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 Viatris Inc. (NASDAQ:VTRS) 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 healthcare worker in a lab coat, holding a microscope and reflecting on the diagnosis of a patient.
Viatris Inc. (NASDAQ:VTRS)
Number of Hedge Fund Holders: 50
Share Price as of the Close of July 31: $12.06
Viatris Inc. (NASDAQ:VTRS) tops our list of the best dividend stocks under $15. The American pharmaceutical company specializes in a wide variety of therapeutic areas. The company spun off from Pfizer in 2020. It reported strong results in the first quarter of 2024. The company’s Brands segment performance shows substantial growth in emerging markets and Europe. The segment generated revenue of $2.3 billion, which declined by nearly 5% from the same period last year. Its overall revenue came in at $3.66 billion, down 2% from the prior-year period. Despite the decline, the company continued to perform well in advancing its product pipeline. In the first quarter, its new products generated $154 million in revenue.
Viatris Inc. (NASDAQ:VTRS) boasts a solid balance sheet and a strong cash position, which the company has been actively utilizing to return cash to shareholders. In the most recent quarter, the company reported an operating cash flow came in at $615 million and its free cash flow amounted to $565 million. The free cash flow was sufficient to return $393 million to shareholders through dividends and share repurchases.
Although Viatris Inc. (NASDAQ:VTRS) has a strong balance sheet and generates solid cash flow, it also carries significant debt, amounting to $18.2 billion as of the most recent quarter. Analysts suggest that a substantial portion of the company’s free cash flow will need to be allocated towards reducing this debt. However, with new products in development, the company’s cash flow remains a relatively minor concern for investors. In addition, its dividend appears to be safe as the company spends about $600 million in annual dividend payments.
Viatris Inc. (NASDAQ:VTRS) currently pays a quarterly dividend of $0.12 per share and has an impressive dividend yield of 4.04%, as of August 1. Since the company initiated its dividend policy in 2021, investors might not anticipate significant dividend increases. This is due to the high interest costs, which suggest that the company is likely to focus on strengthening its balance sheet rather than raising its dividend payouts.
The number of hedge funds holding stakes in Viatris Inc. (NASDAQ:VTRS) jumped to 50 in Q1 2024, from 43 in the previous quarter, as per Insider Monkey’s database. The stakes held by these hedge funds have a collective value of nearly $1.2 billion. Among these hedge funds, Deerfield Management was the company’s leading stakeholder in Q1.
Overall VTRS ranks 1st 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 VTRS 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 VTRS but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and 10 Best of Breed Stocks to Buy For The Third Quarter of 2024 According to Bank of America.
Disclosure: None. This article is originally published at Insider Monkey.