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 Ford Motor Company (NYSE:F) 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 Ford truck roaring down a highway, with powerful headlights blazing its way.
Ford Motor Company (NYSE:F)
Number of Hedge Fund Holders: 41
Share Price as of the Close of July 31: $10.82
Ford Motor Company (NYSE:F) is a Michigan-based automobile manufacturer that deals in the manufacturing of a wide range of commercial vehicles and luxury cars. The company’s solid cash position makes it a favored income stock among investors. By the end of the second quarter, its strong balance sheet held nearly $27 billion in cash and approximately $45 billion in liquidity. This strong financial standing supports a disciplined approach to capital allocation, allowing for investment in long-term growth and returns to shareholders.
Ford Motor Company (NYSE:F) reached its peak in 1999, trading at approximately $35 per share, thanks to strong sales of sport utility vehicles, pickup trucks, and large cars in the US Since then, it has dropped by over 71%. A significant factor in this decline has been the company’s struggles with high warranty costs. For example, Ford Blue’s EBIT of $1.2 billion was lower compared to the same quarter the previous year, primarily due to increased warranty expenses.
Despite the negative perception, Ford Motor Company (NYSE:F) is not as poorly regarded by analysts as it might appear. J.D. Power, a prominent American data analytics and consumer intelligence firm, recently released its 2024 US Initial Quality Study, which highlighted the company’s progress in recent years. Ford Motor Company (NYSE:F) made a notable leap of 14 positions, moving up to 9th place on the list of brands with the fewest problems per 100 vehicles. In the second quarter of 2024, the company reported revenue of $47.8 billion, up from $45 billion during the same period last year.
Due to its strong cash position, Ford Motor Company (NYSE:F) has paid supplemental dividends to shareholders frequently over the years, in addition to its common dividend. It currently offers a quarterly dividend of $0.15 per share and also paid an additional dividend of $0.18 per share earlier this year. With a dividend yield of 5.98% as of August 1, F is one of the best dividend stocks under $15.
At the end of March 2024, 41 hedge funds, up from 40 in the previous quarter, held stakes in Ford Motor Company (NYSE:F), as per Insider Monkey’s database. These stakes have a consolidated value of over $1.5 billion. Fisher Asset Management owned over 65.2 million shares in the company, becoming its largest shareholder in Q1.
Overall F ranks 2nd 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 F 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 F 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.