If you have $1,000 that you can afford to invest in the stock market, dividend stocks can help make the most of your money, specifically those that are trading at low valuations. While buying Nvidia and investing in hot tech stocks can be alluring, they can also be volatile investments. You can set yourself up for safer returns by targeting much more reasonably priced options instead.
Three excellent dividend stocks that can make for more practical investments right now include PepsiCo (PEP +0.39%), AT&T (T 4.22%), and Pfizer (PFE 0.61%). Let’s take a close look at these businesses and why these stocks look undervalued today.
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PepsiCo
PepsiCo is a leader in the soft drink and snack market. Although it hasn’t generated much growth of late, this is still a highly stable company to invest in. In each of the past three years, its revenue has been in excess of $90 billion, and earnings have been north of $8 billion.
This is also the 54th consecutive year that the company has increased its payout, which puts it in the category of a Dividend King. Not many stocks belong to the illustrious club, which features many of the safest income stocks to own. At 4.2%, PepsiCo also already offers a fairly high yield as it is; it’s four times that of the S&P 500 average, which is just over 1%.
Today’s Change
(0.39%) $0.55
Current Price
$142.55
Key Data Points
Market Cap
$194B
Day’s Range
$141.78 – $143.67
52wk Range
$127.60 – $171.48
Volume
122.3K
Avg Vol
6.5M
Gross Margin
54.22%
Dividend Yield
4.01%
While PepsiCo’s stock has declined this year, it’s an intriguing option to hold on to for the long term, given the value it possesses. Currently, it’s trading at a forward price-to-earnings (P/E) multiple of 16, which is based on analysts’ expectations of its future earnings.
AT&T
Another excellent dividend stock to consider is AT&T. The telecom giant pays 4.5%, which is an even higher payout than PepsiCo. While the company hasn’t raised its dividend in years, with AT&T’s financials looking strong of late, it may only be a matter of time before it gets back to growing its payout. This year, the company projects its free cash flow to total at least $18 billion, which is far higher than the roughly $8.2 billion that it issues in dividends over the course of 12 months.
Today’s Change
(-4.22%) $-1.04
Current Price
$23.60
Key Data Points
Market Cap
$171B
Day’s Range
$23.46 – $24.20
52wk Range
$22.95 – $29.79
Volume
1.4M
Avg Vol
39.6M
Gross Margin
43.08%
Dividend Yield
4.50%
At a forward P/E of just 11, the stock is incredibly cheap when compared to the average S&P 500 stock, which trades at 22 times its expected future earnings. With some great value and a high dividend, AT&T looks to be an underrated buy right now. This is a low-volatility investment you can safely hold on to, even amid uncertainty in the markets.
Pfizer
Arguably, one of the best dividend stocks to own right now is Pfizer. At 6.7%, it’s hard to find a payout this high without taking on high risk. The stock’s payout ratio is over 100%, which is likely to spook investors, but that doesn’t tell the whole story. This past year, the company incurred not only one-time acquisition-related expenses but also restructuring costs as it made its operations leaner and more efficient. Without those items, its financials would look much better, and the dividend would appear more sustainable.
Investors are, however, also concerned about what lies ahead for Pfizer due to patent cliffs around multiple drugs, which could weigh on its top line and thus result in an even worse bottom line. But with investments into growing its pipeline and adding valuable assets to expand its growth opportunities (hence the acquisitions), I believe the company is doing what is necessary to combat the challenges ahead.
Today’s Change
(-0.61%) $-0.15
Current Price
$25.39
Key Data Points
Market Cap
$146B
Day’s Range
$25.30 – $25.61
52wk Range
$23.08 – $28.75
Volume
387.7K
Avg Vol
37.2M
Gross Margin
65.16%
Dividend Yield
6.73%
While its results remain stable right now, investors may be looking for further proof that the business is on the right track before buying the healthcare stock. But with it trading at a forward P/E of just under nine, there’s some solid margin of safety that comes with this investment, which can make it worth the risk.
