The U.S. economy is on shaky ground and headline inflation levels remain historically high, having risen 4.9% year over year in April. One way for investors to offset the negative effects of inflation is to generate regular income via dividend stocks. Historically, dividends have accounted for about 40% of the total stock market return since 1930, but they have accounted for more than half of the market's total return during decades in which inflation was high, according to Fidelity.
Fortunately, there are plenty of dividend stocks out there that don't cost an arm and a leg. Here are 10 of the best dividend stocks under $20, according to CFRA Research:
Vale SA (VALE)
Vale is a Brazilian miner and is one of the world's largest iron ore and nickel producers. Analyst Matthew Miller says Vale has an impressive free cash flow profile that helps the company fund its dividend. Miller says Vale faces ongoing risks associated with the 2019 Brumadinho dam disaster in Brazil, but the company has taken appropriate measures to reduce the risk of future ruptures. He says Vale has a strong balance sheet and the stock is undervalued given its potential for capital returns. CFRA has a "buy" rating and $18 price target for VALE stock, which closed at $14 on May 10.
Ford Motor Co. (F)
U.S. auto giant Ford reinstated its dividend in late 2021 after suspending it in 2020. Critics of the move question Ford's focus as the company has also pledged to invest $50 billion in vehicle electrification technology through 2026. Analyst Garrett Nelson says Ford shares are attractively valued and the company has turned a corner from an operational standpoint. Nelson says the company's ongoing restructuring plan should help reduce operating costs and improve productivity, and investors get paid a solid dividend for their patience. CFRA has a "buy" rating and $16 price target for F stock, which closed at $11.89 on May 10.
Kinder Morgan Inc. (KMI)
Kinder Morgan is one of the largest U.S. midstream oil and gas companies, focused primarily on natural gas. Analyst Stewart Glickman says Kinder Morgan's strategy of taking a conservative approach to operations served the company well during the 2020 energy market downturn, and the company is now positioned to generate enough operating cash flow to cover its major 2023 outlays. Glickman says liquids demand has nearly recovered from pre-pandemic levels, and European imports of liquefied natural gas should boost LNG demand. CFRA has a "buy" rating and $21 price target for KMI stock, which closed at $16.79 on May 10.
Manulife Financial Corp. (MFC)
Manulife Financial is one of the world's largest insurers and wealth managers. Analyst Catherine Seifert says Manulife's revenue growth may slow in coming quarters, but the stock's modest valuation and peer-leading operating revenue growth should support the stock. In addition, Seifert says rising interest rates, easing pandemic restrictions and a rebound in asset values will be growth tailwinds in 2023. She projects 4% to 7% segment operating revenue growth in 2023 and between 5% and 8% growth in 2024. CFRA has a "buy" rating and $23 price target for MFC stock, which closed at $19.62 on May 10.
Orange SA (ORAN)
Orange is a diversified French telecommunications company. Orange shares are up 29.5% so far in 2023 through May 10, the best performance of any stock on this list. Analyst Adrian Ng says Orange's overall revenue growth of 1.3% in the first quarter was driven by repricing in Europe and strong performances in Africa and the Middle East region. Looking ahead, he expects the Spain market to stabilize, roaming revenues to recover and services revenue to remain stable. CFRA has a "buy" rating and $12.50 price target for ORAN stock, which closed at $12.79 on May 10.
Telefónica SA (TEF)
Spain's Telefónica is another attractive international telecom dividend stock trading under $20. Ng says Telefonica has made several key restructuring decisions to improve its balance sheet, including buying E-Plus in Germany and GVT in Brazil, and exiting the Central American market. In addition, Telefonica is combining its U.K. assets with Liberty Global PLC (LBTYA, LBTYB) in a joint venture deal that will generate roughly $3.1 billion in cash for Telefonica. CFRA has a "buy" rating and $4.50 price target for TEF stock, which closed at $4.40 on May 10.
Nokia Corp. (NOK)
Nokia is a telecom equipment and digital map data vendor that also licenses intellectual property to third parties. Analyst Keith Snyder says 5G wireless network upgrade investments in North America and China are boosting Nokia sales, and he anticipates the 5G cycle will be larger and last longer than previous upgrade cycles. Nokia hopes to regain Mobile Networks market share losses in 2023, and Snyder says the company's sales and margin guidance suggests this year will be a rebound year for Nokia. CFRA has a "buy" rating and $6.50 price target for NOK stock, which closed at $4.08 on May 10.
Regions Financial Corp. (RF)
Regions Financial is a U.S. regional bank providing consumer and commercial banking, real estate and mortgage products, and wealth management services in 16 U.S. states in the Midwest and South. Regions has taken a big hit in recent months as a string of bank failures have investors concerned about the stability of the financial sector. Analyst Alexander Yokum says Regions is well positioned to navigate the unpredictable deposit environment given its small average account balance. Meanwhile, the stock's underperformance has pushed its dividend up. CFRA has a "buy" rating and $23 price target for RF stock, which closed at $16.09 on May 10.
Huntington Bancshares Inc. (HBAN)
Huntington Bancshares is a U.S. regional bank offering full-service consumer and commercial banking, insurance, brokerage services and investment management, mostly in the Midwest region. Huntington shares are down 32.1% year to date through May 10 amid the banking crisis, the worst performance of any stock on this list. However, Yokum says the weakness is a buying opportunity. He says Huntington is relatively well positioned to navigate the crisis given 69% of its deposits are insured, suggesting the bank faces less deposit outflow risk than peers. CFRA has a "buy" rating and $14 price target for HBAN stock, which closed at $9.58 on May 10.
Host Hotels & Resorts Inc. (HST)
Host Hotels & Resorts is a real estate investment trust, or REIT, that owns a portfolio of luxury hotels in North and South America. Analyst Michael Elliott says business and group travel demand is still recovering from the pandemic in 2023 but will likely not make it back to 2019 levels this year. In addition, he says Host's destination properties are better positioned to weather a U.S. economic downturn than most hotels. He projects 4% to 6% revenue growth in 2023. CFRA has a "buy" rating and $19 price target for HST stock, which closed at $17.32 on May 10.
https://money.usnews.com/investing/stock-market-news/slideshows/best-cheap-dividend-stocks-under-20
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