Four Cheap Dividend Stocks To Buy Right Now

The priorities for fixed-income investors differ vastly from regular investors. While a regular investor generally looks out for the investment opportunities that can provide a better capital appreciation, a fixed-income investor prefers stable and consistent income. However, they might find it very hard to find the right stock for their portfolios, since the stocks that are stable, have a consistent dividend payout history and boast a respectable dividend yield are expensive to buy. With this in mind, we have scanned the portfolios of around 800 funds we track in order to identify four dividend stocks that are trading under $10, have a solid dividend yield and enjoy a strong level of support among the investors in our database

We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).

#4 Frontier Communications Corp (NASDAQ:FTR)

 – Investors with Long Positions (as of December 31): 31

– Aggregate Value of Investors’ Holdings (as of December 31): $342.2 million

Though the stock of Frontier Communications Corp (NASDAQ:FTR) ended the fourth quarter nearly flat, its ownership among investors covered by us inched down by two and the aggregate value of their holdings in the company fell by $108 million. Billionaire Seth Klarman‘s Baupost Group was one of the funds which reduced its stake in Frontier by 20% to nearly 11 million shares during the fourth quarter. The company posted an earnings beat for the fourth quarter recently, which caused its shares to rally and they now trade up over 13% year-to-date. Despite this rise, Frontier Communications Corp (NASDAQ:FTR)’s stock currently sports an attractive annual dividend yield of nearly 8%. Last year Frontier Communications Corp announced that it would acquire Verizon (NYSE:VZ)’s wireline assets in several key markets in a $10.4 billion deal. While this deal is expected to get completed by March 31 and Frontier is expecting massive synergies from this acquisition, analysts at Citigroup are concerned about the complications involved in this deal. Citing that reason, on March 9, they downgraded Frontier’s stock to ‘Sell’ from ‘Neutral’ and lowered their price target to $4 from $5.

#3 Energy Transfer Equity LP (NYSE:ETE)

 – Investors with Long Positions (as of December 31): 33

– Aggregate Value of Investors’ Holdings (as of December 31): $707.23 million

Energy Transfer Equity LP (NYSE:ETE) has lost over two-thirds of its market capitalization since the reverse one-for-two stock split in late-July. In spite of this negative momentum, the number of hedge funds covered by us with ownership in the company increased by six and the aggregate value of their holdings declined only marginally during the fourth quarter. The 40% drop that the stock has suffered this year has helped in further increasing its annual dividend yield to 14.25%. On March 12, Reuters reported that the company has held talks to sell its controlling stake in convenience store operator Sunoco (NYSE:SUN). However, on March 16, Energy Transfer Equity LP (NYSE:ETE) refuted those claims, saying that it has no such plans as of now. Despite the fact that the stock prices of both Williams Cos. (NYSE:WMB) and Energy Transfer Equity have plummeted since they announced their $32.6 billion merger last year, the former has issued a statement reiterating its commitment to close the deal.

#2 Vereit Inc (NYSE:VER)

– Investors with Long Positions (as of December 31): 35

– Aggregate Value of Investors’ Holdings (as of December 31): $1.33 billion

Once ‘the World’s largest net lease REIT’, Vereit Inc (NYSE:VER) lost that claim and its credibility when, in October 2014, a major accounting scandal broke out. Though it took a lot of steps in 2015, including appointing a new CEO and suspending its dividend on an interim basis, those were not enough to win back investors’ trust. During the last quarter of 2015, the ownership of the REIT among investors covered by us fell by nine and the aggregate value of their holdings fell by $151 million. The fourth quarter numbers that the company has released recently seems to suggest that it is in a recovery mode. This has led its shares to rally and they now trade up by around 7% year-to-date, while its dividend yield amounts to 6.46%. While the Adjusted Funds From Operations (AFFO) the company posted for the fourth quarter declined by 9% year-over-year to $0.20 per share, the AFFO for fiscal year 2015 was down by 7% from the previous fiscal year to $0.84 per share. In fiscal 2016, the REIT plans to dispose of assets worth between $800 million to $1 billion and expects AFFO to be in the range of $0.75 to $0.80 per share. Matthew Barrett‘s Glendon Capital Management increased its stake in the company by 6% to 6.09 million shares during the fourth quarter.

#1 Staples, Inc. (NASDAQ:SPLS)

– Investors with Long Positions (as of December 31): 49

– Aggregate Value of Investors’ Holdings (as of December 31): $1.05 million

Amid an almost 20% drop of its stock during the fourth quarter, the ownership of Staples, Inc. (NASDAQ:SPLS) among investors covered by us came down by five and the aggregate value of their holdings decreased by $283 million. However, it still had the support of enough funds to emerge as the most popular cheap dividend stock among hedge funds going into 2016. Notable investors in the company included Richard S. Pzena‘s Pzena Investment Management, which increased its holding in Staples by 31% to 33.30 million shares during the October-December period. The quarterly dividend of $0.12 per share, at its current stock price, translates into a dividend yield of 4.80%. On March 4, Staples, Inc. (NASDAQ:SPLS) reported EPS of $0.26 on revenue of $5.30 billion for its fiscal 2015 fourth quarter, compared to EPS of $0.31 on revenue of $5.66 billion it had reported for the same period of the previous year. On March 18, the company along with Office Depot (NASDAQ:ODP) sent a letter to their shareholders stating that in spite of the Federal Trade Commission (FTC) refusing their proposed merger, their commitment to the deal hadn’t changed. Furthermore, they also alleged that the FTC in making its case refused to acknowledge the emergence of new competitors like Amazon (NASDAQ:AMZN) in the office stationary supply market.

Disclosure: None