Baby Boomers looking to put new money to work may wish to check out the broader basket of dividend stocks while interest rates are still relatively elevated. Undoubtedly, rates are bound to fall from here and fast. If inflation plunges in the coming months, don’t count another double-shot (50 bps) rate cut out just yet.
In Canada, annual inflation fell below the desired 2% mark to 1.6% in September, opening the door for a 50 bps cut. If the U.S. inflation is in for a similar trajectory (I think there’s a good chance it will), investors should brace for a scenario that sees rates nosedive over the next 18 months. In such a scenario, dividend stock yields may be in for an even tighter squeeze.
It’s never a good idea to rush into any corner of the market. But if you’re a retired Baby Boomer looking to supplement their passive income, I find there’s no sense in waiting around, especially as lower rates jolt stocks and pinch yields.
Further, some dividend stocks are taking a hiatus right now, offering dip-buyers a chance to get a fair price on high-quality, high-yielding merchandise. Here are two dividend stocks to start with if you seek affordable but still bountiful defensive dividend payers going for less than $30 per share.
Key Points About This Article
- Rates are going down, but perhaps at a quicker rate than we’ve been led to believe if inflation undershoots 2%.
- Ford and Pfizer stand out as intriguing dividend picks in October.
- 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.
Ford Motors
Ford Motors (NYSE:F | F Price Prediction) stock has been stuck in the gutter for a few years since crashing off its early-2022 peak. Still down close to 57% from those highs, value hunters may wish to give the name a closer look if they’re looking to play a “no-landing” scenario for the economy and far lower interest rates for 2025 — two factors that could help the auto industry drive higher from here.
At $10 and change per share, F stock is cheap (5.72 times forward price-to-earnings) and bountiful (5.5% dividend yield). Goldman Sachs analyst Mark Delaney recently upgraded shares to buy from hold while increasing his price target by a buck to $13 per share (implies more than 20% upside from current levels). The notable upgrade comes just weeks before the traditional automaker pulls the curtain on its quarterly earnings (due on October 28, 2024).
Undoubtedly, expectations are rather muted, but Mr. Dalaney believes the company has a “margin opportunity” in commercial and software & services. He’s right. There’s ample room for margin improvement, and it won’t take a turning of industry tides for the firm to achieve such margin gains.
Sure, investing in any cyclical company entails a greater tolerance for choppiness, something that many Baby Boomers may lack. That said, given the modest valuation and the huge dividend you’ll be paid to wait, I find F stock to be rather intriguing right here.
Pfizer
Pfizer (NYSE:PFE) stock seems to have finally bottomed after dropping like a rock in 2022 in a sell-off that saw shares shed nearly 55% from peak to trough. With activist investors over at Starboard Value getting involved, it seems like there’s deep value to be extracted from the company as it seeks to reinvigorate its growth profile in the post-COVID vaccine era.
With many promising drugs in the pipeline (the Talzenna-Xtandi combo recently showed promise in its Phase 3 trial) and a potential horse in the obesity (GLP-1) drug race, PFE stock has many pathways to stage a comeback. For now, patient investors can enjoy collecting the dividend (yielding 5.8% at writing) while they wait for the tides to turn and for Starboard to nudge the ailing pharma firm in the right direction.
While Starboard has a solid track record that speaks for itself, investors should proceed with caution as there’s only so much that outside help can do to unlock value, especially when it comes to the complicated biotech and pharma scene.
Wells Fargo’s Mohit Bansal “struggles to see value” in the name and is “skeptical on what an activist investor could bring to the table.” Undoubtedly, PFE stock has been quite a value trap in recent years. But if you believe in the firm and like the dividend, it may make sense to nibble on a few shares while they’re priced at less than $30.
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