We recently compiled a list of the 12 Best Dividend Stocks Under $30. In this article, we are going to take a look at where Barings BDC Inc. (NYSE:BBDC) stands against the other dividend stocks under $30.
Dividend stocks have remained a focal point for investors, especially amid market volatility and the growing need for steady cash flow. Over time, many investors have turned to dividends as a financial cushion for uncertain periods. According to a recent report by J.P. Morgan Wealth Management, dividend stocks are typically priced lower compared to the broader market. Moreover, high-quality dividend stocks tend to be less volatile, experiencing about 80% of the market’s overall fluctuations. This suggests that they offer a more stable investment option while potentially being available at a more attractive valuation.
Also read: 7 Cheap Quarterly Dividend Stocks to Invest in
This trend has drawn the attention of income-focused investors, leading to an increase in dividend income as a key component of personal earnings. According to a report by S&P Dow Jones Indices, dividend income has grown from 2.68% in Q4 1980 to 7.88% in Q2 2024, highlighting its increasing role as a source of income. The report also pointed out that since 1936, dividends have contributed to more than a third of overall equity returns, with capital gains making up the remainder.
The dividend growth approach has proven effective for long-term investors, as these stocks have delivered solid returns over time. When adjusted for inflation, dividend growth has outpaced rising prices, reinforcing their appeal. A report by WisdomTree noted that from 1957 to 2023, dividends increased at an average annual rate of 5.7%, exceeding inflation by more than 2%. The report also highlighted that dividend reductions were rare, occurring in only six of the past 64 years, and only once dropping more than 5%. In contrast, stock prices declined in 18 of those years, with the steepest drop exceeding 40% and an average decline of over 11%. Stock prices also showed more than twice the volatility of dividend cash flows, as short-term fluctuations are often driven by market sentiment, while long-term value is supported by stable cash flows.
Over the years, US companies have consistently raised or maintained their dividend payouts, reflecting investor preferences. According to J.P. Morgan’s Outlook 2025 report, US profit margins remain strong, hitting all-time highs. In this decade, companies in the broader market have returned nearly 75% of their annual earnings to shareholders through dividends and share buybacks, compared to just 50% in the 2000s. While concerns about the concentration of the index in major tech firms persist, the report forecasts positive earnings growth across every sector in the broader market for 2025, a trend not seen since 2018.
Tech stocks, traditionally associated with growth, are increasingly becoming dividend payers in response to investor demand. Just a few years ago, the idea of major tech companies offering dividends seemed unlikely. However, the pool of potential dividend stocks is expanding, attracting significant capital that has been sitting in money market instruments to hedge against interest rate risks. Here are some remarks from Dividend Research Analyst Juan Pablo Albornoz told S&P Global Market Intelligence:
“Providing a dividend is a way for these profitable tech companies to prove to the market and their shareholder base that they can provide sustained regular shareholder return on a regular and predictable basis.”
This approach benefits investors who can now combine investments in both growth and income-generating stocks.
Our Methodology:
For this list, we used a Finviz stock screener to find dividend stocks with share prices below $30 as of the close of January 30. From the initial list, we selected 12 companies with dividend yields above 4% and a history of regular dividend payments, indicating sustainable dividends. The stocks are ranked according to their share prices. 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).
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)
Share Price as of the Close of January 30: $10.07
Barings BDC Inc. (NYSE:BBDC) is a North Carolina-based business development company that specializes in debt investments in middle-market companies. The company remains focused on growth strategies designed to enhance portfolio value and boost net investment income. In the third quarter of 2024, the company made 11 new investments totaling $88.4 million, along with an additional $36.6 million invested in its existing portfolio companies. The company reported a total investment income of $70.9 million for the quarter, with net investment income reaching $30.2 million.
Over the years, Barings BDC Inc. (NYSE:BBDC) has positioned itself as a top business development firm by seizing growth opportunities and generating substantial value for shareholders. Over the past year, its stock has provided a nearly 10% return, which is especially impressive considering its low-risk profile. Unlike high-beta stocks, which tend to carry more risk for the potential of higher returns, Barings BDC offers a more stable investment. Its consistent markets, appealing dividends, and increasing net asset value all contribute to its lower risk profile.
Barings BDC Inc. (NYSE:BBDC), one of the best dividend stocks on our list, has been paying regular dividends to shareholders since 2007. Its quarterly dividend currently comes in at $0.26 per share and has a dividend yield of 10.28%, as of January 30.
The number of hedge funds tracked by Insider Monkey owning stakes in Barings BDC, Inc. (NYSE:BBDC) grew to 11 in Q3 2024, from 9 in the previous quarter. These stakes have a total value of over $21.7 million. With over 1 million shares, Two Sigma Advisors was the company’s leading stakeholder in Q3.
Overall BBDC ranks 2nd on our list of the best dividend stocks under $30. While we acknowledge the potential for BBDC as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BBDC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
