There are many different types of investors out there. From growth investors (the group that’s largely outperformed most during this long-standing bull market) to more passive income-oriented investors (those with larger bond holdings and dividend stocks), the range of investors is as large as it is diverse. Some prefer stability and consistency over big gains, and others are out there looking to crush the market. To a certain degree, it may generally pay to have some portion of one’s portfolio aimed at both categories, particularly for those looking to at least get the average market return each year.

That said, for those looking to take a more defensive tilt right now, dividend stocks are a great option to consider. Finding dividend stocks that are relatively undervalued (there are certainly plenty of “cheap” options out there) is a great place to start. Doing one’s own homework on how these stocks may fit within their portfolios is important, but there are some clear winners I think are low-hanging fruit investors should start with.

The following three dividend stocks are top options I think investors looking for dividend stocks trading under $20 per share may want to consider. Now, two of these picks are just under that $20 threshold. Accordingly, it’s possible by the time you’re reading this that they’ve surged well above that level. After all, these three stocks certainly have the fundamentals and valuations that could prompt surges in short order.

With that said, let’s dive in!

Key Points About This Article:

• Having a solid mix of growth and dividend stocks within an individual portfolio can help stabilize returns during down markets, and provide more return consistency.
• These three dividend stocks trading under $20 per share look like reasonable bets for those with a long-term investing time horizon.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

AT&T (T)

Dallas-based telecommunications company AT&T (NYSE:T) offers wireless, wireline, and broadband services across the U.S, Mexico, and other global markets. The company’s Communications segment was praised by market analysts due to its market share, especially within the wireless mobility space. The company’s other segments, which include business wireline and consumer wireline are smaller, but also profitable operations that investors shouldn’t overlook. 

From a free cash flow perspective, there’s a lot to like about how AT&T is positioned right now. Indeed, this company looks like a cash flow machine, generating a 10% increase in its free cash flow this past quarter, despite reporting flat revenue growth. In other words, AT&T is a company that’s focused on squeezing more juice out of the lemon that has been the telecom sector. That’s a good thing for investors.

That said, AT&T isn’t giving up entirely on its growth prospects. In fact the company exceeded subscriber growth forecasts this past quarter, adding 419,000 customers, exceeding the 219,000 estimate. With a 5.8% annual dividend yield, and the stock rising 12% year-to-date, it’s clear a number of dividend investors are increasingly focusing on this stock due to its impressive yield. Indeed, even compared to short-term bonds, this is a stock that provides a healthy yield.

It’s worth noting that AT&T cut its dividend for the first time in 35 years to address the debt from WarnerMedia’s acquisition. But over the long-term, there’s reason to believe that this balance sheet stabilization move will pay off. For now, this is a top dividend stock under $20 I think investors may want to at least add to their watch list.

Barrick Gold (GOLD)

A Toronto-based global gold miner, Barrick Gold Corporation (NYSE:GOLD) comes second on this list of cheap dividend stocks to buy. The company boasts excellent performance within its key mining projects spread across five continents. As far as major gold miners are concerned, most investors will see Barrick’s name pop up in discussions, for good reason.

The company’s impressive stock price performance over the past year shouldn’t be overlooked. With a gain of more than 26% over the past 12 months, GOLD stock certainly looks like an attractive bet, particularly for investors looking to play rising gold prices. The company’s attractive forward price-earnings multiple of 15-times and its 2.1% dividend yield are meaningful, and provide a strong fundamental case for why this stock could continue to surge higher over time.

As gold prices continue to surge, many analysts expect the company to earn an investment-grade rating for its debt. And with interest rates expected to decline, that could mean even greater cash flow which is likely to be redistributed to investors over time via additional buybacks and dividend hikes.

In Q1, the company reported operating cash flow of $760 million, expecting $5 billion to flow in every year. This strong cash flow supports dividend growth and capital investments, ensuring steady production growth.

As a senior miner, Barrick Gold offers more stability compared to volatile junior miners. Despite trading between $16 and $19 per share since summer, Barrick’s Q2 production indicates it will meet its annual gold and copper targets. The stock has outperformed metal prices recently, suggesting strong future prospects.

Vale SA (VALE)

Vale (NYSE:VALE) is a top pick for undervalued industrial stocks, trading at a low multiple of 5-times earnings, but also offering a sky-high 17% dividend yield. Of course, any time a yield for any company surges into double-digit territory like this, the market is clearly pricing in some sort of cut on the horizon. And the company’s recent results, which showed a decline in nickel production (which Vale attributed to maintenance), don’t paint an overly-rosy picture moving forward.

That said, it’s worth diving into Vale’s Q2 2024 results which weren’t bad. The company reported a 7% rise in iron ore shipments and stable copper output. Vale also reported adjusted EBITDA of $4 billion and is well-positioned for annual EBITDA of $18 to $20 billion if commodity prices rise. Vale’s focus on energy transition metals like copper and nickel promises long-term gains.

Like Barrick, much of Vale’s valuation is tied to commodity prices, which have started to come down considerably. For those looking for green flags on interest rate cuts, this could be a good thing. But for now, it’s likely to be a headwind for VALE stock.

The company also achieved its highest output since 2018 in Q2. The company’s effective cost management and operational improvements drive its growth. Though C1 cash costs for iron ore rose to $24.9 per ton due to seasonal factors, Vale maintains a full-year cost guidance of $21.50 to $23 per ton. Freight costs fell to $19 per ton, thanks to long-term contracts. Despite short-term cost pressures, Vale’s strong production, cost control, and freight advantages make it a noteworthy stock worth considering on dips like this. 

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.