yield of 8.37%, as of January 25. It has raised its dividends for 53 years in a row.

Altria Group, Inc. (NYSE:MO) offers a dividend reinvestment plan to shareholders with the option of purchasing additional shares of the company. As of January 25, the stock is trading at $44.9 per share and has a price-to-earnings ratio of 17.41.

In the third quarter of 2022, Altria Group, Inc. (NYSE:MO) reported revenue of $5.41 billion, which fell by 2.2% from the same period last year. The company distributed $1.6 billion to shareholders in dividends and nearly $5 billion in the first nine months of 2022.

At the end of Q3 2022, 47 hedge funds tracked by Insider Monkey reported owning stakes in Altria Group, Inc. (NYSE:MO), down from 48 in the previous quarter. The consolidated value of these stakes is over $1.5 billion.

11. Emerson Electric Co. (NYSE:EMR)

P/E Ratio as of January 25: 16.51

Share Price as of January 25: $89.08

Emerson Electric Co. (NYSE:EMR) is an American manufacturer of industrial, commercial, and consumer products. The company offers a convenient and low-cost dividend reinvestment policy to shareholders, which places it as one of the cheap DRIP stocks to buy now.

Emerson Electric Co. (NYSE:EMR) pays a quarterly dividend of $0.52 per share, having raised it by 1% in November. The company has been raising its dividends consistently for the past 66 years. The stock’s dividend yield on January 25 came in at 2.33%.

In December, Citigroup lifted its price target on Emerson Electric Co. (NYSE:EMR) to $109 with a Buy rating on the shares. The firm mentioned that the company could benefit from gradually improving supply chains.

In fiscal Q4 2022, Emerson Electric Co. (NYSE:EMR) reported a strong cash position, with an operating cash flow of $1.2 billion and a free cash flow of $1 billion. For FY23, the company expects to pay nearly $1.2 billion in dividends to shareholders. As of January 25, the stock is trading at a share price of $89.08 with a P/E ratio of 16.51.

At the end of September 2022, 48 hedge funds in Insider Monkey’s database owned stakes in Emerson Electric Co. (NYSE:EMR), up from 47 in the previous quarter. The collective value of these stakes is over $1.15 billion. D E Shaw owned the largest stake in the company in Q3.

10. Franklin Resources, Inc. (NYSE:BEN)

P/E Ratio as of January 25: 11.93

Share Price as of January 25: $30.19

Franklin Resources, Inc. (NYSE:BEN) is a California-based multinational holding company. The company is among the cheap DRIP stocks on our list as it has a P/E ratio of 11.93 and is trading at $30.19 per share, as of January 25.

Franklin Resources, Inc. (NYSE:BEN) remained committed to its shareholder obligation, returning $773 million to stakeholders in dividends during FY21. The company pays a quarterly dividend of $0.30 per share and has a dividend yield of 3.97%, as of January 25. It maintains a 43-year streak of consistent dividend growth.

Along with a direct investment plan, Franklin Resources, Inc. (NYSE:BEN) also offers a DRIP policy to shareholders, which allows them to purchase additional shares of the company by investing all or a portion of their cash dividends.

At the end of September, 25 hedge funds in Insider Monkey’s database owned stakes in Franklin Resources, Inc. (NYSE:BEN), up from 24 in the previous quarter. These stakes have a collective value of nearly $126 million.

9. Enterprise Products Partners L.P. (NYSE:EPD)

P/E Ratio as of January 25: 11.33

Share Price as of January 25: $26.18

Enterprise Products Partners L.P. (NYSE:EPD) is a Texas-based natural and crude oil pipeline company that also provides energy services to its consumers. In January, Wolfe Research upgraded the stock to Outperform with a $27 price target, appreciating the company’s balance sheet and strong dividend yield.

Enterprise Products Partners L.P. (NYSE:EPD) announced its DRIP policy in 2003. The reinvestment plan is simple which allows the investors no-cost means of investing in the company’s common shares. As of January 25, the stock is trading at a PE multiple of 11x with a $26.18 share price.

Enterprise Products Partners L.P. (NYSE:EPD) pays a quarterly dividend of $0.49 per share, having raised it by 3.2% in January. Through this increase, the company stretched its dividend growth streak to 23 years. The stock has a dividend yield of 7.49%, as of January 25.

At the end of Q3 2022, 21 hedge funds tracked by Insider Monkey owned stakes in Enterprise Products Partners L.P. (NYSE:EPD), compared with 23 in the previous quarter. The collective worth of these stakes is over $221.6 million. With roughly 4 million shares, Fairholme (FAIRX) was the company’s largest stakeholder in Q3.

Fairholme Capital Management mentioned Enterprise Products Partners L.P. (NYSE:EPD) in its Q2 2022 investor letter. Here is what the firm has to say:

“Enterprise Products Partners L.P. (NYSE:EPD) is the largest position in the Fund. Enterprise provides processing and transportation services to producers and consumers of natural gas, natural gas liquids, and oil. These hydrocarbons are critical for modern life and have few if any, ready substitutes. Commodity prices do not greatly affect the company’s toll road fees. Enterprise is priced at less than nine times distributable cash flows and pays a 7.5% cash distribution.”

