We recently compiled a list of the 12 52-Week Low Dividend Stocks To Consider. In this article, we are going to take a look at where APA Corporation (NASDAQ:APA) stands against the other 52-week low dividend stocks.
Dividend stocks have noticeably lagged over the past year or so, with tech stocks dominating the spotlight. However, with major tech companies beginning to implement dividend policies, there is renewed optimism for investors, offering a mix of growth and dividend potential. Currently, all eyes are on the Fed’s upcoming decision on interest rate cuts, which could significantly benefit dividend-paying stocks.
While keeping an eye on the future performance of dividend stocks is crucial, it’s also wise to look back and see how these equities have weathered different market storms. A report from S&P Dow Jones Indices revealed that dividends have been crucial in generating overall equity returns. Since 1926, dividends have accounted for about 32% of the total return for the broader market, with capital appreciation contributing 68%. Consequently, both reliable dividend income and the potential for capital appreciation are key factors in setting expectations for total returns.
Also read: 14 Best 52-Week High Stocks to Buy According to Short Sellers
Inflation is rarely a friend to investments, as the past year has demonstrated. However, dividend stocks have historically held their ground during periods of high inflation. In the 1940s, 1960s, and 1970s—decades characterized by high inflation and total returns below 10%—dividends made a significant contribution to overall returns, as reported by Hartford Funds.
Among dividend strategies, the Dividend Aristocrats Index is the most well-known, tracking companies with at least 25 consecutive years of dividend growth. These stocks are generally less volatile than other asset classes, according to S&P Dow Jones Indices. Over the long term, the Dividend Aristocrats have outperformed the broader market with lower volatility, resulting in higher risk-adjusted returns. The index’s ability to protect against downside risk is evident in its capture ratios: it has outperformed the market in 69.34% of down months and 43.61% of up months. Moreover, the Dividend Aristocrats experienced a smaller drawdown compared to the benchmark index.
Analysts believe that the movement of returns on investments is shaped by market forces. Daniel Peris, a portfolio manager with Federated Hermes and author of a recent book on the future of dividends, suggested that stock market price appreciation alone might not meet the needs of income-seeking investors in the coming years. This, he believed, would likely drive companies to increase their payouts to remain competitive with cash and bonds. He indicated that more companies might start offering dividends and make them a more significant part of their value proposition. However, investors need to be cautious when investing in dividend equities. According to Michael Clarfeld, who manages the Dividend Strategy portfolios at ClearBridge Investments, dividend investing is about making informed decisions by examining a company’s cash flows and how they distribute payouts to investors.
The recent dip in the performance of dividend stocks has made them more attractive to investors. The Dividend Aristocrats Index has seen an increase of nearly 9% since the beginning of 2024, while the broader market has returned 16.5%. These stocks could present a good entry point for investors due to the steady income they offer, providing stability and predictability for a portfolio during volatile times. Given this, we will take a look at some of the best 52-week low stocks that pay dividends.
Our Methodology:
For this article, we first listed down all dividend stocks that recently hit their 52-week lows. We then used Insider Monkey’s exclusive database of 912 leading hedge funds to get the hedge fund sentiment for each stock. Finally, we narrowed our list to 12 of these stocks that had the highest number of hedge fund investors, as tracked by Insider Monkey in Q2 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).
Workers in hard hats and safety gear processing oil and gas in a US refinery.
APA Corporation (NASDAQ:APA)
Number of Hedge Fund Holders: 31
1-Year Share Price Decline as of September 4: 41.2%
52 Week Range: $25.85 – $44.98
An American holding company, APA Corporation (NASDAQ:APA)’s subsidiaries explore for and produce oil and natural gas in the US, Egypt, and the UK. The stock is down by over 27% since the start of 2024 and has fallen by over 41% in the past year. Due to this, on the business front, the company took several steps to expand its energy infrastructure portfolio and drive growth. In the second quarter of 2024, it reported production of 473,000 barrels of oil equivalent (BOE) per day. Adjusted production, excluding Egypt’s noncontrolling interest and tax barrels, was 405,000 BOE per day. Its revenue for the quarter came in at $2.8 billion, up significantly from $1.9 billion in the same period last year.
Although APA Corporation (NASDAQ:APA) has posted strong earnings, analysts have yet to give it the green light, as they still expect the company to encounter business headwinds. Ariel Investments also mentioned in its Q2 2024 investor letter:
“Oil and natural gas explorer, APA Corporation (NASDAQ:APA, also traded lower in the quarter following an earnings miss. Weaker than expected production guidance and an upcoming increase in capital investment weighed on investor sentiment. Additionally, the company’s pending acquisition of Callon Petroleum Company, which stands to enhance the scale of APA’s existing Delaware Basin assets and appears accretive to key financial metrics in late 2024 and beyond, is still being digested by investors. Nonetheless, APA continues to deliver strong well performance in the Permian Basin and express confidence in its Suriname development, as it continues to work with TotalEnergies to complete a plan for the oil hub. Management remains focused on free cash flow generation and returning capital to shareholders.”
For dividend investors, APA Corporation (NASDAQ:APA)’s cash position is solid enough to meet their expectations. In the most recent quarter, the company reported an operating cash flow of $877 million. It ended the quarter with $160 million available in cash and cash equivalents, up from $87 million six months ago. This strong cash generation also allowed the company to return $135 million to shareholders through dividends and share repurchases during the quarter. It currently offers a quarterly dividend of $0.35 per share and has a dividend yield of 3.83%, as of September 4.
At the end of the June quarter of 2024, 31 hedge funds owned stakes in APA Corporation (NASDAQ:APA), as per Insider Monkey’s database. These stakes have a collective value of over $294.5 million. Among these hedge funds, Harris Associates was the company’s largest stakeholder in Q2.
Overall APA ranks 6th on our list of the 52-week low dividend stocks to consider. While we acknowledge the potential for APA 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 timeframe. If you are looking for an AI stock that is more promising than APA 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.