Screening for Cheap Stocks with Dividends over 5%

  • (0:30) – Building A Portfolio With Strong Income

  • (5:30) – Tracey’s Top Stock Picks

  • (22:15) – Episode Roundup: AB, GGB, HBI, SUN, JHG


Welcome to Episode #315 of the Value Investor Podcast.

Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.

This week, she takes a look at value stocks that are also paying hefty dividend yields. Many investors are looking for income this year. There’s nothing better, however, than getting a cheap stock that also pays out a big check.

But how do you find them?

Screening for Cheap Stocks with High Dividend Yields

To find cheap stocks, Tracey screened for stocks with P/Es under 15, her usual level for value.

She put in a high yield with stocks paying over 5% but also those that had a 5-year history of dividend growth.

But the most important criteria in this volatile market was a Zacks Rank of #1 (Strong Buy) and #2 (Buy). The Rank should hopefully screen for companies where the analysts are raising estimates, not cutting them. The Rank is the secret sauce on this screen.

Screening for these items, it gave 16 stocks. But that was a little too many, so by adding a P/S ratio under 1.0, which indicates even more value, there were just 4 stocks. So she added one from the first screen to round it out to 5 companies.

5 Cheap Stocks with Big Dividends

1.       AllianceBernstein Holding, LP AB

AllianceBernstein is an asset management company with a market cap of $3.8 billion. Shares have fallen 19% in the last year and are cheap, with a forward P/E of 13.9.

AllianceBernstein pays a dividend currently yielding 6.75%. But earnings are expected to fall 25% this year and another 3% next year. It is expected to report earnings on Feb 8, 2023.

Is AllianceBernstein’s big dividend safe?

2.       Gerdau GGB

Gerdau is a Brazilian steel company. Shares of Gerdau are up 24% in the last year but are still cheap with a forward P/E just 7.

Zacks has Gerdau paying a dividend yielding 20% but YahooFinance says it is just 11%. Some commodities companies pay variable dividends so that can wreak havoc with the “annual” dividend.

Analysts are bullish on Gerdau with one analyst raising estimates for 2023 in the last week. Still, earnings are expected to fall 39% in 2023.

Is Gerdau’s dividend yield risky?

3.       Hanesbrands Inc. HBI

**Warning: This podcast was recorded before Hanesbrands reporting earnings and cut their dividend completely.

Hanesbrands has paid a quarterly dividend since 2013. It even paid it through the pandemic. By the end of 2022, it was yielding 7.1% as the shares had sunk nearly 50% over the last year.

But when Hanesbrands announced fourth quarter and full year 2022 results on Feb 2, 2023, it also eliminated its dividend to focus on paying down debt.

Shares of Hanesbrands plunged on the news. Investors should always weigh the risks of a company continuing to pay a very high yield. Do your research.

4.       Sunoco Inc. SUN

Sunoco is the largest fuel distributor in the United States. It operates in 40 states and delivers fuel to over 10,000 sites.

Shares of Sunoco are up 6.2% over the last year but are still cheap with a forward P/E of 11.3.

On Jan 25, 2023, Sunoco said its Board of Directors had maintained the dividend, which is payable on Feb 21, 2023 to those shareholders of record as of Feb 7, 2023.

The dividend is currently yielding 7%.

Should investors be looking to energy companies like Sunoco for dividend yield in 2023?

5.       Janus Henderson Group plc JHG

Janus Henderson is an asset management company headquartered in the United Kingdom. It also reported earnings on Feb 2, 2023.

In 2022, Janus Henderson returned $358 million to shareholders through dividends and buybacks. As of the end of 2022, it had $1.2 billion in cash and cash equivalents. Janus Henderson’s board also announced another $0.39 quarterly dividend.

That dividend is currently yielding 6%. Shares of Janus Henderson are cheap, with a forward P/E of 12.7.

Is it time to look at foreign companies like Janus Henderson for deals?

What Else Should You Know About Finding the Cheap Stocks with Big Yields?  

Listen to this week’s podcast to find out.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Sunoco LP (SUN) : Free Stock Analysis Report

Gerdau S.A. (GGB) : Free Stock Analysis Report

Hanesbrands Inc. (HBI) : Free Stock Analysis Report

AllianceBernstein Holding L.P. (AB) : Free Stock Analysis Report

Janus Henderson Group plc (JHG) : Free Stock Analysis Report

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Zacks Investment Research