We recently published a list of 10 Best Dividend Stocks Under $5. In this article, we are going to take a look at where Uniti Group Inc. (NASDAQ:UNIT) stands against the other dividend stocks under $5.
Dividends have consistently been a strong source of returns over time. These stocks hold both theoretical and practical significance in assessing stock values. Although dividend stocks have underperformed the broader market in recent years, their long-term performance remains steady.
Since the beginning of 2024, the Dividend Aristocrats Index—which monitors companies that have consistently raised their dividends for at least 25 consecutive years—has yielded returns of over 8% for investors. However, this performance has fallen short compared to the broader market, which has surged by nearly 19% during the same period. Despite this shortfall, 2024 has been a favorable year for dividends overall. This improvement is largely attributable to several major technology firms, previously known for not paying dividends, announcing the start of their dividend programs. Moreover, these companies have collectively distributed billions in their inaugural dividend payments.
Also read: 12 Best Dividend Stocks For Steady Growth
The long-term performance of dividend stocks also takes into account periods of high interest rates, during which other asset classes typically experience declines. This doesn’t imply that dividend stocks only perform well during episodes of high interest rates. While there isn’t a clear connection between their performance and interest rates, historical data shows that they tend to remain relatively stable regardless of the rate environment. For instance, in certain periods of rising US interest rates, such as the mid-1970s, dividend-paying stocks outperformed the broader market. Conversely, as rates decreased from the mid-1980s to the mid-1990s, the performance of high-yield stocks relative to the market remained relatively stable. Even if we set aside historical data and concentrate on more recent performance, we find that elevated interest rates did not have any serious impact on the performance of dividend equities. For example, in 2022, when the Federal Reserve raised its federal funds rate seven times to tackle persistent inflation—four of which were consecutive hikes of 75 basis points—dividend stocks outperformed the broader market. This could be due to the fact that dividend-paying companies tend to be well-established and more stable, with enough confidence in their cash flows to commit to returning cash to shareholders. Moreover, committing to a dividend imposes financial discipline. Instead of using excess cash for acquisitions that may or may not create value, repurchasing shares at uncertain prices, or funding speculative growth initiatives, executives are compelled to manage payouts responsibly.
Given investors’ growing interest in dividend stocks, more companies are initiating and increasing their dividend payments. A key driver behind this trend is that many companies, particularly large tech firms, have substantial cash reserves and are rapidly boosting their free cash flows. This strong financial footing allows them to reward investors with higher dividends. According to the latest report from S&P Dow Jones Indices, companies in the index paid $153.4 billion in dividends during the second quarter of 2024, up from $151.6 billion in the previous quarter and $143.2 billion in the same period last year. The report also highlighted that there were 539 dividend increases reported, compared to 460 in the same period last year, marking a 17.2% year-over-year growth. The total amount of these increases reached $20.4 billion for the quarter, up significantly from $9.8 billion in Q2 2023. With that, we will take a look at some of the best dividend stocks under $5.
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Aerial view of a communication site, showing the breadth of the company’s real estate portfolio.
Uniti Group Inc. (NASDAQ:UNIT)
Number of Hedge Fund Holders: 22
Share Price as of the close of August 23: $4.49
Uniti Group Inc. (NASDAQ:UNIT) is an American real estate investment trust company that specializes in the acquisition, ownership, and leasing of communications infrastructure. The company was spun off from Windstream to take ownership of the telecommunications company’s fiber optic assets. It continues to make substantial progress on this merger and is on track to complete the transaction by the second half of 2025. As a combined company, they plan to maintain a disciplined growth trajectory, expand their fiber network into Tier II and III markets, and significantly enhance their overall financial profile. With demand for both commercial and residential fiber at an all-time high, Uniti Group Inc. (NASDAQ:UNIT) is well-positioned to capitalize on this growth potential moving forward.
As of June 30, 2024, Uniti Group Inc. (NASDAQ:UNIT) owns around 142,000 miles of fiber routes, 8.6 million fiber strand miles, and various other communication properties across the US. The company reported strong earnings in the second quarter of 2024, driven by high demand for its essential fiber infrastructure. Around 40% of its consolidated bookings during the quarter—the highest since 2022—were fueled by Hyperscalers and Generative AI demand, with expectations for continued growth. The core recurring strategic fiber business saw a 3% increase in the second quarter of 2024 compared to the same period in 2023, while net success-based capital intensity at Uniti Fiber decreased to 27% from 44% in the second quarter of 2023.
For the first six months of the year, Uniti Group Inc. (NASDAQ:UNIT) reported an operating cash flow of $174.3 million, down from approximately $200 million in the same period last year. The company ended the quarter with nearly $619 available in cash and cash equivalents. It is one of the best dividend stocks on our list as the company has paid uninterrupted dividends to shareholders since 2015. Its quarterly dividend currently comes in at $0.15 per share for an impressive dividend yield of 13.51%, as of August 23.
The number of hedge funds tracked by Insider Monkey owning stakes in Uniti Group Inc. (NASDAQ:UNIT) grew to 22 in Q2 2024, from 19 in the previous quarter. These stakes are worth over $75.3 million in total. With over 10 million shares, Elliott Management was the company’s leading stakeholder in Q2.
Overall UNIT ranks 3rd on our list of the best dividend stocks under $5. While we acknowledge the potential for UNIT 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 UNIT 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.