8. Truist Financial Corporation (NYSE:TFC)

P/E Ratio as of January 25: 11.01

Share Price as of January 25: $48.7

Truist Financial Corporation (NYSE:TFC) is a North Carolina-based bank holding company that provides accounts, credit cards, and commercial banking services to its consumers. On January 24, the company declared a quarterly dividend of $0.52 per share, consistent with its previous dividend. It has raised its dividends for two years in a row. The stock’s dividend yield on January 25 came in at 4.26%.

In January, Jefferies upgraded Truist Financial Corporation (NYSE:TFC) to Buy with a $52 price target, highlighting the company’s revenue and its overall performance.

Truist Financial Corporation (NYSE:TFC) has a share price of $48.7 with a PE ratio of 11.01, which makes it one of the cheap DRIP stocks on our list.

At the end of September, 39 hedge funds tracked by Insider Monkey reported owning stakes in Truist Financial Corporation (NYSE:TFC), up from 33 in the previous quarter. The collective value of these stakes is over $570.2 million.

7. Bank of America Corporation (NYSE:BAC)

P/E Ratio as of January 25: 10.85

Share Price as of January 25: $34.8

Another cheap DRIP stock on our list is Bank of America Corporation (NYSE:BAC), which is an American financial services company. The company holds a nine-year track record of consistent dividend growth. It currently pays a quarterly dividend of $0.22 per share for a dividend yield of 2.52%, as of January 25.

In the fourth quarter of 2022, Bank of America Corporation (NYSE:BAC) reported revenue of $24.5 billion, which showed an 11.2% growth from the same period last year. The company’s net interest income also jumped by 29% to $14.7 billion.

Following the company’s recent quarterly earnings, Citigroup raised its price target on Bank of America Corporation (NYSE:BAC) in January to $38 with a Buy rating on the shares. The stock is trading at a share price of $34.8 and has a price-to-earnings ratio of 10.85.

Berkshire Hathaway owned the largest stake in Bank of America Corporation (NYSE:BAC) in Q3 2022, worth $30.5 billion. Overall, 97 hedge funds tracked by Insider Monkey reported owning stakes in the company, with a collective value of $35.6 billion.

Ariel Investments mentioned Bank of America Corporation (NYSE:BAC) in its third-quarter 2022 investor letter. Here is what the firm has to say:

“We initiated three new positions in the quarter. We added leading financial institution Bank of America Corporation (NYSE:BAC) which serves individual consumers, small and middle-market businesses, and large corporations with a full range of banking, investing, asset management, and other financial and risk management products and services. The current company was formed through various mergers including NationsBank, FleetBoston, US Trust, Countrywide Financial, and Merrill Lynch with the legacy commercial bank to form a national banking powerhouse and bulge bracket investment firm. As one of the ‘Big Four’ U.S. banks it enjoys scale driven cost advantages and economies of scale which provide meaningful competitive advantages and potential for strong returns in the largely commoditized banking industry. A survivor of the financial crisis, BAC has emerged with a solid capital base and stands to benefit from a rising interest rate environment.”

6. National Fuel Gas Company (NYSE:NFG)

P/E Ratio as of January 25: 9.40

Share Price as of January 25: $57.7

National Fuel Gas Company (NYSE:NFG) is an American diversified energy company, based in New York. The company mainly specializes in the distribution of energy resources. Its DRIP policy allows shareholders to reinvest their dividends without any broker. The company is among the cheap DRIP stocks on our list.

National Fuel Gas Company (NYSE:NFG) has rewarded shareholders with 120 years of consistent dividend payments while maintaining a 52-year streak of dividend growth. The company pays a quarterly dividend of $0.475 per share for a dividend yield of 3.29%, as of January 25. Due to its consistent dividend growth, it is a great investment option alongside The Procter & Gamble Company (NYSE:PG), Bank of America Corporation (NYSE:BAC), and Johnson & Johnson (NYSE:JNJ).

As of the close of January 25, National Fuel Gas Company (NYSE:NFG) has a share price of $57.7 with a price-to-earnings ratio of 9.40.

At the end of September 2022, 29 hedge funds in Insider Monkey’s database reported owning stakes in National Fuel Gas Company (NYSE:NFG), up from 23 in the preceding quarter. The collective value of these stakes is roughly $219 million. Among these hedge funds, GAMCO Investors was the company’s leading stakeholder in Q3.

Click to continue reading and see 5 Cheap DRIP Stocks To Buy Now.

AI Fire Sale: Insider Monkey’s #1 AI Stock Pick Is On A Steep Discount

Published on December 13, 2024 at by Inan Dogan, PhD

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China’s terrifying internet “Master Key”… and the one microcap that could stop them

Published on December 18, 2024 at by Insider Monkey Staff

In August 2024, news outlets around the world revealed one of the most shocking data breaches in recent history.

Approximately 2.9 billion records, including names, email addresses, phone numbers, mailing addresses, financial data and, distressingly, Social Security numbers, were stolen when Coral Springs, Florida, firm National Public Data (NPD) suffered a massive cyberattack. The company confirmed that the breach, which happened in December 2023, resulted in the potential leaks of data in the summer of 2024.

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If they succeed in harnessing this groundbreaking “Master Key” technology, the consequences could be catastrophic.

Click to continue reading…

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