We recently compiled a list of the 10 Best Dividend-Paying Stocks Under $15. In this article, we are going to take a look at where Amcor plc (NYSE:AMCR) stands against the other dividend-paying stocks under $15.
During the bull market driven by the “Magnificent Seven” stocks, dividend stocks lagged in performance. Since the beginning of 2024, the Dividend Aristocrats Index has increased by only 5.50%, while the Nasdaq has risen by 13.6%. That said, the performance of tech stocks becomes less significant when considering the long-term returns of dividend stocks. Dividend-paying stocks with strong balance sheets and stable yields can offer investors consistent income, protection against market declines, and steady growth for their investments.
When investing in dividend stocks, it might seem logical to invest in stocks with the highest yields. However, according to analysts, concentrating solely on yield may not be the most effective investment approach. Not all dividend yields are equally secure, as companies under financial strain may suspend or cut their dividend payments. Therefore, investors are encouraged to prioritize the sustainability of dividends and, if possible, seek out companies with a track record of dividend growth. To know more about strong dividend payers, have a look at Best Dividend Stocks of All Time.
Historically, companies that consistently grow their dividends have outperformed those that do not pay dividends, while also exhibiting less volatility. Although dividends are not guaranteed and can fluctuate, just like in today’s time, they have played a major role in equity total returns over the decades. From 1930 to 2023, dividends and their reinvestment accounted for 40% of the annualized total return of the broader market, with the remaining return coming from capital appreciation.
Companies globally are distributing record dividends to shareholders, largely due to their robust balance sheets. With companies holding near-record levels of cash and liquid assets, they are increasingly returning this cash to investors through dividends. Global dividends grew from $1.23 trillion in 2020 to $1.66 trillion in 2023, according to a report by Janus Henderson. The firm forecasts total dividends to reach $1.72 trillion for 2024, up 3.9% on a headline basis.
A company’s dividend payout ratio is an important measure of how flexible its dividend policy is. Firms that only earn enough to cover their dividends or pay out most of their earnings as dividends might face risks from competitive pressures, as their cash flow may not be adequate to sustain operations. Moreover, companies with high dividend yields or, more critically, high payout ratios might be at risk of limited future growth, which could impact both share price appreciation and the potential for increasing dividends. According to data collected by Nuveen, stocks with the highest payout ratios have not been the strongest long-term performers. Over the past 20 years, companies with medium and medium-high payout ratios that paid dividends have generally delivered better performance.
Consistently growing dividends is a challenging target, as it requires companies to be financially very stable. For companies that are still in the growth phase and have lower share prices, evaluating dividend sustainability becomes a straightforward metric to consider. In this article, we will take a look at some of the best dividend stocks under $15.
Our Methodology:
For this list, we used a Finviz stock screener to find dividend stocks trading below $15 as of the close of July 31. From the initial list, we narrowed down the selection to companies that pay regular dividends to shareholders and possess strong dividend policies, ensuring consistent future dividends. From the resultant list, we picked 10 stocks with the highest number of hedge fund investors, using Insider Monkey’s Q1 2024 database of 920 hedge funds and their holdings. 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).
An automated assembly line producing a variety of packaging products.
Amcor plc (NYSE:AMCR)
Number of Hedge Fund Holders: 17
Share Price as of the Close of July 31: $10.53
A multinational global packaging company, Amcor plc (NYSE:AMCR) ranks fifth on our list of the best dividend stocks under $15. The company’s free cash flow has consistently been a strong point, which is favorable news for income investors. In the first nine months of FY24, the company reported adjusted free cash flow of $115 million, a significant increase from $14 million in the same period the previous year. This result met the company’s expectations. The improvement in cash flow is mainly due to better management of working capital. Management continues to project that adjusted free cash flow for the fiscal year will be between $850 million and $950 million.
With evolving investment trends, investors are increasingly focused on companies adopting sustainable investment solutions, which are essential for addressing climate change. In 2018, Amcor plc (NYSE:AMCR) became the first global packaging firm to commit to making all of its packaging recyclable or reusable by 2025. This pledge aims to tackle a significant environmental challenge using the company’s capability, scale, and reach. The shifting investment patterns have also significantly boosted the company’s cash generation. The company produces substantial annual cash flow and is dedicated to maintaining an investment-grade credit rating. It is believed that the company’s robust annual cash flow and strong balance sheet enable it to reinvest in the business for organic growth, pursue acquisitions or share repurchases, and return cash to shareholders through attractive and increasing dividends.
During the first nine months of 2024, Amcor plc (NYSE:AMCR) returned $570 million to shareholders through dividends and share repurchases. The company currently pays a quarterly dividend of $0.125 per share and has a dividend yield of 4.75%, as of August 1. With a dividend growth streak spanning over 40 years, AMCR is one of the best dividend stocks on our list.
At the end of March 2024, 17 hedge funds tracked by Insider Monkey held stakes in Amcor plc (NYSE:AMCR), compared with 22 in the previous quarter. These stakes are collectively valued at over $65.6 million. Ken Griffin’s Citadel Investment Group was the company’s leading stakeholder in Q1.
Overall AMCR ranks 5th on our list of the best dividend-paying stocks to buy under $15. You can visit 10 Best Dividend-Paying Stocks Under $15 to see the other dividend-paying stocks that are on hedge funds’ radar. While we acknowledge the potential of AMCR as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is more promising than AMCR but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.