When a stock is trading near its 52-week low, that can potentially be an attractive time to buy. A cheaper share price means that investors aren’t feeling great about the stock for one reason or another. In some cases, it may be an overreaction, but in other cases, there is significant risk and the sharp drop in price is justifiable.
For the three stocks listed here, there isn’t much risk. They aren’t doing well this year, but they still have great businesses, and they can recover in the long run. Lowe’s Companies (LOW 3.32%), Procter & Gamble (PG 0.94%), and Chevron (CVX 1.72%) all offer attractive yields that are higher than the S&P 500 average of 1.2%.
Here’s why these can be terrific stocks to add to your portfolio today, especially if you want a lot of dividend income.
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Lowe’s Companies: 2.2% yield
Home improvement retailer Lowe’s has seen its share price fall by more than 9% since the start of the year (returns as of June 27). It’s getting close to its 52-week low of $206.39. Investors are worried that amid sluggish economic conditions, people are going to be holding back on spending on home renovation projects and repairs, which is a valid concern. But it’s also a short-term one. As economic conditions improve, there should be an uptick in business for Lowe’s.
For the current fiscal year (which ends in January), Lowe’s is projecting its comparable sales to be flat to up 1%. While that doesn’t scream growth, it also means the company isn’t expecting its revenue to nosedive, either. It’s stable, and that’s a good sign for dividend investors. If the business can keep things relatively stable amid such challenging macroeconomic conditions, that’s a good sign of its overall strength and diversification.
The company’s payout ratio is also modest at just 38%, which means the dividend is well supported with solid financials. Although this may not be a terribly exciting stock to own right now, Lowe’s can make for a great long-term buy. It trades at less than 19 times its trailing earnings, and with an above-average yield of 2.2%, it can be a good option to consider adding to your portfolio. The company has also increased its dividend for more than 50 consecutive years, making it a Dividend King.
Procter & Gamble: 2.6% yield
You can collect a higher yield with Procter & Gamble stock, where the payout is around 2.6%. Entering trading this week, the stock was just a few dollars away from its 52-week low of $156.58. However, it’s down around 5% since the start of the year. The sell-off hasn’t been extreme, but it’s been enough to push this blue chip stock near its low.
During the first three months of the year, the company’s net sales totaled $19.8 billion and were down 2% year over year. However, its organic growth rate, which excludes the effects of foreign currency, divestitures, and acquisitions, was steady at 1%. As with Lowe’s, this isn’t an exciting rate of growth for the business. But Procter & Gamble’s business has generally been fairly stable over the years.
The company has many top consumer brands in its portfolio, including Pampers and Tide. These are staples that people simply can’t do without. The biggest risk is that consumers might trade down to no-name products, but there hasn’t been a significant drop in sales lately to suggest that that’s a huge concern for the business.
The stock remains a solid investment over the long term, especially when you consider that it has raised its payout for 69 consecutive years. While you’ll be collecting 2.6% in dividends if you invest today, over the long term, that dividend income is likely to rise. This is another example of a great stock to just buy and hold for years.
Chevron: 4.8% yield
The highest payout on this list belongs to oil and gas giant Chevron, which yields 4.8%. This Warren Buffett-approved stock is down around 1% this year, which doesn’t look too bad given that oil prices have been falling over the past 12 months.
There can be considerable volatility that comes with the stock due to changing commodity prices. In its most recent quarter, which ended on March 31, Chevron’s net income declined by 37% to $3.5 billion. While that may seem troubling, that can also easily change if the price of oil rises higher in the future. What’s impressive is that even despite the volatility, the company has a dividend growth streak that spans 38 years. Even with the drop in earnings, its payout ratio is still around 75%.
As a leading company and producer in the oil and gas industry, Chevron can be a fairly stable and safe investment to hang on to, especially if you love dividends. While it has been rallying over the past month, it’s still not far from its 52-week low of $132.04. Now can be a great time to buy it.