Regardless of what your investing strategy is right now, ask yourself this: What’s something you’d like to enjoy this summer? If your answer is peace of mind, then you’re a lot like me.
Dividend-payers show strength during economic shifts and policy changes, making them valuable during the summer, when a lot of everyday consumers are relaxing. Investors can relax too, because all it takes is some simple work to ensure that our portfolios generate a lucrative passive income stream.
Of course, it’s all about picking the right dividend stocks, and that’s what I strive to do. Today, I’m looking at three discounted stocks with low beta scores (which measure volatility risk in relation to the broader market), and Warren Buffet even owns a couple of them.
Join me as I look at three dividend stocks that pay very well and show great consistency:
Pembina Pipeline Corp (PBA)
One pivotal player in Canada’s energy sector that has experienced significant dividend growth over the past six decades is Pembina Pipeline Corp. (PBA). Offering essential services to oil and gas producers, PBA has a strong track record of successful acquisitions and partnerships. With an expected upcoming turnaround in the energy infrastructure sector, PBA holds the potential for substantial returns. Also, PBA recently confirmed its confidence in future performance by increasing its dividend and providing a positive fiscal-year outlook. I like PBA’s commitment to rewarding its shareholders.
A great “buy the dip” opportunity, PBA’s stock is currently down year-to-date by 9.13%, trading near its 52-week low, with a beta score of 0.63 PBA shows $10.87 billion in TTM revenue at $3.69 per share, and it profited $2.73 billion during the same period via its 26.20% net margin. Projected to show $1.8 billion in sales at $0.45 per share for the current quarter, PBA has an ROE (return on equity) of 18.90%, a P/S (price to sales) ratio of 2.12x, a P/B (price to book) ratio of 1.46x, and a $1.2 billion free cash flow. PBA has a 6.23% dividend yield, a quarterly payout of 50 cents ($2.00/year) per share, and a 61.61% payout ratio. With a 10-day average volume of roughly 841 thousand shares, PBA has a median price target of $38.95, with a high of $43.17 and a low of $34.97. This new price range represents a potential 40% price jump. Analysts recommend that we buy and hold stock in PBA.
Ares Capital Corp (ARCC)
Dividend stocks to always be on the lookout for are those that represent a business development company, of which Ares Capital Corp. (ARCC) is a good example. BDCs, like ARCC, provide financing to small- to medium-sized businesses and must distribute at least 90% of their income to shareholders as dividends to be exempt from federal taxes. This is an appealing opportunity for income investors due to its sustainable dividend and promising growth prospects. As access to credit tightens, businesses are increasingly turning to BDCs, supporting ARCC‘s potential. Notably, Warren Buffett holds shares of ARCC through Berkshire’s subsidiary, New England Asset Management (NEAM).
ARCC’s stock is up only slightly year-to-date by 0.32%, around the middle of its existing 52-week range. With an 0.84 beta, ARCC shows TTM revenue of $2.27 billion at $1.27 per share, from which it made $667 million in net income through its 29.33% profit margin. For its last earnings report, ARCC displayed EPS of
$0.63 per share vs. the $0.56 predicted by analysts (an 11.9% surprise), and for the current quarter, it is expected to post $621.5 million in sales at $0.57 per share. ARCC has an impressive dividend yield of 10.28%, a quarterly payout of 48 cents ($1.92/year) per share, and a 142.52% payout ratio. With a 10-day average volume of 4.96 million shares, ARCC has a median price target of $20.25, with a high of $24 and a low of $18, allowing room for a potential 29.5% price increase. Analysts say buy and hold.
Crown Castle Inc (CCI)
Also a member of Warren Buffet’s portfolio is Crown Castle Inc. (CCI). As a real estate investment trust (REIT), CCI stands out as an excellent dividend stock due to its strategic focus on operating telecom towers and small cells, crucial for enhancing data capacity in high-traffic areas. With the ever-increasing growth of mobile data usage projected to continue for years, CCI‘s telecom assets hold significant value. Combine that with the fact that its valuation is cheaper than historic levels, and CCI remains an attractive choice for long-term income investors.
Down by 16.70% year-to-date and trading at discounted pricing, CCI has a safe 0.66 beta score and an ROE of 21.92%. CCI shows TTM revenue of $7.02 billion at $3.86 per share, and it generated same-period net income of $1.67 billion on the back of its 23.83% profit margin. With a P/B ratio of 1.01x, CCI most recently reported $0.97 per share vs. $0.91 per share as projected EPS by analysts (a 7.1% surprise), and for the current quarter, it is predicted to show $1.9 billion in sales at an EPS of $1.07 per share. CCI has an annual dividend yield of 5.46%, a robust quarterly payout of $1.56 ($6.24/year) per share, and a generous 159.72% payout ratio. With a 10-day average volume of 2.3 million shares, CCI has a median price target of $150, with a high of $165 and a low of $135, representing the potential for a 46% increase from where its price currently sits. Regarding CCI, analysts are telling us to buy and hold.
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