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 Barings BDC, Inc. (NYSE:BBDC) 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).
A close up view of a bank of computers and wires, showing the complex technology powering the company’s financial services.
Barings BDC, Inc. (NYSE:BBDC)
Number of Hedge Fund Holders: 12
Share Price as of the Close of July 31: $10.03
Barings BDC, Inc. (NYSE:BBDC) is an American business development company that offers debt investments in middle-market companies. The company is distinguished as one of the leading business development companies in its sector, thanks to its knack for capitalizing on growth opportunities and delivering significant value to shareholders. Over the past year, it has surpassed many competitors and broader market indices, achieving an impressive total shareholder return of over 19%. This is especially notable given the company’s low-risk profile. Typically, high returns are associated with high-risk, high-beta stocks. In contrast, the company provides lower risk through its stable end markets, attractive dividends, and rising net asset value. Its five-year monthly beta of approximately 0.70 reflects its lower volatility compared to the overall market.
Barings BDC, Inc. (NYSE:BBDC) also gains significantly from the expanding business development sector. The BDC industry is experiencing rapid growth, with assets under management hitting a record $315 billion as of March 2024. Additionally, capital flow into BDCs remained strong throughout 2022 and early 2023, as investors rebalanced their portfolios. The company has been concentrating on growth opportunities to improve its portfolio value and increase net investment income. In the first quarter of 2024, the company invested $143 million in both new and existing companies. Its net investment income for the quarter was approximately $30 million. Moreover, the company reported nearly $70 million in revenues, marking a 4% increase from the same period last year.
Barings BDC, Inc. (NYSE:BBDC) made it to our list of the best dividend stocks under $15 as the company remains committed to its shareholder obligation, in addition to maintaining strong business fundamentals. The company has raised its payouts for five consecutive years in a row and offers a quarterly dividend of $0.26 per share. The stock offers an impressive dividend yield of 10.42% as of August 1. Its YoY quarterly base dividend growth comes in at 4%, compared with an industry’s mean of 3.1%.
Insider Monkey’s database of Q1 2024 indicated that 12 hedge funds owned stakes in Barings BDC, Inc. (NYSE:BBDC), which remained unchanged from the previous quarter. These stakes have a total value of more than $35.5 million. Among these hedge funds, Callodine Capital Management was the company’s leading stakeholder in Q1.
Overall BBDC ranks 8th 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 BBDC 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 BBDC 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.
