In this article, we will take a look at some of the best cheap quarterly dividend stocks to invest in.
Growth stocks are typically seen as companies with the potential to outperform the market in the future, even if they are currently unprofitable or trading at high valuations. While they offer the possibility of substantial returns, they also come with significant risks. In contrast, value stocks tend to perform well when the broader economy is expanding. These are well-established companies with consistent profits, many of which pay dividends. Investors are drawn to them because they are often perceived as undervalued relative to their true worth. Sectors like banking, utilities, and healthcare fall into this category. Historically, value stocks have outpaced growth stocks for much of the market’s history, but that trend has reversed over the past decade.
Over the past five years, the growth stocks in the Vanguard Fund have surged approximately 111%, with much of the increase occurring after the fourth quarter of 2022. This momentum was largely driven by major tech firms introducing artificial intelligence products and services, which accelerated earnings growth and lifted valuations. Meanwhile, value stocks have struggled to keep pace. Since late 2022, the value stocks in the Vanguard Fund have lagged behind its growth-focused counterpart and have gained only 48% over the past five years. In theory, this gap suggests value stocks could eventually rebound. Many of these companies continue to generate profits and return a portion to shareholders, so at some point, buyers may step in, pushing their performance closer to historical norms.
By the end of 2024, the value fund was trading at around 16 times its projected earnings for the year, significantly lower than the growth fund, which was valued at approximately 27 times earnings. This represents a roughly 40% discount, compared to the average 30% gap over the past decade, according to Barron’s analysis of FactSet data. This valuation gap makes value stocks look more appealing. If these companies deliver earnings in line with or above analysts’ expectations, they could demonstrate to the market that they are worth more than their current prices suggest, potentially leading to strong stock performance.
Also read: 15 Best Monthly Dividend Stocks To Buy Right Now
As noted earlier, value stocks are often associated with dividend payments. These stocks typically offer higher dividend yields and stronger fundamental ratios compared to growth stocks. When it comes to dividend investing, dividend growth plays a crucial role. The Dividend Aristocrats Index serves as a key benchmark for dividend-focused strategies, tracking companies that have increased their payouts for at least 25 consecutive years.
A report by S&P Dow Jones Indices highlighted that investment strategies focused on income generation tend to display value-oriented characteristics. Stocks with high dividend yields and lower valuations frequently attract investor interest. However, the report also pointed out that the Dividend Aristocrats Index blends both growth and value traits rather than leaning heavily toward one style. A comprehensive analysis of the index from 1999 to 2022 revealed that, on average, 59.04% of its holdings were value stocks, while 40.94% were classified as growth stocks. Given this, we will take a look at some of the best cheap quarterly dividend stocks to invest in.
Image by Steve Buissinne from Pixabay
Our Methodology:
For this list, we scanned through Insider Monkey’s database of 900 hedge funds as of Q3 2024 and selected dividend companies with strong dividend histories and yields of at least 1%, as of January 30. From that list, we picked dividend stocks with forward P/E ratios below 16, as of January 30. The low price-to-earnings ratio shows that they are traded below their intrinsic value. The stocks are ranked in descending order of their P/E multiples. We also considered hedge fund sentiment around each stock using Insider Monkey’s data for Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
7. Lockheed Martin Corporation (NYSE:LMT)
Forward P/E Ratio: 16.05
Lockheed Martin Corporation (NYSE:LMT) is a Texas-based defense and aerospace manufacturing company that specializes in advanced technology systems, services, and products. The company has attracted investor interest, as defense contractors are generally viewed as dependable investment options. This stability largely comes from their strong ties to the US government, which provides a consistent stream of contracts. In addition, defense budgets tend to remain resilient even during economic downturns.
Growing geopolitical tensions across the globe are further driving defense spending, as nations focus on replenishing equipment used in conflicts and addressing evolving security threats. Among Lockheed Martin Corporation (NYSE:LMT)’s various divisions, its missiles and fire control segment stands out as the fastest-growing and most profitable, making it a key driver of future expansion. In the past 12 months, the stock has surged by over 5.2%.
Lockheed Martin Corporation (NYSE:LMT) reported mixed earnings in the fourth quarter of 2024. The company’s revenue for the quarter came in at $18.6 billion, which fell by 1.3% from the same period last year. However, in 2024, the company allocated more than $3 billion toward enhancing national security through research and development, as well as capital investments aimed at supporting its customers’ missions. These efforts focused on driving innovation and modernizing operations with cutting-edge digital and manufacturing technologies. Its strong and stable performance also allowed it to return over 100% of its free cash flow to shareholders in 2024.
Lockheed Martin Corporation (NYSE:LMT) also demonstrated strong cash generation in FY24. The company’s operating cash flow came in at $7 billion and its free cash flow the year amounted to $5.3 billion. In addition, it returned $6.8 billion to shareholders through dividends and share repurchases in FY24. The company offers a quarterly dividend of $3.30 per share and has a dividend yield of 2.91%, as of January 30. It has been growing its dividends for 22 consecutive years. With a forward P/E ratio of 16.05, LMT is one of the best cheap quarterly dividend stocks to invest in.
At the end of Q3 2024, 58 hedge funds tracked by Insider Monkey held stakes in Lockheed Martin Corporation (NYSE:LMT), up from 56 in the previous quarter. The consolidated value of these stakes is nearly $2.4 billion. Among these hedge funds, Two Sigma Advisors was the company’s leading stakeholder in Q3.
6. QUALCOMM Incorporated (NASDAQ:QCOM)
Forward P/E Ratio: 15.02
QUALCOMM Incorporated (NASDAQ:QCOM) is an American semiconductor company that provides a wide range of wireless technology services. While recent AI developments from DeepSeek have introduced some uncertainty to the market, the outlook for the year remains unclear. However, trends in handset demand and the expansion of AI within the industry are independent factors. Qualcomm has integrated AI into its latest technologies, including IoT and automotive applications. In the IoT sector, AI enhances data analysis directly on devices, improving efficiency for users. Meanwhile, in the automotive segment, AI plays a crucial role in enabling autonomous driving technology. The stock has surged by nearly 18% in the past 12 months.
In fiscal Q4 2024, QUALCOMM Incorporated (NASDAQ:QCOM) reported solid financial performance, with revenue rising 18% year-over-year to $10.24 billion. Net income saw a 33% increase from the same period in the previous year, reaching $3.5 billion. In addition, the company achieved annual earnings per share growth of more than 30% for the fiscal year. The stock has a forward P/E ratio of 15.02, which makes it one of the best cheap quarterly dividend stocks.
QUALCOMM Incorporated (NASDAQ:QCOM) is not only recognized for its innovations and portfolio expansion but also for its strong dividend policy. The company maintains ample cash reserves to support its dividend payments, finishing the quarter with $8 billion in cash and cash equivalents. It generated $12.2 billion in operating cash flow, an increase from $11.3 billion in the previous year. Demonstrating its commitment to shareholder returns, the company paid out $2.2 billion in dividends. The company has been rewarding shareholders with growing dividends for the past 20 years. It currently pays a quarterly dividend of $0.85 per share and has a dividend yield of 1.98%, as of January 30.
As of the close of Q3 2024, 74 hedge funds tracked by Insider Monkey held stakes in QUALCOMM Incorporated (NASDAQ:QCOM), down from 100 in the previous quarter. The collective value of these stakes is more than $3.23 billion. With over 1.8 million shares, Tiger Global Management LLC was one of the company’s leading stakeholders in Q3.
